Originally published here on May 18, 2021
Understanding social tokens and how they might reshape social media
Bit what?
There are 3 reactions I came across when I brought up the topic BitClout over the past week
- 90% never heard of it
- 9% it’s a scam
- 1% it’s the most engaging and exciting community right now
Ok, that’s a lie. Actually, no one I spoke to in person had ever heard of it, but the 9 to 1 “It’s a scam” to “I’m a fan” ratio of people discussing it online seems accurate.
Nevertheless, something is brewing here. BitClout led me down the rabbit hole of social tokens and how they might change the way value is created and exchanged on social media. Also, on the off chance this is the next big thing, I want to establish my bragging rights for writing about this early on. *wipes dust off shoulder*
Let’s dive into
- What makes BitClout special?
- The Golden Age of the Creator Economy
- What drew me into the BitClout ecosystem
- These darn controversies!
- So should I sink my retirement funds into this?
What makes BitClout special?
In short: BitClout is a social network merged with a stock market, reinvented on the blockchain. The value created by its users is re-distributed amongst them, rather than being gobbled up by the platform itself. This concept flips the incentives for all participants. (And incentives are the hidden forces driving human behavior)
To show how BitClout is different, let us back up a second and illustrate how value and money flows in traditional social networks:
Importantly, value creation (i.e. the content creation and interaction) is largely separated from monetization.
The platform gathers as much data as possible about its users to sell uber-specific advertising slots to its advertisers.
Successful creators achieve high social status and reach, which they usually monetize outside of the platform (exceptions are famous YouTubers receiving percentages of ad revenues).
This results in somewhat skewed outcomes for the different participants in the system and how they are rewarded, e.g. Facebook amassing $60b in cash reserves, while many of the creators on the platform are working several jobs to make ends meet.
Don’t get me wrong—I am not saying all social media giants are evil data- & money-harvesting overlords, but rather that the creators who are bringing value to their platform might not have gotten the best deal out of the arrangement…so far.
Enter BitClout
On BitClout, value creation and monetization are closely intertwined.
The platform is only an interface between users and creators —(in theory) there is no central instance that controls the platform or extracts value on the back of the users.
Successful creators are directly linked to their fans without an intermediary and freely exchange engagement AND monetary value. On BitClout, this is possible through so-called creator coins, which are issued for each new user and traded on an open market. If, for example, my
Philip-coin (basically my “stock”) is purchased on the market, its price rises, and if it is sold, it falls. Additionally, the creators can choose to receive a percentage of all their coin sales.
This results in a greatly simplified model and, at first glance, it might seem like a derivative of Patreon. But there is a lot more to this. The native integration of money on a social platform opens up completely new avenues of monetization through engagement, for both creators and fans.
Here are some ideas that are already possible or will be in the near future:
- Exclusive access and engagement: On the one hand, fans show loyalty through “buying” into their favorite artists and getting access to exclusive content, shoutouts, and behind-the-scenes looks or meetups. On the other hand, artists give back to their fans, by gifting their own coins to top followers or by actually responding to the DMs of their coin holders.
- Support and speculation through investing: Fans can support up-and-coming artists by investing in them early on. This provides the artists with cash flow, enabling them to focus on their craft. The fans in turn participate in the monetary upside as the artist becomes more popular and the related coin appreciates in value. You could become rich just by investing in your favorite new indie artists before they are discovered. Not to forget, fans now have verifiable bragging rights on the blockchain in front of their friends for discovering the hottest new act before it became mainstream. Just imagine the clout some Beliebers could attain amongst their peers by showcasing their Justin-Bieber-coin holdings from the early 2010s.
These are just initial ideas being tested and many more models of engagement between creators and fans will emerge.
BitClout is just one example of a new hype category within the blockchain sphere called “social tokens”. Serious competitors such as Roll and Rally are also throwing their hats in the ring, backed by the same or similarly high-profile investors. Chris Dixon from investment firm Andreessen Horowitz even believes this new wave of social interaction and monetization, built upon decentralized blockchain platforms (i.e. not owned by a corporation) will laud in a “20-year golden period renaissance for creative people”.
Indulge me in speculating what this “Golden Age of the Creator Economy” could look like:
In this creator-driven age, decentralized platforms are competing for creators through unique incentives, while creators go “shopping” in the mall of platforms: Where can I find the most suitable incentive structure for my content? Which platform boasts an engaged community that fits my target criteria? Which platform is optimized for my use case?
The rules and structures of the platforms will be transparent and decided upon by their users, and enforced by smart contracts on the blockchain. Creators will be able to rely on these rules and build their businesses on them. There will be no product managers in California deciding to change the rules from one day to the next, cutting creator revenue at their whim.
And, most importantly, all users are the owners of their data, including posted content, connections, and interactions. If users are unhappy with the development pace on one platform or the incentives do not suit their needs anymore, they can move to the next platform without needing to rebuild their reputation or asking for permission. They will vote with their feet. The interoperability and free flow of creators and users between platforms will be a key component to break the powerful lock-in effect of current platforms.
What drew me into the BitClout ecosystem
✨ Early days = asymmetric potential: To be clear, compared to the incumbent platforms, this 2-month old project is tiny, with currently >250k accounts on the platform (vs >2 BILLION monthly active users on Youtube). Yet, I precisely find this appealing—it feels like you are part of a group of highly motivated settlers making their journey across the open plains of a new online territory. You can claim your stake anywhere and, chances are, you can be the first at something. Granted, there is a high probability your claim of something will be a claim of nothing, yet the potential exists for you to receive outsize returns—socially and/or monetarily. There is a feeling of urgency and support amongst users, which I have not experienced before.
💰 High profile investors: If you are interested in venture capital or the crypto industry, BitClout’s list of alleged and confirmed investors is one of the most impressive I have seen. Heated discussions exist as to why some of the bigger names have not explicitly confirmed their investment, but most likely they would have denied their involvement in this controversial project by now if there were no merit to the claims.
🤝 Insane community-centric developer pace: Seemingly every day on the platform a new feature is implemented. Not only are most of these features novel (gifting tiny amounts of currency with a sort of “super-like” called diamonds 💎 or sorting your inbox by who holds how much of your coin), but most are in direct response to community requests (enabling creators to be paid without selling their own coins and thereby tanking its value).
🏘️ Flourishing eco-system of exciting projects: If you understand that bitclout.com is only the first app built on top of the BitClout blockchain, you will grasp that entrepreneurs are building complementary apps to further enrich the entire BitClout experience. On BitHunt you can currently track over 70 projects that range from various data analysis tools to track creator coin investments, to BitClout specific media projects (news, podcasts), social games, creator engagement tools, and many more. Keep in mind that the whole platform was launched only 2 months ago. This ecosystem is just getting started.
These darn controversies!
I’d be remiss if I did not highlight the significant criticism and controversy this project has attracted from the start. It is safe to say that big influencers on crypto Twitter, which I respect, are no fans of BitClout.
Amongst the greatest criticisms: there is currently no official way to redeem the returns you made on the platform into other currencies—it is a one-way street. You drop bitcoin into a magic fountain, attempt to multiply it, and then hope again to redeem it in the future (WHAT??). Amongst the users there is a universal expectation this will be a feature implemented in the near future, and teams are already building workarounds.
There are concerns about the actual decentralization of the project with semi-anonymous developers sitting on ~4000k BTC worth approximately $200m. Theoretically, no one is keeping them from escaping to a private island without a trace and living la Vida Loca 🏝. These developers and early investors also secured approximately 95% (8m) of the current circulating supply of BitClout (8.4m) for their own accounts and to pre-load the accounts of prominent personalities.
Update May 18, 2021: Right after I finished editing this post the BitClout team open-sourced the entire BitClout code base enabling all developers around the world to optimize and build on the core code of the platform. A massive step towards the decentralization of the platform and unthinkable in traditional social media.
This copying of prominent social media profiles from Twitter and pre-loading them with coins has received a fair amount of criticism itself, whereas others point to it being an aggressive, yet legitimate growth-hacking tactic. Nevertheless, legal charges were filed regarding this issue.
On top, open questions remain regarding the impact on mental health and sense of self-worth when your account and those of your friends literally have a $ value attached. However, is it really all that different than counting and comparing likes and followers?
So should I sink my retirement funds into this?
All this is to say many questions need to be addressed and the core developers and investors could alleviate some of them with more transparency. Still, these are very early days and if you pursue such an ambitious vision, you are bound to ruffle some feathers.
Please don’t take any of this as investment advice and do your own research before investing any money. I see a high probability of this project never fully taking off and am prepared to lose most of my investment. Nevertheless, I see BitClout as a fascinating experiment that I want to experience first-hand. My early involvement is also an asymmetric bet, in which I potentially gain a lot and risk only a little, which are the kinds of bets I want to take at this stage in my life.
As you probably grasped by now, I am very excited about the emerging category of social tokens and this Golden Age of the Creator Economy we might be at the cusp of. I’m convinced it will be possible to create completely new ways for creators and users to interact with one another and exchange value. We can create a future in which a handful of large tech firms do not control every part of our online interactions and identity.
It is a future in which YOU take ever more ownership by participating in a thriving online ecosystem, rather than merely consuming.
Please reach out!
If you found any of this interesting and have ideas or recommendations on how to clarify certain passages or graphics, I’d love to hear from you. Please reach out to me on Twitter, BitClout, or by replying to this email.
Take it easy! <3
Big thanks also to Livia and Micha for their thoughts on the early drafts of this piece!