BitClout, a controversial service that tokenizes Twitter people almost without permission, has $170M worth of BTC raised by a16z and others (Jeff John Roberts/Decrypt).
What is BitClout and How Does It Work? Twitter Controversy erupts over the Social Media Experiment
BitClout creator claims that it is a new method to monetize a user base. Crypto Twitter’s brightest light isn’t even interesting.
Popular users of CryptoTwitter have discovered that they have a second profile on BitClout. But, over there, some people are selling and buying tokens representing their identities. Whether those behind these profiles have ever used the social networking site doesn’t matter.
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“The core insight behind BitClout” is that you can combine speculation with content and you get a 10x product that creates innovative ways to monetize creators. However, it also gives you a new business model, CoinDesk’s lead creator of BitClout, diamond hands. He spoke to CoinDesk via phone.
BitCloud doesn’t exist as a company. It is a proof of work blockchain for social media management. It was created by anonymous developers. Only its token, BTCLT is held by backers. A number of crypto-businesses and prominent investors have nevertheless bought in.
This was not a persuasive argument for many prominent industry members, who seem to have a particular objection to their images and Twitter profiles being copied onto another website.
BitClout allows you to socialize on a blockchain, such as a hive, Steem, and Cent. It also generates social tokens (such as roll or rally), which are real people. These social tokens’ supply is controlled by automated market makers (like Unicode or Curve), although one is governed primarily by a bonding curve that explicitly increases the value of tokens as they are issued.
Users must first get BTCLT in order to use the site. To trade, you must put Bitcoin into the site to obtain BTCLT. There is no way to exchange it back. BitClout allows users to send BTC to BitClout in exchange for BTCLT. However, they are unable to trade the BTC back to BTC online.
James Prestwich ( founder of Summa, which was bought by Celo operators last Summer ), has been harshly critical of BitClout. That’s because it is one of his main reasons.
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Prestwich stated that BitClout is not available for sale in a telephone conversation. You can put money into, it but not get money out.
Diamondhands indicated that the platform welcomes exchange listing and bridges to other Blockchains. It has exchanged for its investors. Listings should be possible soon.
Diamondhands said, “To me, it’s just a matter of time before everyone sees where history is right.”
Diamondhands said that there was a premise for 2 million tokens of BTCLT tokens to be distributed to investors and founders. Although there’s no supply cap for BTCLT tokens, he said that the cost of new emissions is so high that no more tokens will be purchased once the supply reaches 19 million.
Mining companies that secure the network will also earn Bitcoins, but it’s only about 500,000 in the future.
BitClout sought to secure the support of crypto-investors majors in order to convince creators that it was not a project they would use BTC for.
Diamondhands emailed CoinDesk with a list of investors that included Sequoia Andreessen Horowitz and Social Capital. It also included Winklevoss Capital and Arrington Capital as well as Polychain, Pantera and Digital Currency Group (CoinDesk’s parent), Huobi, and Variant, among others.
Diamondhands explained that he felt like he needed the well-known names of creators to feel sure that the project was real.
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BitClout is based on a proof-of-work blockchain that works in a similar fashion to Bitcoin, but which can hold the text from social media posts. The BTCLT token, which is used to store gas, will eventually be used in a governance system that manages the project’s BTC treasury. Diamondhands announced that the code will soon become open-sourced on BitClout. Once that happens, other users will be able permissionless to join as nodes and miners.
CoinDesk said that they would respect pseudonymity when we began our discussions. Diamondhands claimed that the creators are hiding their identities to keep the project centralized in spirit and in fact.
While crypto social networks may not be new, Diamondhands believes that BitClout has a key innovation. It emphasizes the creator’s value, not their content.
“The platforms that have existed to date really focus more on the post and its atomic unit than on the creator. Diamondhands explained that this is a big difference because posts are only short-term. This makes it less exciting as an asset type. However, if you can speculate on a creator, this is a long-term asset that you can actually invest in for a while.
It is powerful to be creative and increase one’s value. However, some see a darker side.
Lumi has been a blockchain researcher and has been digging into BitClout’s conversation engines since BitClout launched last week.
Lumi explained to CoinDesk that people are incentivized to cancel people. You just need to create a short job and then manipulate the reputation of someone.
He also objected to BitClout’s quality experience. It is similar to the feeling and spirit of 2017’s initial coin offering rush to send money to crypto addresses in order to get back tokens. He does not like the idea of seeing these types of optics returned to the space.
The lure of a pool that already appears to be earning value could still be attractive.
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Creators who have reserved accounts will already have a set amount of tokens available for them to activate at any time. However, users don’t have to wait to get their accounts activated to speculate on tokens. This may be why many Crypto Twitter users are anxious about this new project.
One former CoinDesk employee already has two dozen BitClout accounts that contain their coin.
This reporter’s profile is shown to have a $12,000 market value.
It is based upon the idea that 32 tokens are minted and saved for @BradyDale. The market cap assumes that each token would sell for around $400 if it were purchased individually. (Each token that is sold slightly raises the price of the next one to be sold. The market cap is then listed on the website as though all supplies would be sold at this price.
However, The white paper explains that:
“Buying creates coin while locking money into the profile and pushing the price up, while selling destroys the coins and pushes the price down.
Therefore, it seems that token market caps are understated at best. Prestwich explained that the tokens are designed to give people quick paper gains, so they can invest more money and purchase more BitClout.
“I don’t believe it’s a scam but. People use that term far too loosely,” Nic Carter of Castle Island Ventures told CoinDesk. He had not activated or invested in his account. “It certainly has some Ponzi-like features, but it isn’t the only thing that this app has. Every app for consumers is gamified. Frequent Flyer Miles are basically a Ponzi scheme.
How to get in
An account can be created by anyone, even if they are not on Twitter. To activate a reserved account, however, the user must tweet out their BitClout account. Diamondhands explained that this proves legitimate owners. But, it is not surprising that publicity can also help.
If an account is activated they can set a tax on any new token emissions once it has been created. A token’s total supply is increased each time someone buys it. Some of this money would go to the token’s representative.
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Celebrities and other crypto-denizens who have preloaded accounts will notice that they also have a set amount of their tokens available for them. Diamondhands said that the amount was set in proportion to the number of followers. There were approximately 15,000 preloaded accounts, all of which were based on Twitter.
If the BitClout page does not have a blue checked next to it, it isn’t activated on the blockchain. But, the rest of their basic content via Twitter is already there.
Diamondhands indicated that access to the website has been possible without an invitation. You don’t need to pair your account with a Twitter profile. If someone wishes to remain anonymous and buy tokens from other wallets, they can also do this.
Diamondhands said, “The best thing about BitClout is it allows you to be completely anonymous, which many platforms, in general, don’t even allow.”
Diamondhands explained that what got her excited about the project was “fundamental demand”, which Diamondhands called the creator of the platform monetizing on it. This is what actually drives the value.
BitClout’s users and posts are an underlying data model that can be accessed by any web application. Nodes are websites that allow BitClout content to be published and accessed by users. Sites can create new ways to make money or offer incentives for token holders by using this open data structure.
Diamondhands claims that bigger objections will be resolved in the future, as exchange listing allows users to exit positions and new nodes create new experiences. It is open to connections to other chains.
He said, “Any platform that wishes to implement an atomic Swap from BitClout onto its chain, that would just so be such an incredible thing.”