“If you build it, they will come.” – A popular misquote from 1989 Kevin Costner movie Field of Dreams
Imagine that you wake up on a sunny morning to discover that you have a social media profile on an unknown website and a crypto token, issued in your name, is trading like a hot cake. Wait a moment. You can also claim a lot of tokens preassigned for you and make a lot of money overnight. Seems like a Hollywood movie plot! It has happened with so many celebrities recently. The controversial social media network is named ‘BitClout’. The privacy-invading site is the talk of the town nowadays.
Reserved profile of Elon on BitClout
It was March 2021. A few prominent investors received mail from an unknown website to explore the site and they were encouraged to forward the link to their trusted contacts. Within a few days, the website became viral. The website was ‘BitClout’. Al Naji, the founder of the project, launched it while he was hiding behind the pseudonym ‘Diamondhands’. The whitepaper of BitClout describes it “as a new type of social network that mixes speculation and social media, and it’s built from the ground up as its own custom blockchain.” The architecture of the project is similar to Bitcoin but it supports complex social network data like posts, profiles, follows, speculation features etc. BitClout allows users to invest in people just like investing in company stocks. The creator coins are like personal tokens. The value of a creator coin is proportional to the popularity of the related person.
The whitepaper says that “BitClout is a fully open-source project and there is no company behind it-- it’s just coins and code.” This isn’t entirely true. BitClout is backed by investors like Sequoia Capital, Coinbase Ventures, Winklevoss Capital, Polychain, Pantera, Huobi etc. How did such a new project attract capital from such prominent investors? The rumour mill says that BitClout is the brainchild of billionaire investors like Chamath Palihapitiya and Naval. Chamath has a verified profile on BitClout but Naval has not yet claimed his profile. So many celebrities and crypto influencers have obtained 'blue ticked' profiles on BitClout and billions of dollars are being traded here.
BitClout has been criticized by the media and many called it a ‘Scam’ or ‘Ponzi’. The site looks like a Twitter clone and it lifts popular profiles from Twitter to include on its platform without anybody’s permission as per an algorithm. A celebrity can claim his/her pre-generated BitClout profile only after tweeting the BitClout profile link from the related Twitter account but trading of the creator coins starts even before the verification. For example, Elon Musk Coin is the number one creator coin on BitClout but he has not claimed his profile. People are anticipating that Elon will claim the profile on BitClout and provide legitimacy to the said profile. BitClout has found negative headlines so far but is that a marketing strategy? The initial mystery, exclusivity, hype, controversy and unusual rollout indicate that the team has pre-calculated everything.
“The price of BitClout doubles for every million BitClout sold. This makes BitClout naturally scarce, resulting in 10 to 19 million BitClout minted in the long run (less than Bitcoin’s max supply of 21 million).” – BitClout Whitepaper
BitClout blockchain’s native cryptocurrency is BitClout (CLOUT). To buy the creator coins, the investors need to deposit BTC and buy CLOUT (up to $450 buying is possible via wire deposit). This reminds us of several past scams. CLOUT price determination is really hazy. Recently, the cryptocurrency has been listed on Blokchain.com. CLOUT is trading above $100 presently. The purchased creator coins can’t be transferred outside the platform. No record is found on the blockchain about the creator coins. How a creator coin attains its initial value is mysterious. Yes, anybody can create a profile on BitClout but after creating, you don’t get your own creator coins free of cost if you are not a whitelisted celebrity. You need to buy that if you want. You need to set a founder reward percentage in your profile which gives you a recurring commission on all future trading activity of your coin. This is easy money for celebrities and gives them a reason to shill. The bots are also very active on the platform. Within minutes of creating a profile, the bots will buy your coins and set the value high so that you get allured to buy your own coins. If you don’t buy, the bots will sell the coins after some days and the coins' value will go down. That’ll be another temptation for you to buy your own creator coins at a lower rate. When more people buy the creator coins, the value goes up and when more people sell, the value goes down. It is like an AMM (Automated Market Making) model but the mechanism is absolutely hazy here.
We need decentralized social media. An uncensored platform that gives power back to the people should find many takers, but unauthorized copying of Twitter profiles has no justification. BitClout is a privacy disaster. The 'Ponzi' nature of the weird platform can’t be denied. The celebrities are making a lot of money here and their selfish profiteering objective is the driving force of BitClout. It is difficult to say whether BitClout will be successful or not but it can be the precursor to create a better decentralized social media. We want free-flowing, democratized social media stocks but without compromising with ethics, transparency and promoting magical realism.
Note: This post was first published here for Cryptowriter.