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Holding shares in a company’s success is what the stock market is all about. Now, a new form of speculation is on the rise in the form of social crypto, where people can invest in the fame of another. Here’s the essence of BitClout and why it’s a huge risk for investors.
BitClout is a social crypto exchange where users can buy and sell tokens based on people’s reputations. The success of a coin is based on the Twitter fame of a celebrity, as the more people want to buy into the celebrity, the more the coin is worth. Elon Musk in his prime might have sold his coin for a fair price, but now that coin would be higher than a SpaceX rocket. Fans can invest in the success of their favorite content creators, buying when they are small and cashing out when the creator becomes an icon. According to BitClout’s creator, BitClout aims to mix speculation and content together, developing a new business model for creators that isn’t ad-driven- it’s success-driven.
According to TechCrunch, BitClout allows creators to directly monetize their internet presence, and fans get the chance to bet on them. “Users who believe in a budding artist can invest in their social currency and could earn returns as the creator becomes more famous and their coins accrue more value.” This also allows content creators to monetize their success in a unique way, as BitClout allows them to opt in to receive a percentage of the transactions deposited into their BitClout wallets. Instead of necessitating ad revenue and brand deals, content creators can focus on making quality content and becoming a presence fans want to invest in.
In essence, BitClout sounds like a great idea. The issue, according to an interview with Lumi, a blockchain researcher had with CoinDesk, is that BitClout incentivizes people to cancel celebrities. Opening a short position and then mangling someone’s reputation would become a common tactic, amassing a fortune on someone else’s fall from grace. With cancel culture on a rise, the possibility might scare celebrities into jumping onboard the BitClout train.
BitClout also has a very startling present-day form, as many fear it to be the next BitConnect, which scammed its way to a $400 value in 2017 and is now worth nothing. BitClout currently does not allow users to transfer their BitClout tokens out of the BitClout network. Instead, users can only funnel Bitcoin into the system, with no way of actually capitalizing on returns (as of now). This very fact scares investors and users alike, as Bitcoin can be deposited into the system, but the system crashes, users would lose out on valuable assets.
As of now, few celebrities are verifying the social accounts being created on BitClout. And still, BitClout is creating shadow accounts for high-profile Twitter users, posting on their behalf on the BitClout system, and accepting coin trades based on their fame. The creators of BitClout claim it as a safety issue, creating these shadow accounts before users steal the identities of creators on the BitClout service. This doesn’t bode well with those content creators whose faces are being used without their permission, and some have spoken out about the issue on Twitter- some in more lighthearted ways than others.
I’m going to be upset if I’m listed on bitclout without my consent.
But I’m going to be furious if I’m not.
— Ryan Selkis (@twobitidiot) March 22, 2021
Regardless of the risks, plenty of high-profile investors are backing the project, such as Chamath Palihapitiya’s Social Capital, Coinbase Ventures, Winklevoss Capital, and Reddit co-founder Alexis Ohanian. Other big names include Sequoia Capital and Andreessen Horowitz.
With the big names behind it, BitClout could shape up to be the next big social crypto, paving the way for content creators to turn their backs on advertisements and focus on creating quality content.
On the other hand, the system could be an incentive for groups of people to cancel celebrities and profit off of their mangled reputations, resulting in a catastrophic exit by the content creators that make BitClout worth anything at all.