With star venture capital backing but frequently facing criticism, is the popular BitClout really "viable"?

This article is from ChainNews, authored by LeftOfCenter.

On March 23, a social network platform called BitClout revealed its list of investors, which includes several well-known star crypto funds, such as Sequoia Capital, Andreessen Horowitz (a16z), Social Capital, TQ Ventures, Coinbase Ventures, Winklevoss Capital, Arrington Capital, Polychain, Pantera, DCG (the parent company of CoinDesk), Huobi, Variant, and others.

BitClout is a project by an anonymous development team that gained industry attention early on, but it received mostly negative reviews. For instance, well-known critic Larry Cermak, research director at The Block, bluntly stated that it "could be a scam." According to one of the anonymous founders of the team, the announcement of the funding was merely to dispel "rumors," and the endorsement from these top investment institutions could significantly enhance the project's credibility.

However, the endorsement from major institutions did not have the desired effect; instead, it attracted more criticism and skepticism, with some claiming that "compared to BitClout, the notorious BSV seems more reliable." Although there was hope to gain attention through celebrity hype, prominent user 0x_Infinitum publicly stated, "Don't buy my tokens on BitClout; they are useless, anyone who buys them is a fool." In fact, BitClout has violated the law by publishing Twitter users' personal profiles on its platform without permission. Brandon Curtis, the product lead at decentralized exchange Radar Relay, issued a legal warning to BitClout founder Nadar Al-Naji through the law firm Anderson Kill, stating that the latter used his likeness without consent.

So, what kind of platform is BitClout? What is its operational mechanism? And why has it sparked widespread criticism?

What Exactly is BitClout?

According to the official white paper released by BitClout, BitClout is a new type of blockchain-based social media. Unlike ordinary social media, accounts on BitClout can issue their own community tokens (similar to Roll or Rally). Since the token supply is controlled by automated market makers (like Uniswap or Curve) and uses a joint curve pricing model, it means these tokens can largely be speculated upon.

This is precisely the goal the development team aims to achieve; the steep joint curve can maximize the price of community tokens, stimulating FOMO (fear of missing out) and encouraging more investment in BitClout tokens.

A BitClout team member using the pseudonym Diamondhands candidly stated that BitClout's innovation lies in speculating on the creators themselves as an asset class, rather than the content itself, which distinguishes BitClout from other crypto social media. Diamondhands said, "If you have a creator that can be speculated upon, then you can make a long-term investment. In contrast, the content itself does not possess such long-term value."

In fact, BitClout hopes to attract attention through celebrity effects to help monetize itself. To quickly convert users, BitClout has adopted an extremely aggressive approach by directly transplanting some prominent users' Twitter accounts and related content onto its platform.

Specifically, BitClout reserves accounts for some prominent Twitter users, meaning it automatically creates accounts for them that they only need to activate. Users simply need to post a BitClout tweet to complete the activation and claim the account. Activated accounts are verified and display a blue checkmark next to their profile. Additionally, BitClout reserves a certain number of tokens for these accounts, with their value proportional to the number of followers. Currently, BitClout has automatically generated about 15,000 Twitter accounts for prominent users.

In other words, for those with a large number of followers, even if they have not claimed their accounts, they will find that they already have a BitClout account. If they have many followers, it will also automatically issue a considerable amount of community tokens. Just think about how many people can resist such temptation to claim their accounts. If users claim their accounts and start posting content on these platforms, BitClout achieves its goal of converting a prominent account, while the celebrity effect of the prominent user will attract more followers to the platform.

On the other hand, even if these prominent accounts do not join the platform, traders can still trade these tokens. In this way, BitClout maximizes the celebrity effect and speculative attributes to enhance user conversion.

BitClout's Controversial Operations

Despite the backing of luxurious investment institutions and the extreme use of celebrity effects and speculative attributes, prominent users are not buying it and have faced almost unanimous criticism and skepticism.

James Prestwich expressed shock at seeing so many venture capital funds and big-name companies supporting such a toxic and even illegal project. The founder, nadertheory, refuses to admit that he created it and promotes his tokens using others' reputations and brands, which is an unethical and cunning act. In short, this is a scam, essentially allowing latecomers to pay for the profits of early investors.

https://twitter.com/_prestwich/status/1374528577614479365

0x_Infinitum called for not to buy his BitClout social tokens, stating they are useless and anyone who buys them is a fool.

In fact, the controversial operations of BitClout include the following:

First, the BitClout website is not publicly visible.

When you open the website, you are greeted with a line of small text. To access the site, you must have a password, which implies that you need to buy tokens to gain access. This may surprise crypto enthusiasts who advocate for decentralization.

Second, the method of buying tokens is also quite strange.

Unlike the mainstream IDO or IBP crowdfunding models, BitClout uses a very old-fashioned fundraising model by sending BTC to exchange for BTCLT. However, once you purchase BTCLT, you cannot exchange it back for BTC. As of March 18, nearly 2,705 BTC had been raised. This inevitably brings to mind the widely popular "send money to an address and then receive tokens" scams from the 2017 ICO boom.

Twitter user Hsaka remarked that the notorious BSV seems more reliable than BitClout.

https://twitter.com/HsakaTrades

However, anonymous team members stated that as long as BTCLT is listed on exchanges, it can be traded, given that many mainstream exchanges are among BitClout's investors, which means the possibility of being listed is quite high.

Additionally, BitClout claims to adopt an anonymous model for decentralization, but some speculate that its founder is actually Nader Al-Naji, who is the founder and CEO of BASIS and previously worked as a developer at Google and D. E. Shaw.

Blockchain researcher Lumi believes that BitClout's radical economic incentive model may lead to actions aimed at defaming someone for wealth, stating, "In reality, you just need to open a short position and find a way to damage someone's reputation."

Twitter user Ma/ya Zehavi believes that BitClout is a breeding ground for greed and opportunism in crypto projects. Wearing a mask of decentralization, it actually aims to conceal the essence of its dystopian social structure. Some ideas may seem cool, but the more you think about it, the more you feel it could lead to terrifying consequences in real life, as predicted in an episode of Black Mirror.
https://twitter.com/mayazi/status/1373742991484018696

However, the most criticized aspect of BitClout is its direct appropriation of users' content for profit, which has already caused infringement.

Stephen Palley tweeted condemnation, stating that BitClout profited from his name, preferences, and reputation without permission. He hopes to have his account taken down immediately.

https://twitter.com/stephendpalley/status/1373810813237137414

Furthermore, Brandon Curtis, the product lead at decentralized exchange Radar Relay, issued a legal warning to BitClout founder Nadar Al-Naji through the law firm Anderson Kill, stating that the latter used his likeness without consent. Anderson Kill stated that Nadar Al-Naji violated California Civil Code Section 3344 (protecting individuals' names, likenesses, voices, and signatures) and Section 1798 (protecting personal privacy rights). According to the documents issued by Anderson Kill, BitClout is created and controlled by Nadar Al-Naji, who created and sold NFTs without authorization, using the names, reputations, and likenesses of approximately 15,000 Twitter KOLs and celebrities.

Ideamarket

The model of BitClout reminds one of another platform called Ideamarket.

Similar to BitClout, Ideamarket is also an information market based on social accounts. Like a real stock market, users need to use real money to vote for various social accounts, thus establishing an ideal market for information that does not require trust in centralized media but is generated by market votes.

Ideamarket founder Mike Elias believes that this approach has many benefits:

First, an information market generated by the market can improve the accuracy of the information market, rather than being completely controlled by "narrative central bank" media companies.

Second, users on Ideamarket need to use dollars to vote for various accounts, meaning that malicious market behaviors like buying followers to gain trust are costly. Moreover, increasing credibility through buying followers on Ideamarket is transparent, which actually benefits market transparency.

Finally, Ideamarket hopes to bring profits to perceptive investors by identifying and advocating for underappreciated ideas, which Mike Elias believes will trigger an "intellectual gold rush."

Compared to BitClout's radical cold start, Ideamarket takes a more steady approach. Ideamarket was first launched in 2019 and is currently live on the Ethereum mainnet. Like BitClout, each account on Ideamarket has its own personal token, and as the number of purchased tokens increases, its value becomes higher.

Compared to the luxurious backing of major funds, the investment institutions in Ideamarket are much smaller, including Mechanism Capital, Hartmann Capital managing partner Felix Hartmann, The LAO, Web3 Foundation technical educator Bruno Skvorc, and DAO enthusiast Philip Silva.

The development of Ideamarket is also a steady approach, starting with support for only Twitter and now beginning to integrate other platforms, including Substack. Ideamarket has released tasks for integrating the Gitcoin Grants market in the 9th round of the Gitcoin donation bounty program. Additionally, Ideamarket has up to 10 bounty tasks in the 9th round of the Gitcoin donation event, with a total prize pool of $24,000.

In terms of intent, vision, transparency, and ethos, Ideamarket and BitClout have significant differences. The former is grassroots-driven, adhering to a more open and transparent idealistic vision (not meant derogatorily), and its development and integration are more collaborative, representing a bottom-up model. The founding team has been quietly working for nearly two years and is gradually starting to see some progress. In contrast, the aggressive BitClout, backed by major funds, employs a more radical speculative mechanism to attract speculators' participation and uses a more old-fashioned fundraising model. However, ideals aside, Ideamarket still cannot escape manipulation by speculators; at least for now, Ideamarket is still far from achieving the goal of creating a credible decentralized rational market.