SECURITY

Backed by celebrity endorsements but facing criticism! Is it wrong to issue social tokens for celebrities without permission? What is BitClout?

2021/3/27

share

A Twitter influencer urged his fans, "Don't buy the coins I have on BitClout, whoever buys them is a fool."

(This article is authorized to be reprinted from Chain News, with the original title "Despite the backing of celebrity venture capitalists, the hot BitClout is repeatedly criticized. Is BitClout really viable?" Original article here)

On March 23, a social networking platform called BitClout revealed a list of its investors, including big-name celebrity crypto funds such as Sequoia Capital, Andreessen Horowitz (a16z), Social Capital, TQ Ventures, Coinbase Ventures, Winklevoss Capital, Arrington Capital, Polychain, Pantera, DCG CoinDesk's parent company, Huobi, Variant, etc.

Advertisement - Continue scrolling for more content

BitClout is a project developed by an anonymous team that has attracted industry attention early on, but mostly with negative reviews. For example, well-known critic and The Block's research director, Larry Cermak, bluntly referred to it as a "scam." According to one of the team's anonymous founders, the release of this financing news was just to dispel "rumors," and with the endorsement of a large number of top-tier investment institutions, the project's credibility could be significantly enhanced.

However, the endorsement of top institutions did not have the desired effect and instead brought more criticism and doubt, with some saying "compared to BitClout, the notorious BSV seems more reliable." Although hoping to gain prestige through celebrity endorsements, a prominent figure, 0x_Infinitum, publicly stated, "Don't buy the tokens I have on BitClout, they are useless, whoever buys them is a fool."

In fact, BitClout's unauthorized publication of Twitter users' personal information on the platform has violated the law. Brandon Curtis, the product manager of the decentralized exchange Radar Relay, has issued a legal warning to BitClout founder Nadar Al-Naji through the law firm Anderson Kill, stating that the latter used his image without consent.

So, what kind of platform is BitClout really? How does it operate? And why has it sparked so much controversy?

What is BitClout?

According to the official whitepaper released by BitClout, BitClout is a new type of blockchain-based social media platform. Unlike regular social media platforms, accounts on BitClout can issue their own community tokens (similar to Roll or Rally). Since the token supply is controlled by automated market makers (such as Uniswap or Curve) and employs a bonding curve pricing mechanism, these tokens are highly susceptible to speculative trading.

This is the goal that the development team aims to achieve. The steep bonding curve maximizes the price of community tokens, triggering FOMO (fear of missing out) and encouraging more funds to be invested in BitClout tokens.

Diamondhands, a member of the BitClout team, candidly stated that the innovation of BitClout lies in speculating on creators themselves as an asset class, rather than on the content itself, which sets BitClout apart from other crypto social media platforms. Diamondhands stated, "If you have a creator you can speculate on, then you can make long-term investments. On the contrary, the content itself does not possess this long-term value."

In practice, BitClout hopes to attract attention through the celebrity effect to monetize its platform. To rapidly convert users, BitClout has adopted an extremely aggressive approach by directly transferring content from some verified Twitter accounts to its platform.

Specifically, BitClout reserves accounts for some verified Twitter users, meaning that accounts are automatically created for them, and users only need to activate them. Users simply need to post a BitClout tweet to activate and claim the account. An activated account is considered a verified account and will display a blue checkmark next to the profile. Additionally, BitClout reserves a certain amount of tokens for these accounts, with the value proportional to the number of followers. Currently, BitClout has automatically generated about 15,000 Twitter verified accounts.

Therefore, for those with a large number of followers, even if they have not claimed the account, they may find that they already have a BitClout account. If they have a substantial following, BitClout will automatically issue a considerable amount of community tokens for them. Consider how many people can resist the temptation to claim the account. If users claim the account and start posting content on these platforms, BitClout's goal is achieved. Through this method, a verified account is transformed, and the celebrity effect of the verified account will attract more fans to join the platform.

On the other hand, even if these verified accounts do not join the platform, traders can still trade these tokens. Through this approach, BitClout maximizes the celebrity effect and speculative nature to increase user conversion.

BitClout "Scam" Receives Criticism

Despite endorsements from prestigious investment institutions and utilizing the extreme celebrity effect and speculative nature, BitClout has faced almost unanimous skepticism and criticism as major verified accounts did not participate.

James Prestwich expressed shock at the extensive support from venture capital funds and major companies for such a toxic or even illegal project. Founder nadertheory refused to acknowledge his involvement and promoted his tokens using others' reputation and brand, which is considered unethical theft. In essence, it is a scam designed to profit early investors at the expense of latecomers.

0x_Infinitum urged not to purchase BitClout social tokens as they serve no purpose, calling those who buy them foolish.

The controversial operations of BitClout include:

Firstly, BitClout's website is not publicly visible.

Upon visiting the website, you are greeted with a message stating that a password is required to access the site, implying the need to purchase tokens to visit. This revelation may come as a surprise to crypto enthusiasts who advocate for decentralization.

Secondly, the method of purchasing tokens is peculiar.

Unlike the current mainstream methods of IDO and IBP crowdfunding, BitClout uses a very old-fashioned fundraising model. It involves sending BTC to BitClout in exchange for BTCLT, but once you purchase BTCLT, you cannot exchange it back to BTC. As of March 18th, nearly 2705 BTC had been raised. This method may remind people of the widespread "send money to an address and receive tokens" scams during the 2017 ICO frenzy.

In the eyes of Twitter user Hsaka, even the infamous BSV seems more reliable than Bitclout.

However, the anonymous team members of BitClout stated that once BTCLT is listed on exchanges, it can be traded. Since mainstream exchanges are among BitClout's investors, there is a high likelihood of being listed.

Furthermore, BitClout claims to be decentralized and adopts an anonymous mode. However, some speculate that its founder is actually Nader Al-Naji. Nader Al-Naji is the founder and CEO of BASIS and previously worked as a development engineer at Google and DE Shaw.

Blockchain researcher Lumi believes that BitClout's aggressive economic incentive model may lead to actions that defame someone's reputation for financial gain. "In reality, all you need to do is open a short position first and then find a way to damage someone's reputation," Lumi stated.

Twitter user Ma/ya Zehavi believes that Bitclout is nurturing greed and opportunism through crypto projects. Wearing the mask of decentralization is actually to conceal the underlying dystopian social structure. Some ideas may seem cool, but the more you think about it, the more likely it will develop into the terrifying consequences predicted in a Black Mirror episode for real life.

However, the most criticized aspect of Bitclout is directly using users' content to profit, which has already led to copyright infringement.

Stephen Palley condemned Bitclout in a tweet, stating that Bitclout is profiting without permission using individuals' names, preferences, and reputations. He called for immediate removal of his account.

In addition, Brandon Curtis, the product manager of decentralized exchange Radar Relay, issued a legal warning to BitClout's founder Nadar Al-Naji through the law firm Anderson Kill, stating that the latter used their image without consent. Anderson Kill claimed that Nadar Al-Naji violated California Civil Code Sections 3344 (protecting the name, image, voice, and signature of natural persons) and 1798 (protecting personal privacy). According to documents issued by Anderson Kill, BitClout, created and controlled by Nadar Al-Naji, created and sold NFTs without authorization, using the names, reputations, and images of about 15,000 Twitter KOLs and celebrities.

Ideamarket

The model of Bitclout reminds people of another platform called Ideamarket.

Similar to Bitclout, Ideamarket is an information market based on social accounts. It functions like a real stock market, where users need to vote with real money on various social accounts to establish an ideal market for information. This market does not require trust in centralized third-party media but is determined by market voting.

The founder of Ideamarket, Mike Elias, believes there are many benefits to this approach:

Firstly, an information market generated by the market can improve the accuracy of the information market without being completely controlled by "narrative central banks" media companies.

Secondly, users on Ideamarket need to vote on various accounts using USD, meaning that engaging in malicious market behavior, such as buying followers for trust, comes at a high cost. Additionally, any reputation enhancement through purchasing followers on Ideamarket is publicly transparent, which benefits market transparency.

Finally, Ideamarket aims to bring profits to discerning investors by identifying and advocating for under-recognized creativity. Mike Elias believes this will spark an "intellectual gold rush."

Compared to Bitclout's aggressive cold start, Ideamarket takes a more steady approach. Ideamarket was first launched in 2019 and is currently deployed on the Ethereum mainnet. Like Bitclout, each account on Ideamarket has its own personal tokens, and as the token quantity purchased increases, its value also rises.

Compared to the prestigious endorsements of major funds, Ideamarket's investment institutions are much more niche, including Mechanism Capital, Hartmann Capital Managing Partner Felix Hartmann, The LAO, Web3 Foundation technical educator Bruno Skvorc, and DAO enthusiast Philip Silva.

Ideamarket's development approach is also gradual, initially supporting only Twitter and now beginning to integrate other platforms, including Substack. Ideamarket released a task to integrate the Gitcoin Grants market in the 9th Gitcoin Grants round. In the 9th round, Ideamarket offered up to 10 bounty tasks with a total prize pool of $24,000.

Both Ideamarket and Bitclout have significant differences in terms of their original intentions, vision, transparency, and ethos. The former is grassroots-driven, adhering to a more open and transparent idealistic vision (no pejorative connotation), with more collaborative development integrations, following a bottom-up approach. The founding team is more laid-back, having quietly worked for nearly two years and is slowly showing signs of progress. On the other hand, the rapidly emerging Bitclout is more cryptocurrency-focused, endorsed by major fund investors, and employs a more aggressive speculative mechanism to attract speculators. However, despite the ideals, Ideamarket still cannot escape manipulation by speculators. At least for now, Ideamarket is far from achieving its goal of creating a trustworthy decentralized rational market.

https://www.vice.com/en/article/pkd8nb/people-have-spent-over-dollar1-million-on-a-literal-marketplace-of-ideas

https://bitclout.com/one_pager.pdf

https://www.coindesk.com/what-is-bitclout-the-social-media-experiment-stoking-controversy-on-twitter