My take at understanding the platform and what risks and rewards it has to offer to its users.
I recently joined BitClout, a new social network with its crypto-currency. Tim Denning is advertising heavily. It caught my eye, and probably the eyes of thousands of other followers.
As a writer trying to grow my readership, it would be negligent to ignore a new platform. So I had a look at the promises around being an early adopter, quickly developing an audience, and making heaps of money on a new platform.
This article is the result of my investigation. It covers the basics of blockchains, crypto-currencies, how BitClout is built on those, and what that might mean for creators.
What is BitClout?
BitClout is 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 BitClout documentation
BitClout calls itself a new type of social network, build on top of its blockchain. In fact, It is several different things in one.
First, it is a social network similar to Twitter. You can post, follow users to read their posts, and like them, and all interactions are stored on a blockchain.
Second, it is also a platform for creators to monetise their work. Likes earn you money, and you can buy and sell NFTs.
Third, it is an investment platform. You can buy and sell shares of a creator, so-called creator coins. You are free to invest into your own coin just as easily as investing in other creators.
It also uses its own crypto-currency. Initially, it was called
$CLOUT , but recently the developers renamed it to
$DESO. Every new joiner starts with an account, and it powers almost all of the interactions with the platform.
To understand BitCloud better, it makes sense first to understand or remind ourselves how a blockchain and cryptocurrency work.
What is a Crypto-Currency?
A crypto-currency is similar to a “normal” currency, but no single organisation, such as a central bank, controls it. With a “normal” currency, banks store the data on how much money you own and your historical transactions. With a crypto-currency, this is stored in a distributed ledger, the blockchain.
There is no single copy of that ledger. Instead, multiple copies exist, distributed over all nodes on a network, which communicate to keep the ledgers in sync. In lay-man terms, those nodes are computers run by strangers that contain the knowledge of who owns how much money, as well as the entire transaction history.
I don’t want to go into too many details, but one big question is: How do you keep the consensus between all nodes and prevent past entries from being altered?
That is where mining comes into play. Mining is the process of finding a solution to a computationally complex problem that validates the current state of the blockchain. The first person to solve this gets a reward, their solution is distributed to all other nodes, and the game begins again. As soon as the solution has reached the majority of nodes, it is unchangeable history.
Suppose someone changes a past entry. They would have to solve all problems from that point up to the latest entry again. Then they have to distribute it to the majority of the nodes. Assuming that every node acts selfishly and tries to solve the problem before anyone else, starting again with a different history is a handicap and a loss-making strategy. So no one should do it.
For a blockchain to be properly decentralised, you need enough independent miners in your network. You need a way to incentivise work to validate new nodes. With bitcoin, you get newly created bitcoins as a reward. Hence the term mining.
For a blockchain to be successful as decentralized storage, you need enough independent miners in your network
Suppose one person or organisation can control the majority of the network (actually, the majority of the computing power in the network). In that case, they can decide which transactions might succeed, as well as double-spend coins.
What BitClout Offers to Creators
It promises a way to monetise your work. Either buy selling NFTs or by investing in yourself and convincing others to buy your creator coins.
How you convince others to buy your coins is entirely up to you. You can either “post quality content” or promise special treatment to your investors.
Beyond that, the central premise is that you can earn a considerable following as an early adopter. Other than the value of the audience itself, some of your followers might invest in your creator coin. Its value rises, and eventually, you can sell some of your coins, converting them into cash or Bitcoin.
What is the catch?
Every Action Incurs a Fee
Every interaction on the platform, like posting or liking a post, has a minimal charge. This charge makes sense for a decentralised network. There will be a cost of processing the action and adding it to the blockchain. Someone has to pay the miner their reward for verifying the transaction.
This design is similar to the Ethereum gas fee, but I don’t fully understand the BitClout system. The main questions are who sets the amount, and how is it transferred?
Paying for every post and like might sound like a step back compared to Twitter, where those fundamental interactions are free. However, it could also incentivise users to interact less but do so more deliberately.
The Platform is in its Early Stages
BitClout was started in March 2021 and quickly grew its follower count. Initially, it was missing a lot of features. For example, you could not exchange their internal currency back into bitcoin. In addition, the source code was not public, and the founders stayed anonymous.
Things have improved a lot since then. It is now listed on blockchain.com so that you can extract your money from it.
Since its launch, it has also open-sourced at least some of its source code. The idea of open source code is that everyone can read, run and improve it. As a result, the community will find bugs and iron them out. But this process takes time.
There are Some Weird Early Transactions
The first transactions generated a lot of the currency out of thin air and transferred it to several accounts. Here is a thread investigating it.
When a new blockchain network is created, most likely, the first nodes will be run by the founders and early insiders. On its own, that is not dodgy, but moving that much of their currency around early on is strange.
Is it a Scam?
It is a new platform, and lots of people advertise you to join and invest. So naturally, the question comes up: Is it a scam?
To some, it looks like a pyramid scheme. The founders and early joiners convince others to join and invest, who in turn recruit more people to the platform. Once the price of the internal
$DESO currency is high enough, and the early joiners cash out, the price plummets and the vast majority is left with their losses.
It boils down to the question of why are people joining the platform? If their main goal is to invest early and sell out later, it will implode sooner or later.
If people join BitClout to create or consume content, chances are good it will prosper
But BitClout has potentially more to offer. There is inherent value in a platform that helps creators monetise their content. As long as many people join to either create or consume content, chances are good it will prosper.
Unfortunately, there are some red flags. The unclaimed account of Elon Musk, for example, has the highest value creator coin. I have seen it at valuations between 30K to 45K. An inactive account with such a high value sounds wrong for a platform that rewards creators for their content.
I will keep an eye on BitClout, but I won’t be investing any money or a considerable amount of time into it.
One of its main functionalities is a twitter-like social network. I haven’t quite figured out how to get the most out of Twitter, so I am feeling out of my depth there. The same applies to creating and trading NTFs. For people with more experience in tweeting and creating digital art, it will be much easier.
The core concept sounds solid to me. Combining blockchain storage and giving creators more ways of monitoring their work is an exciting idea. The success of onlyFans, Patreon, or Buy Me A Coffee shows demand for this.
Both the underlying blockchain and the social platform seem to be in their very early stages, which makes me doubt the robustness of both the source code and the network of nodes behind the chain.
My main concern is the combination of a creator platform, social network and investment platform. A lot of the discussion focuses on the investment aspect. The need to understand investments with a separate crypto-currency makes for a high barrier of entry or the potential for many people to lose money.
The question remains whether it is a scam. I don’t believe the founders set it up as a scam, but that doesn’t mean they aren’t building it to get rich. Being set up as a decentralised network, it is also not entirely in the hands of the founders but the users and contributors.
My understanding of the topic is not complete, and there are still some open questions. Feel free to comment if there are things I missed or left incomplete.
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