What Is BitClout?
BitClout is a new social network that is both a cryptocurrency social experiment and apparently a work in progress.
According to BitClout's own description in its one pager whitepaper, it is "a new type of social network" on a custom blockchain with the feature of enabling speculation of people and posts with real money in the form of its own cryptocurrency $BitClout (BTCLT).
Currently, BitClout is a Twitter-style social network clone with several missing features and one 'killer feature' which enables speculators to purchase the 'coin' from any user profile on the network. This feature is what many supporters of the network are most excited by. It offers speculators/supporters of a user profile to potentially profit if more people purchase that profile's coin. The more people who purchase the coin, the more valuable it becomes according to a predetermined bonding curve algorithm.
BitClout is some pretty big missing features. New registrants of BitClout can comment or post a 280 character message or image but only if they have a completed profile. To have a completed profile, one needs BTCLT, the social network's cryptocurrency. Liking posts requires no BTCLT and retweeting (or 'reclouting') is not possible yet.
To really be able to participate in the network, one needs BTCLT which one can only get by trading Bitcoin for it. Mining BTCLT is not possible at the moment and there is no public BitClout nodes or any information on how one may run one yet.
The most controversial and biggest missing feature of all is that whilst a person may be able to trade in Bitcoin for BTCLT, there is no way to sell BTCLT or trade it for anything else at the moment except for a BitClout user profile's 'creator coin'.
What BitClout Is Supposed To Be About
"BitClout is decentralizing social media in much the same way as Bitcoin is decentralizing the financial system."
- BitClout Whitepaper
As a work in progress, the only information available on what the BitClout network could become is based on the information provided in their onepager.
BitClout is supposed to be a decentralised network that is open source and the platform is supposed to be 'owned' by creators i.e. its users. The onepager makes the claim that "anyone on the internet can run a BitClout "node" that serves the BitClout content... [and] anybody can build apps on top of the BitClout data without the risk of being de-platformed, and they can even create their own feed algorithm."
None of the claim has materialised yet.
When the network is fully functional however, BitClout would supposedly enable the creation of a new type of market that trades "social clout" as an asset. The exact cryptoeconomics of BTCLT is still a work in progress as besides being able to purchase a user profile's coin, there is very little actualisation on the utility of such a coin yet.
According to the onepager, there should only be 10 to 19 million BTCLT ever minted. CoinDesk writes that BitClout would run on a proof-of-work blockchain similar to Bitcoin but one designed to hold the text of social media posts. BTCLT is used as gas and will likely eventually also be used in the governance process of managing BitClout's Bitcoin treasury (which currently sits at around 3,559 BTC or ~$202 million USD).
The Economics for a Creator's Coin
Every user profile on the BitClout social network has their own "creator coin" that is pegged to BTCLT and a pricing based on circulating supply of that profile's coin. The price of any creator coin in terms of US Dollars is given by the formula:
Price in $USD = 0.003 * creator_coins_in_circulation^2 * bitclout_price_in_usd
A profile's creator coin is a 'continuous token' that follows an automated market maker protocol. This means that at any given time, a BitClout user can immediately buy or sell another user's creator coin from that person's profile. A user profile's coin is minted (i.e. comes into existence) whenever someone purchases that profile's coin by trading in BTCLT.
Whenever a new coin comes into existence for that profile, the value of that coin increases in terms of BTCLT as the next coin to be minted will require more BTCLT.
Upon purchasing a profile's creator coin, the BTCLT used to purchase that coin will be 'locked up' in that profile. This enables the holders of that coin to be able to sell to the profile for BTCLT based on the market price at any given time. When the creator coin is sold back to the originator of that coin, the coin is 'burned' (destroyed) and the market value for the creator's coin will drop as per the bonding curve.
As a continuous token, a creator's coin have the properties of:
- Limitless supply
- Deterministic price (as explained by the formula above)
- Continuous price (the price of coin
nis less than token
n+1and more than token
- Instant liquidity (the profile would always have BTCLT to buy back the tokens it sells)
The BitClout onepager provides some details on how this pricing model works along with a spreadsheet on how to figure out a profile's creator coin price based on the circulating coin supply for that profile.
The Potential Benefits Of Having A Profile's Creator Coin
As a work in progress, the BitClout platform currently provides no utility for holding onto a profile's creator coin.
As mentioned previously, reclouting ('retweeting') is not yet available on the platform. There is some discussion that at some point, one can reclout a person's post with some financial incentive baked in for doing so. One benefit other than 'bragging rights' proving that you were one of the 'earlier' reclouter of a profile is that you can pay an influencer such as Kim Kardashian to promote your content in return for purchasing her coin.
In the BitClout onepager, the BTCLT team declare the intent to build some features on their platform that would make it worthwhile holding onto a profile's creator coin. These features are rather speculative at the moment as there is no public roadmap but possible tangible benefits for holders of a coin would be that one could use it to buy access to the owner of a particular user profile. Holders of a profile's coin could gain an exclusive AMA, a sponsored post promotion or use the coin to purchase a subscription to the profile's exclusive content.
Other possible benefits could include the possibility that the originator of the creator coin offers some form of reward or incentive to holders of their coin to keep HODLing.
Analysis: What BitClout is Currently
The BitClout platform offers a grand vision for how a social network with monetary incentives built in for content creators on its platform could work. It also makes the promise that the platform would be (1) decentralised and (2) open source.
Currently neither of those promises hold true.
The source code for BitClout's "unique blockchain" has not been released. Neither has any information been made public as to how one can run a BitClout node.
In terms of precedent as social network with crypto financial incentives baked in, there are a few which one could draw parallels from. Steemit which is a cryptocurrency equivalent of Reddit and Earn.com which enabled users to earn Bitcoin when answering inbound message requests.
There are also a number of controversial aspects to how BitClout has been launched which can't be easily overlooked.
The biggest one which I have outlined previously is that one can purchase BTCLT or the creator coin of a BitClout profile but there is no mechanism to withdraw from the platform. Whilst one could make arguments that the BitClout team wants to increase user retention and withdraw the possibility of capital flight after quick gains, this conveniently missing feature and that it is not yet decentralised, make it seem a bit scammy (BitConnect 2.0 as some pundits call it).
Whilst the impossibility of withdrawing from the BitClout platform is not too dissimilar from purchasing a new project's token in an Initial Coin Offering (ICO), there are a few things to note. The price of BTCLT is currently artificial and the only winners are the people who buy in early. This either is a smart design to benefit the oft-looked first adopters of a social network or is a Multi-level Marketing and possibly Ponzi scheme.
When one buys a token, until the token is listed or there is a large private market for individuals (over-the-counter) willing to trade for it, the token only represents a perceived value until it floats.
The 'market' price of BTCLT at the moment only reflects buying pressure as there is no selling pressure. BitClout uses an atomic swap mechanism to facilitate the BitCoin to BitClout exchange with the pricing of BTCLT baked in to double for every million BTCLT sold.
Assuming that $BitClout maintains a price of $155.79 USD and that there is currently an estimated ~8,000,000 $BitClout have been minted, then at the whitepaper's theoretical amount of 10 million $BitClout being minted in the long run, each $BitClout would be worth ~$155.79 * 2^2 = ~$623.16.
In the event that BitClout overtakes Twitter as a default social network platform and the amount of $BitClout minted reaches 19 million, then each $BitClout under the assumption of current $USD pricing could potentially be worth around $319K (~$155.79 * 2^11).
A rough BTC/$BitClout calculation from tjin below and how many $BitClout have been minted:
As there is no selling pressure, this means that BTCLT can only go up in price. Even if one wants to sell or exit - this isn't possible.
This lock in period means that any person buying BTCLT or a profile's creator coin is speculating on not only BitClout succeeding as a social network but also that the BitClout team will enable BTCLT selling and that BTCLT will hold its value.
The BitClout platform is currently being driven by a narrative phenomena.
Like Bitcoin or the meme markets, the value of BTCLT is being driven by the concept known as narrative economics. Interest in BitClout is being driven by speculation that the social network will become valuable and that BTCLT's value will hold, making it a useful token to have. The narrative that BitClout is a superior alternative to our current social networks because of the cryptocurrency incentive feature is predicated on an information cascade in which a sizeable population hold the belief that BTCLT is indeed valuable. Even if it is currently a counterfactual, so long as this belief holds true - BTCLT will be valuable.
In the crypto community, there is an ethos of decentralisation, permissionless network and decentralisation.
Unlike Bitcoin, BitClout hasn't released its blockchain code publicly and isn't decentralised yet. The BitClout platform has already had a rollback and the BitClout team have chosen to selectively benefit a number of insiders with a password-locked pre-launch and monetising through scraping the profiles of top Twitter users without their permission.
Whilst it is common for a team in a cryptocurrency project to premine blocks, there is usually more clarity on governance structure and token distribution. Until there are independent nodes and miners, BitClout is not decentralised and not dissimilar from Twitter. There is no possibility to fork the BitClout code if anything goes wrong in the network. Although BitClout claims to be "decentralizing social" akin to how "Bitcoin is decentralizing money" and the team have adopted the mantle of Satoshi Nakamoto's pseudonymity, the platform has given a preference to Silicon Valley insiders.
As BitClout isn't open sourced yet, the team and the early investors have also premined some of the creator coins that they think are most valuable and have pushed up some of the prices.
Whilst there have no announcements from the official channels of BitClout's investors, there are apparently some big names who back it. The list of who's who in Crypto include some pretty big Silicon Valley names such as a16z, Alexis Ohanian, Coinbase Ventures, Gemini Capital, Sequoia Capital, Alexis Ohanian and more.
BitClout has “pre-mined” two million BTCLT tokens for its founders and investors and, if the project is following the model of other token projects, has likely distributed them at a steep discount.
The list of insiders and the people who have benefited from some type of premine based on their existing Twitter ranking means that BitClout starts off as a financially incentive biased social network to start off with.
The early investors into BTCLT who know the team's identity have the benefit of always getting their money/funds returned to them. Whilst the BitClout team are pseudonymous with two public handles being used diamondhands and maebeam, there are a lot of people who point to Nadar Al-Naji being diamondhands.
If the BitClout platform fails, the big name investors could trade back their BTCLT for Bitcoin and walk away with very little financial harm.
If the narrative that BTCLT is a valuable currency to trade Bitcoin for succeeds in creating an information cascade, the big name investors make a massive Bitcoin financial gain as per the BTCLT token bonding curve. The big names investors as early holders of BTCLT and the 'early influencers' (as determined by whether their Twitter profile was scraped) are therefore incentivised to promote the platform and shill the BTCLT cryptocurrency.
The 9,974th 'Top Twitter user', Jo Swinson, who has 159.3K followers on Twitter has been given $6.91K of coins for example. All she needs to do to claim it is tweet her BitClout public key and "#bitclout". In this manner, BitClout is attempting to bribe/incentivise influential people to promote their platform and create a status quo that benefits those with premined coins.
The higher ranked the scraped Twitter user, the more premined coins they have been allocated.
Some of the top Twitter influencers have made claims on their account, such as Steve Aoki.
Whilst the BitClout is not yet open source, there is a public explorer so there is a bit of transparency in terms of where the Bitcoin is and where BTCLT is being spent. The explorer allows one to see every transaction/event that happened on BitClout. Every coin purchase, profile update, follow/unfollow and post submissions. New BitClout users are being given 0.00002 starter BTCLT by Merlin.
Conclusion on BitClout as a social experiment
Some cool things about BitClout
There are quite a few people excited about it.
So much so that despite only being just over a month old. The Genesis Block for BitClout was on the 1st of March. There are already people reverse engineering bits and pieces of BitClout and thinking about possible applications to build on top of it.
One developer, Hunter Paulson, has for example made some documentation on an unofficial BitClout API and is also developing a BitClout Taxes app (for when one can eventually cash out).
The concept of fans being able to support a creator through a creator specific creator coin is interesting.
Some not so cool things about BitClout
BitClout is still rather rough around the edges.
When inspecting the site, I can see a lot of TODO Fixes:
There are also claims that BitClout is paying a suspect individual from Nigeria who may be using Twitter bots to promote the project on social media. The paid shilling is from some of the BitClout's Bitcoin wallet being paid to Hydra, a darknet market.
BitClout is trying to promoting a cypherpunk ethos but the method in which they are building a social network is not dissimilar from the existing social network giants. The team behind BitClout have not been the most ethical in how they have rolled out the platform or distributed BTCLT.
The premining and lack of transparency in governance does not entirely give power to creators but concentrates it among the early investors.