Reddit releasing blockchain-based tokenization with "Community Points" - detailed breakdown
A follow up to my post yesterday. Things have escalated since, and now more people are seeing the Wallet and Points show up in the official Reddit app. It's clearly still being A/B tested, but we have a ton more information as the Wallet is now fully featured with information.
Huge credit to Reddit user MagoCrypto for parsing all the official information as text. You can read the official text from the app here.
The overview
Reddit's Community Points is an ERC-20 token residing on the public ethereum blockchain. It's a multi-purpose, fully-fledged tokenization, voting, tipping, membership and gamification token.
The Points are decentralized as you'd expect of an ERC-20 token, and we will surely see it go live on exchanges and such. Points can be used in various different ways, as per the different subreddits, with utility expected to expand over time.
Reddit Points will be displayed next to usernames on participating subreddits. Make no mistake, Reddit is going all in!
Distribution
Reddit has a pretty detailed distribution model, which you can go through in the link above. I'll just highlight the important points. Initial distribution will be 50 million Points, based on Karma earned in the subreddit. It's not clear if this is applies to all subreddits, or particular subreddits, or if each subreddit will have it's own sub-Points, so to speak. Either way, given the available information, it's likely to be global distribution, with each subreddit having their own allocation.
The first year will see 50 million Points distributed, with further years seeing narrowing inflation, reducing down to a total supply of 250 million Points.
There's some cool tokenomics with burned points (more on that later), where half of burned Points will be reintroduced each month.
Beyond the initial distribution, Points will be distrubted on a 4 weekly basis. Reddit will publish a list of karma amounts for each user in the subreddit. The community has a week to adjust the amounts, based on abuse etc, and a final list will be voted on by the community, and will lead to the smart contract distributing the Points as agreed.
Moderators get 10% share, Reddit gets 20%, and another 20% is reserved for the Reddit community. Again, unclear what that means just yet.
Memberships
One of the main utilities of Points would be to buy Memberships within subreddits. This will unlock special features like badges, emojis, GIFs, etc. Of course, this will be expanded over time for a complete gamification solution, and subreddits will have flexibility to use it whichever way they want.
The cool thing here is that Points spent to buy these memberships will be burned, effectively reducing supply. If people buy Memberships with fiat, Reddit will take their money and burn their own Points.
Voting
Voting and karma distribution on Reddit will continue to be as usual. However, poll results will have a stake-weighted voting component. Of course, there are surely unspecified algorithms at work here.
Regarding karma fraud being exacerbated by Points distribution, Reddit claims to have several mitigation strategies in place. Community members of a subreddit will be notified of possible abuse, and they can take action to ban offending amounts from Points distribution, or even ban from the subreddit outright. It remains to be seen how effective this will be, though Reddit's detection algorithms have improved by leaps and bounds.
Purists will point that this is not strictly decentralized, if people can be banned. But it is, just a mature evolution with abuse mitigations. Each subreddit will have its community members vote on the Points distribution - that's decentralized enough for me, but at the same time affords the benefit of eliminating fraud. Subreddits that are found to be unfair will naturally be uncompetitive, and members will move on to better subreddits.
Other utility
There's of course going to be direct tipping, and possible subscriptions. Transfers between users will obviously be possible through the Wallet. But the great potential here is that subreddits and communities can find utility for the Points token in their own ways. Come to think of it, I can see social networks outside of Reddit also use these Points in creative ways.
Summing it up
A lot of questions still remain, and details will surely come when Reddit officially announces Community Points. But it's pretty clear now that Reddit is taking this seriously - this is not just an experimental feature that'll be forgotten. I have plenty of concerns, particularly with the token distribution and the abuse/sybil attack mitigation. But this is exactly the right approach. It's an add-on bonus on top of the social network, which the community can derive value from whichever way they please.
All i can say is, yikes.
This could spell bad news for HIVE and STEEM.
No matter the system, even if its more flawed by a factor of a 100 then what we have here, the token Marketcap (if listed) will still be huge.
Eh, I think the Reddit/Hive comparison is a bit strange, honestly. Mostly down to the fact that the vast majority of Reddit's posts are quite short, specific, and its primary driving force is the engagement via comments. Hive thrives more on the quality of posts, with comments just serving as some encouragement.
Of course there are some similarities, but the comparison still feels like a huge stretch to me. The driving force of Hive is more that the content that gets rewarded here has a bit more effort aside from linking some news and discussing it. Another negative to consider is that Reddit will clearly go through lengths to have the tokenisation heavily profit them, that's going to be the entire point of it.
I feel what differentiates Hive from something like Reddit is that it can still just be a place for blogging, it's someone's own little place for posting a portfolio or sharing very personal moments of their lives into several hundred words; the comments they get probably won't affect them.
I guess to me the comparison just feels like comparing Hive to Twitter merely because we can reblog and 'like' something, despite the content itself being vastly different.
The fact that Reddit's posts are short and drive engagement; while Hive has longer, more blog-type posts is more a matter of culture rather than something technical. The general format is pretty much the same. There are actually a few subreddits that focus on long-form blogging, story writing etc. Back in 2016, we had an initiative focused on shorter posts, link-shares, memes etc, which proved that Steem could also work in that manner. So, both can work either way, but of course, the majority of content is different between the platforms. We saw in 2017/18 that there were far more casual type posts and shitposts, so I imagine if Steem/Hive ever achieved mainstream adoption, we'd see a cultural shift towards being somewhat more Reddit-like. Similarly, now with Points going out on Reddit, I'm sure we'll see more emphasis on quality on some subreddits there too.
What Hive/Steem does have in addition are certain features from Twitter as you point out - the ability to follow/maintain personal feeds and reblog to them. Reddit has actually tried a Friends feature, but it never really caught on and has been de-emphasized in UI over time. I suspect that's once again due to Reddit's general culture of being a more casual information-based (rather than people-based) social network.
Big players entering new markets can be bad news for the established incumbents. However, very small fish in the market can actually benefit from the rising tide. Hive and Steem are so tiny and negligible that Reddit getting into the blockchain game can actually draw some attention to it. Make no mistake though, a modest increase from negligible baseline is still pretty much negligible. Reddit has literally thousands of times the activity Hive/Steem ever had.
The thing about crypto is, unfortunately, no one actually uses it. The number of active crypto users id say should be measured in thousands.
While Hive/steem numbers are negligible in the grand scheme of things they are quite significant in the crypto sphere.
Reddit entering crypto could be massive for cryptocurrencies with them bringing in more eyes to crypto then ever before. Or they could just make it a side thing that creates more problems then benefits for them and their users.
My fear is if indeed REDDIT coin enters crypto and is placed on CMC, and is traded on Binance etc. and it just ends up being a "side thing", doesnt bring the eyes on crypto, that it could steal the attention Hive, uptrend, minds, steem etc. has among crypto social media users.
Take BTT as an example with Bittorent that has hundreds of millions of users. It meant nothing in the long run for the price of the token. Its boosted by Justins efforts.
(Though, expecting a bunch of freeloaders to invest in your token was a bit reaching, lol)
Remember, holding is also using, and there are millions out there "using" BTC as a store of value. At the end of the day, the number of users don't really matter - it's all about economic activity. That's where bitcoin and ethereum are the only two chains with any significant economic activity. Hive/Steem is absolutely negligible on that scale.
Anyway, the Reddit Points will definitely be on CMC, listed on Binance etc. It's an ERC-20 token like any other, and the Reddit app clearly confirms that -
I hear you, it's possible that only the existing crypto enthusiasts actually use Points, and it goes invisible to the mainstream user. And certainly, I expect only the most savvy of Reddit users to use it. But even if 1% gets it, it's still 5 million active users! Slowly, but surely, over time, more people will start using it, and beyond a critical mass, there'll be an exponential growth. It's hard to say if that will happen, but either way, it's still a huge deal for crypto adoption.
BTT is still in its infancy with no real utility. They have some stuff planned, but I'm skeptical. I'd instead point you to BAT - it now has over half a million of content creators actively accepting BAT, some pretty big names too. The active consumers is harder to track. Note that it's still in beta and slowly rolling out. Brave is on course to hit 10 million users some time this year, and when they start actively pushing BAT, it has the potential to be another million user token.
Millions? Thats stretching it a bit. top 1% hold 90% of all BTC. 18 million wallets once you remove dust.
You can chalk up to that all those that hold couple dollars.
What are you left with?
What i dont get is why you would assume that most of those that are holding are using it as a store of value. It could be equally (or more so) the case that they hold it as a speculative investment.
Thats the question though. How will Reddit present it. Your concern might be distribution etc. (which is fair) but i think the first hurdle is "how do they present it"?
If its something they mention briefly and move on then it might as well be a BTT 2.0.
BTT has a real utility. It rewards seeders of copyrighted content (99,8% of all Bittorrent traffic) with a few cents for seeding. It pays you to violate the law.
I cant say much about their future plans.
BAT is something im looking at right now. Brave was a bit dissapointing so far. My experience is that its quite slower then Chrome, at least for me.
The thing about users and those that utilize the token and blockchain can be quite far off.
If token price, token transactions, token usage is not affected by project user numbers then maybe the project that launched the token doesnt really need blockchain tech
Estimating a number is difficult, as most retail users store their BTC with a custodian/exchange. Coinbase alone has 30 million users, for example. Either way, pretty much every research available on the matter will show you a number definitively in the millions. Holding, speculation, trading are all usage scenarios for a SoV asset like BTC. As for "monthly active users", it's definitely much less.
Brave is basically a reskin of Chrome (Chromium), except with trackers and ads disabled. It's definitely faster than, or at least as fast as, Chrome. Give it a shot, it's a really good browser that puts privacy first.
This all sounds like fitting niche cases and anything that could "fit the mark" of legit token usability. I trust none of that.
Things we would not accept for anything else irl we accept for bitcoin.
Bitcoin is more fringe them any other alt coin since it has 0 appeal outiside it fading market effect.
Honestly, if Satoshi doest show up Vitalik will outshine him in 2 years time.
Network effects are potent. Bitcoin will likely remain the reserve currency of the crypto market for decades to come. Ethereum 2.0 will actually become the scalability and usability solution for Bitcoin. If you notice, there's a lot of work happening to get Bitcoin usable on the Ethereum blockchain, with WBTC, tBTC etc. These will explode when Ethereum itself starts scaling with 2.0.
Aside from Bitcoin and Ethereum, all other tokens will remain niche due to a lack of network effect, and a dwindling timeline to develop one. Still, a niche could be worth billions if this space goes mainstream.