Thought for the week 💭
Is BitClout the future of social media?
BitClout is a new social network that is built on its own custom blockchain. It currently looks and feels a lot like Twitter. It allows users to post text, images and follow others. However, it has one fundamental difference - BitClout allows users to ‘invest’ (and speculate) in people and posts with real money.
Since launching publicly 2 weeks ago, it has been met with considerable controversy. Critics have suggested that it is a glimpse into our dystopian future, an unnecessary new asset class and a potential Ponzi scheme. Nonetheless, BitClout has gained the backing of some of the most reputable VCs and angels including Sequoia Capital, Andreessen Horowitz, Chamath Palihapitiya’s Social Capital, Coinbase Ventures, Winklevoss Capital and Reddit co-founder Alexis Ohanian. It was created by an anonymous group of developers led by someone known as “diamondhands” (who it seems is relatively well known to be this man).
BitClout is not the first crypto social network. However, in my view, it has the potential to be the first majorly successful one. Relative to other crypto networks, BitClout has better economic incentives and has leveraged growth hacking techniques more successfully. It also benefits from a more well-timed go-to-market and deeper pockets in the form of major VC backing.
What is BitClout?
BitClout is a proof-of-work blockchain with a similar architecture to that of Bitcoin. However, BitClout can support more complex transactions that can be used to store social network data like posts, profiles and follows. Like Bitcoin, BitClout is a fully open-source project. There is no single company behind it - it’s “just coins and code”.
BitClout has its own native cryptocurrency called… BitClout (BTCLT). Users can buy BTCLT by trading in Bitcoin (BTC). The price of BTCLT doubles for every million BTCLT sold. This makes BTCLT naturally scarce, resulting in 10 to 19 million BTCLT minted in the long run (less than BTC’s max supply of 21 million).
Users can then transact the BTCLT tokens to perform various actions on the platform. Right now, most of these actions involve exchanging BTCLT for “creator coins”. Controversially, BitClout’s makers scraped Twitter and automatically populated the network with the top 15k Twitter profiles (without their approval). All of these 15k profiles can now be bought/sold on BitClout - despite the fact that many creators have not explicitly consented to be on the platform.
When (if) the creator eventually joins, they will be rewarded for joining the platform by being given a percentage (10% by default) of all of the coins that other users have bought. For example, assuming I spend 100 BTCLT on buying Elon Musk’s coins, he will get 10 BTCLT from me if he eventually joins the platform. He can theoretically trade these in for BTC and therefore USD… although controversially, the platform does not currently allow withdrawals (hence the claims of it being a Ponzi scheme).
This is where it gets Black Mirror-esque. Every user who creates a profile on the BitClout blockchain automatically gets their own creator coin that other users can buy and sell. The price of these coins is dependent on the demand for the coin. As more people buy your coins, the price goes up and as more people sell, the price goes down (similar to stocks).
Here is a dystopian sounding extract from BitClout’s documentation:
“Creator coins are a new type of asset class that is tied to the reputation of an individual, rather than to a company or commodity.
They are truly the first tool we have as a society to trade “social clout” as an asset. If people understand this, then the value of someone’s coin should be correlated to that person’s standing in society. For example, if Elon Musk succeeds in landing the first person on Mars, his coin price should theoretically go up. And if, in contrast, he makes a racial slur during a press conference, his coin price should theoretically go down.
Thus, people who believe in someone’s potential can buy their coin and succeed with them financially when that person realizes their potential. And traders can make money buying and selling the ups and downs.”
I appreciate that on the surface, this sounds completely unnecessary… like the most flagrant and aggressive form of capitalism. However, as I will discuss below, these creator coins can be used to facilitate more than social status speculation. BitClout enables creators to monetise their fanbase in a multitude of novel ways. By providing creators with these tools, it unlocks new business models and therefore new forms of value creation. Moreover, it leads to a more equitable distribution of wealth relative to centralised platforms - with the actual creators of the content receiving the bulk of the financial rewards - rather than the platform itself.
What problems does BitClout solve?
A few months ago, I posited that a successful decentralised social media platform was an imminent reality. My view is that the market pull for a decentralised solution is so fierce that one solution is very likely to succeed in the near term. An extract from my post is below:
Never before have social media’s problems been as critical as they are right now.
The platforms are in a content moderation battle in which everyone is the enemy. They are being attacked from every direction. They are either moderating too much (and therefore suppressing freedom of expression) or too little (thereby enabling political interference and insurgency). It is an impossible battle to win. Facebook has 2bn users posting 100bn times a day. The global SMS system has 20-25bn messages a day. How can we realistically expect a single party to moderate a system like this in a way that appeases everyone?
Meanwhile, the use of black-box ML algorithms that keep users ‘hooked’ on feeds for as long as possible has come at the expense of mental-health, political polarisation, and misinformation. Should one company really be allowed to have this much influence on the national and international zeitgeist?
It is becoming increasingly evident that a new solution is needed. Something that is:
Open-source: Why? So that everyone has the ability to inspect, understand and modify the algorithms that determine so much of their mental state.
Decentralised: Why? So that no single company or government is allowed to make 100% of the decisions.
Interoperable: Why? So that multiple networks can work in tandem - enabling governance and moderation to be split between multiple parties.
More financially equitable: Why? So that the financial rewards are shared with the the actual creators of the content - not just the technology providers.
BitClout meets all four of the requirements I outlined above (open-source, decentralised, interoperable and more financially equitable).
Benefits: Open-source, decentralised and interoperable
The main benefit of a social media platform being open-source and de-centralised is that anybody can build ‘third-party apps’ on top of the platform without the risk of being de-platformed. This results in:
More choice — Most people are currently accessing BitClout from the main node “bitclout.com”. However, just like Bitcoin, anyone on the internet can run a BitClout node that serves the BitClout content. If BitClout is successful, there could be hundreds or even thousands of other nodes in the future. Each of these could have its own unique feature sets. For example, one node might be more tailored towards children with extremely stringent moderation policies. Contrastingly, another node could be suited to users who prioritise freedom of speech. Crucially, BitClout enables users to determine their preference. Users are not reliant on a single, centralised entity that writes 100% of the code (and therefore the rules). Anyone can ‘look under the hood’ - and tweak the experience to better serve the community at large.
More dev resources — Since BitClout’s code is open-source, it enables the global ecosystem of developers to work together on solving the problems that have plagued social media (e.g. disinformation). While Facebook has thousands of developers working on these issues internally, this is a small fraction of the number of engineers who can work on solving the problems of email (e.g. spam filtering). Anyone can build tools that layer on top of the standard protocols that power emails (POP3, IMAP and SMTP). This is why spam filtering is so strong today - it has been built using the collective efforts of tens of thousands of developers.
Interoperable: BitClout is also open to bridges to other chains. According to diamondhands “Any platform that wants to implement an atomic swap from BitClout onto their chain, that would just be such an amazing thing.” This is promising since it will allow BitClout to work in tandem with other networks. This will allow governance and moderation to be split between multiple parties. Given the criticisms that have been levied on centralised platforms like Twitter and Facebook for their excessive influence on society - this is an important feature of any future social media platform.
BitClout’s ‘killer feature’ - better economic incentives
BitClout is not the first attempt at a decentralised or open-source network (e.g. Steem or Cent). It is also not the first to generate social tokens which represent actual people (e.g. Roll or Rally).
However, in my view, it has the best economic incentive structure. Unlike previous platforms, it prioritises the value of the creator - rather than their content. In this way, BitClout aligns the incentives of the audience and the influencer in a way that previous platforms did not.
According to diamondhands:
“The platforms that have existed up to today, really focus on speculating on the post as the atomic unit, rather than on the creator. And there’s a very big difference, because posts are short term. That makes it not really very exciting as an asset class. Whereas if you have a creator that you can speculate on, that’s a very long-term thing that you can really invest in for a long time.”
Understandably, the creation of a speculative ‘human’ or social asset class does not feel like something that would create actual value. In fact, it sounds like a bubble waiting to burst. However, BitClout’s creator coins have significant functional value beyond mere speculation. This is where I see the most upside in BitClout. Here are a few examples of how the BitClout blockchain can be used to unlock currently untapped value creation via new business models:
Fan-to-creator monetisation options: A BitClout creator can offer coin holders exclusive benefits. For example, only users who own a certain amount of their coin can participate in the creator’s comments section. Alternatively, the creator could prioritise and reply to DMs based on coin ownership. This would enable popular creators to identify and communicate with their true superfans. They could also offer certain tiers of coin holders exclusive content. The possibilities are endless. Multiple nodes can be created on top of BitClout to cater to the countless fan-to-creator monetisation use cases that are likely to exist. This results in a more powerful and versatile version of Patreon or OnlyFans.
Removing the middle-man: BitClout can be used to remove intermediaries. This provides creators with more financial benefits than other platforms. For example, BitClout can be used to facilitate (or automate) sponsored posts without the need for an intermediary (such as an agency or the platform itself). Creators can have an “inbox” where anyone can “bid” to have them repost (aka “retweet”) a particular post. If you want Kim Kardashian to retweet your fashion brand, you can submit an entry into her inbox, and if she retweets it then she keeps your money. The bids can all be made using the creator’s own coin, thus significantly increasing the demand for the coin. Again, there are countless creative ways in which this could be used to facilitate payment exchanges between parties on the platform. The key is that the creator has full control. Combined with the algorithmic innovations of the open-source community, rich economic ecosystems are likely to emerge on top of the BitClout ecosystem that facilitate these new economic models.
Is this the future of social media?
Accurately predicting whether a social network will go from zero to one is always fraught with risk. Social networks either reach ‘critical mass’ and become highly successful… or they don’t and they die. It is hard for there to be a sustained middle-ground due to their heavy reliance on network effects. The chairman of AT&T pointed out back in 1908, “a telephone — without a connection at the other end of the line — is not even a toy or a scientific instrument. It is one of the most useless things in the world.” The same is true of social networks.
BitClout faces many challenges. It had a pretty unsuccessful go-to-market that even its own investors were unhappy with. No one can currently take money out of the platform. The site keeps crashing. It's being sued for its aggressive tactic of scraping Twitter data without the users’ consent. Its name is kind of stupid. All of these factors could easily prevent it from reaching critical mass. If this were to be the case, it would join the many failed attempts of social networks that litter the internet today.
Nonetheless, I believe that BitClout has a strong value proposition for creators. It has also launched with perfect market timing - given the plights of social media, the fact that crypto is seeing increasingly widespread acceptance and the fact that the creator economy is exploding. If the developer and creator community can get behind this… it could yield something really special.
I for one am looking forward to taking part in the BitClout ecosystem. If anyone has any good tips on which creators to buy - let me know 😉
News from this week 🗞
Rapidly growing mobile games company Tripledot Studios has secured a £57 million Series A round. Tripledot Studios, based in London and Minsk, was founded in 2017 and has rapidly scaled to strong profitability, reaching more than $100m revenue run-rate as of the beginning of 2021. Link
Swedish esports tournament platform Epulze has secured an investment of SEK 57m (∼£4.7m) from its latest funding round. Link
Casted - an audio and video podcast product aimed at B2B marketers has raised $7 million in Series A funding. Casted’s SaaS platform gives marketing teams a way to publish content. Once published, Casted provides access to a “fully searchable content archive” with transcription services and tagging. It then also helps the company amplify that content via cross-channel distribution. Link
AR startup PlayShifu on Tuesday raised Series B funding of $17 million. Founded in 2016, PlayShifu creates engaging and immersive AR experiences for children that encourage early STEM skills. Link
ShareChat an India-based social media company has raised $502 million in funding to grow its popular short-video app Moj. The round comes just months after the Indian government banned ByteDance-owned rival TikTok from the country. The round -- whose backers include Twitter, Snap, and Tiger Global Management -- assigns the company a post-money valuation of $2.1 billion. The ShareChat app currently has 160 million monthly active users, while Moj has amassed more than 120 million monthly active users within nine months of its launch. Link
MasterClass - a company that sells subscriptions to online courses taught by experts, is raising new funding led by Fidelity at a $2.5 billion valuation, says Axios. It last raised money in mid-2020 in another Fidelity-led round, at a reported $800 million valuation. Link
NoCap a live-streaming concert platform, has raised $3 million in seed funding.Link
Trax, an 11-year-old, Singapore-based image recognition company focused on retail analytics, just raised a whopping $640 million in Series E funding. Trax combines computer vision and cloud-based software to help brick-and-mortar stores manage their inventory, merchandising and operations. Link
Canva has raised $71 million in new funding at a post-money valuation of $15 billion. Founded in 2012, Canva is a graphic design software solutions provider that helps users to design presentations, social media graphics and more with various layouts, images, photo filters, icons and shapes, and fonts. The company’s platform combines a drag-and-drop design tool with a stock library of photographs, illustrations and imagery. Canva claims more that 55 million monthly active users. Link
Sendbird which makes a messaging-as-a-service API that provides chat, voice, and video messaging to a long list of customers, including Reddit, Hinge, Paytm, and Delivery Hero, has raised $100 million in new funding. Today, customers collectively channel some 150 million users through Sendbird’s APIs to chat with each other and large groups of users over text and video. Link
Holler, described by founder and CEO Travis Montaque as “a conversational media company,” just announced that it’s raised $36 million in Series B funding. Holler works with partners like PayPal-owned Venmo and The Meet Group to bring more compelling content into the messaging side of their apps — or as Montaque put it, the startup aims to “enrich conversations everywhere.” Link
Patreon triples valuation to $4 billion in funding led by Tiger. The valuation is more than triple what it was six months ago, and the latest financing brought in $155 million for the company. Patreon allows fans to pay a monthly fee to their favourite musicians, podcasters or YouTube stars in exchange for exclusive content. More than 200,000 artists and entertainers use Patreon to connect with and raise money from fans. Link
Emerging content creator Meadowlark Media has raised $12.6 million in Series A funding. Investors include DAZN, DraftKings, Wasserman and Michael Lynton, former Sony entertainment chief and now chairman of Snap. Link
Virtual concert platform AmazeVR has raised $9.5 million in funding. AmazeVR was founded in 2015 by the founders and former executives of South Korean-based mobile platform company Kakao. After initially launching with a few dozen interactive virtual reality experiences available through a subscription service – including being the first VR platform to carry the animated short film “Gloomy Eyes” narrated by Collin Farrell – AmazeVR recently shifted its model to focus to creating new immersive experiences for recording artists. Link
Charles, a Berlin-based startup that offers a “conversational-commerce” SaaS for businesses that want to sell on WhatsApp and other chat apps, has raised €6.4 million in funding. The SaaS connects chat app APIs, such as WhatsApp and Messenger, with shop and CRM systems, like Shopify, SAP and HubSpot, all delivered through a user-friendly interface. The idea is to make it easier for businesses to meet their customers on the channels they already use and to bridge the gap between sales enquiries and support, and actual conversions. Link
Interesting data from this week 📈
Across public software companies, the average sales efficiency fell from 0.6 to 0.51 over the last 3 years. The majority of that fall occurred before Covid in 2019. In contrast, sales efficiency improved throughout 2020 (despite the fact the world was in lockdown and therefore couldn’t meet face to face).
Source: Tomasz Tunguz