This post is a response to CoffeeZilla’s claims in the following video that BitClout is a scam:
While I’m not involved with the BitClout founding team, and am not a blockchain developer, I am a crypto veteran, and wanted to address the video at the challenge of Barnacules Nerdgasm subsequent to our conversation tonight on BitClout.
Below, I paraphrase the arguments presented by CoffeeZilla throughout his video, adding rebuttals and counterpoints:
@ 0:20 Users hold all the risk!
BitClout is free to use and presents no financial risk to users. However, it is a platform where users can earn crypto for contributing content.
@ 0:41 The founders are greedy!
This is an opinion and is totally unsubstantiated. The crypto-economic dynamics of BitClout are similar to other successful and reputable projects.
@ 1:30 They’re stealing social identities!
Nothing is being stolen. The BitClout core team are republishing publicly available information. Every profile that is reserved clearly indicates such. The team have also been courteous and removed anything posted whenever there was an objection, such as the one publicized case involving a politician.
@ 2:10 They “pre-paid” all of the fans of bitclout!
I’m a fan of BitClout and I haven’t received any form of payment from anyone. In fact, I’ve been networking with a large number of bitclouters lately and I believe that only 1 or 2 of them was an early investor.
@ 2:30 They took too much in the premine!
This opinion is certainly not shared by everyone. The dynamics that relate to what the optimal premine should be are complex. In the case of BitClout, where there is a large amount of work to be done to build out a robust technology stack, plus a content and business ecosystem, and also to support the stability of the network currency, it is much more logical for founders to premine a larger amount.
Bitcoin by contrast had no premine (it’s perhaps debatable whether or not you’d consider Satoshi and friends’ early mining as a premine). But the Bitcoin project was originally much smaller in scope than BitClout is today.
Ripple, a crypto project that does not use proof-of-work mining and it not considered to be fully decentralized, from the beginning endeavoured to build a large business ecosystem on top of its coin. This could be how they justified a 100% premine. While the premine in this case is controversial, Ripple is widely used today and has a market cap of $60 billion.
BitClout is a unique new project with its own set of complex dynamics. And while I don’t have a strong opinion on the choices made by the BitClout team, they do appear logical.
@ 3:00 There’s a premine of 2.3 million BitClout on a max of 19 million BitClout!
First of all, why is that problematic? Secondly, the presenter reveals that he doesn’t understand the theory behind the basic mechanism of price discovery within BitClout. He quite literally doesn’t know what he’s talking about. And if that’s the case, it means he hasn’t even absorbed the BitClout one-pager, which is constantly criticized for being much too short and simple. This is a good reason not to take anything the presenter has to say on crypto seriously.
@ 3:27 The founders are deceitful!
The presenter provides no evidence to back his claim. Again, he doesn’t understand the subject matter, so maybe we shouldn’t fault him too much for a rash ad hominem?
@ 3:55 This is not a project built to last! It was designed to screw people over who come in late!
Totally unsubstantiated opinion with no basis in reality.
@ 4:23 “Big boy” Chamath and others at the top got a lot of BitClout!
These people invested into the project to make it happen. This is how things work at this stage of human civilization. Investors put up capital and take on risk in exchange for a potential future gain. And there’s a reason Chamath is successful at it! He makes great early investments!
@ 4:50 You can’t get your money out!
This is just a flat out lie. There has been a very popular OTC market on the primary BitClout Discord doing over $1 million in volume per day, as well as several smaller OTC markets, plus a series of new projects, such as BitSwap (read their brand new whitepaper), which aim to provide liquidity prior to BitClout being listed on established crypto exchanges.
@ 5:22 BitClout uses “a stupid growth hack”
It’s been referred to as ingenious by famous marketing executives and crypto veterans.
@ 7:00 No one knows or understands anything about the genesis block!
This point is false as we know it was the founding team behind this. (Duh.) It’s also somewhat of an irrelevant point as the coins were indeed moved.
@ 7:15 They stole the profiles!
Again, they didn’t steal anything. They actually added something valuable to those social profiles. It could be called gifting, but it certainly is not stealing. It’s a version of something crypto people call an airdrop. A large number of verified creators have happily accepted their BitClout with no issue and there’s been minimal backlash. (I wonder if Snoop Dogg will go for it after all?)
@ 7:55 The BitClout “company” is doing things “illegitimately”
The presenter makes a wild claim about the character of the project with no basis. He also makes the ignorant assumption that BitClout works just like a normal company. Again, he shows that he has yet to grasp the basic subject matter.
@ 8:22 Investors are buying creator coins with their BitClout!
That is central to the purpose of BitClout. It’s the behaviour the BitClout core team must’ve anticipated and been hoping for, and seeing it only reinforces the utility and value of the network.
@ 9:24 Dispersing creator coins to influencers will lure in investors who don’t know what they’re buying!
Again, BitClout’s value is established. It’s a cryptocurrency just like the many other cryptocurrencies that most investors are aware of, and it trades with over $1 million in volume everyday.
The trading volume has actually been increasing steadily. Grab reports from BitcloutOTC.
@ 9:35 Back in the day only the founder took the risk!
This isn’t true as the idea of early stage investment and loans have also been around since back in the day.
@ 9:45 Crypto puts all the risk on you!
Again, the user doesn’t need to invest a nickel. The idea that crowdfunding is unique to crypto is false, and the belief that there is anything innately wrong with it is purely an opinion (and baseless, IMO. Crowdfunding is awesome!)
@ 10:40 A lot of insiders were involved!
I don’t know how many people in the crypto space knew about this project. There’s no reason to assume that’s relevant, though. Crypto “insiders” are absolutely inundated with new projects to scrutinize and involve themselves with.
Anecdotally, I’ve been into crypto for over 8 years and was not involved in any way with the project before it launched. I’ve spoken about the project with 8-10 people in my network who have some background in crypto, and I don’t think even one of them knew what BitClout was before I brought it up. About 3 or 4 of those people are now interested in BitClout.
@ 11:15 The insiders ran up the price on creator coins before regular people could join!
This objection points to the dilemma that the project has to launch at a specific time, and that only a certain subset of humanity will be aware of it on short order. There are several tested ways to launch a crypto project and I’m sure they all spark controversy for some reason or another. What this objection fails to do is substantiate the claim that the BitClout launch was in any way worse than any other crypto launch.
In fact, the nature of the BitClout launch to hype the platform right away to get verified creators on board (as opposed to lurking in the shadows for a longer period of time and milking some sort of ethically questionable strategy), may actually point to a more-fair-than-normal method for launching a crypto project.
@ 12:02 The fees that are going to be charged per clout/post will be insane! Will you want to pay $1 to tweet!
Since the software is currently closed source and in development, and there have been no detailed technical documents leaked, we just don’t know by what mechanisms the various transaction types will be validated. One thing’s for sure, though. It’s ignorant to assume that the BitClout team, who have managed to raise capital from Silicon Valley’s most reputable investors, do not have an architecture for this project that is capable of low fees and high throughput.
@ 12:43 BitClout exploded overnight! It’s bound to collapse fast too!
A valuation of $1 billion is not so high when compared to the valuations of leading crypto projects. In fact, that market cap would have BitClout ranking only 95th among all crypto projects (according to coinmarketcap). Bitcoin, for context, is worth 1,000 times more.
The presenter ends by bringing up a quote by investor Chamath Palihapitiya which essentially says that a business which grows fast, dies fast. It’s just not clear what BitClout-based business he’s referring to. I have no doubt that while some of them will fail, others will succeed.