What Is BitClout and How Do You Invest?

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BitClout wants to be the Bitcoin of social media. A platform much like Twitter, BitClout is built on top of a custom, decentralized blockchain that lets you speculate on people and their posts with real money. Effectively, BitClout is becoming a marketplace for people’s reputations. To date, over $170 million worth of Bitcoin was already invested in the project, being exchanged for BitClout and diverse creator coins.
To test the whole experience I bought a bit of BitClout and some creator coins from creators I think will work to increase the value of their coins (think celebs trending). I must say, it is an uncanny feeling owning coins based on the public perception of a person. It feels like betting on a person.
Who knows if BitClout will catch on, but just thinking of the implications if it does was enough to get me curious and involved.

What is BitClout?

BitClout is a new open-source social network built on top of its custom blockchain. It was launched in March of this year and is very similar to how Twitter works. Users can create a profile, follow other people, post to the global feed, and send messages. And because it uses blockchain technology, it is decentralized with dozens of nodes around the world and can’t be censored. A sort of blockchain-meets-Twitter.
The biggest innovation, besides being a crypto social network using the power of blockchain technology, is attaching a monetary value to each profile. As its name suggests, you can speculate on someone’s clout by buying that profile’s coins. The idea is to be able to participate in someone’s reputation and influence. Deliver value? The value of the coin goes up. Involved in a scandal? Price drops. In theory, at least.
Through these coins, the public perception of someone, or a brand, becomes tradable. Fans can have a financial stake in someone’s success, say Kim Kardashian, who is one of the most influential social influencers. Did you find an up-and-coming celebrity? Buy his coin, maybe even help him out, and reap the rewards in the future. Are you a creator of some kind? Creating and posting content can be enough reason to create your profile and coin and let others take part in your success.
A lot of controversies surrounded the launch of BitClout. To get some initial traction going, the team behind BitClout pre-populated the platform with the profiles of the top 15,000 influencers on Twitter. Each of those Twitter profiles got a profile pre-made on BitClout, and users could already buy their coins. The real owner could then later claim their BitClout profile by posting about it on Twitter, which would be a brilliant marketing move. While many claimed and verified their BitClout profiles, some didn’t like having a coin with their name attached without their permission. This, combined with the fact that one can buy BitClout with Bitcoin but not sell BitClout for Bitcoin, and also that the team is anonymous, made it seem sketchy and kept many people away.
Since the launch, more information has surfaced, and it is rumored that Nader Al-Naji is behind the project. Nader raised $133 million for his first crypto start-up, Basis Protocol, and later had to refund investors due to tightening securities regulations. Many of the same investors and venture capital firms followed him and invested an undisclosed amount into BitClout. Firms like Sequoia Capital, a16z, Winklevoss Capital, and Coinbase Ventures are among the backers. On the platform itself, the admin is @diamondhands, but it is unclear who is behind that profile.
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Since the launch, the platform is slowly but surely gaining traction, with the growth being exponential. To date, over 150,000 creator profiles have been created, and many of the initial 15,000 pre-loaded profiles were already claimed. DJs Kygo and Steve Aoki, venture capitalist Chamath Palihapitiya, artist Scott Adams, writer Neil Strass, and the Winklevoss twins are amongst those who already claimed their profiles. Elon Musk, Ariana Grande, and MrBeast are among the unclaimed profiles.
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How does BitClout work?

The BitClout blockchain is decentralized, much like Bitcoin (BTC) and Ethereum (ETH), and has its native cryptocurrency, called BitClout. BitClout can be bought on the platform’s website, with the price following an exponential curve and doubling for every million BitClout sold. This makes BitClout naturally scarce and resulting in up to 19 million BitClout minted in the long run.
Every profile on the platform gets its coin that can be bought and sold. Once BitClout is acquired, one can use it to buy these coins, called creator coins. By creating a profile, you can have your coins too.
The price of each coin goes up when people buy and goes down when people sell. Creator coins are also sold on an exponential curve, and therefore also scarce since it would eventually cost billions to mint even one more coin.
Whenever BitClout is used to buy creator coins, the BitClout gets locked in that profile, and creator coins are minted and sent to the buyer. When later selling the creator coins, they get destroyed and BitClout gets unlocked and sent to the seller, at the price of the last buy.
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Every profile can set its own “founder rewards,” a percentage of coins that go to the creator’s wallet whenever new creator coins are minted. So if someone buys 100 BitClout worth of a creator coin, and the founder reward percentage is set at 10%, the buyer would receive 90 BitClout worth of the creator coin, and the remaining 10 would go to the creator’s wallet.

How to invest in BitClout?

To join the platform, the first step is to create your profile. When creating a profile, you’ll be given a seed phrase. This is the private key to access your profile and wallet. There is no way to later change or recover your seed phrase, and anyone with access to it can access your account, so guard it safely.
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Once you create your profile, you can buy BitClout directly on the platform or through a third party. BitClout bought directly on the platform is newly minted and follows the exponential curve, with price slowly rising and essentially doubling every 1 million minted coins.
To buy directly on the platform, send BTC to the displayed address, and once the transaction is processed, use the transferred BTC to buy BitClout.
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You can also invest in BitClout through third-party sources. These are mostly peer-to-peer (P2P) and over-the-counter (OTC) exchanges and the transactions are made with BitClout that was already created on the platform. You’d essentially be exchanging with other users instead of minting new BitClout by buying on the platform. BitClout currently goes for about a 40% discount on these crypto exchanges. A few of these exchanges include BitSwap and CloutEx, as well as @BitcloutOTC on the BitClout platform.
After acquiring BitClout, you can buy any creator coins you’d like. Websites like BitClout Pulse and BitClout List offer a great overview of creator coins with price and verification status and are built and maintained by the community.

Features of Bitclout

Bitclout, being a decentralized blockchain, embodies many of the features ascribed to better-known cryptocurrencies like BTC and ETH. And along these, new features emerge by being a social network built on top of blockchain technology.
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Decentralization

Just like Bitcoin, anyone on the internet can run a BitClout node that processes and serves the BitClout content, and every node on the network stores a full copy of all the data. This means that anybody can build apps on top of the BitClout data.

Transparency

Every transaction is recorded on the blockchain for everyone to see. The price paid, how much was bought, which wallets are the owners. It’s all transparent.

Anonymity

While everything on the blockchain is transparent, there is no identification requirement to create a new profile and wallet. Unless personally divulged, the user and owner behind a profile can remain anonymous.

Resistant to censorship

Recently, de-platforming and canceling people have often made headlines. Big Tech can choose who they want on their platforms, and anyone with differing opinions risks getting booted. On the BitClout blockchain, there is no such risk, since the blockchain is decentralized and without moderation. Different apps built on top of it can have their moderation policies and even create their feed algorithm according to their preferences.

Creator community

Creators have an incentive to generate value for the holders of their coins. And holders, having a stake in the creator’s success, also have an incentive to help the creator raise the value of the coins. Creators have different tools they can use to involve stakeholders. Creating a closed group, holding meetings, publishing premium content for the biggest holders are some of these tools.

Is BitClout a scam?

Some believe BitClout is a scam. And at the beginning, it sure looked like it.
The team behind it was unknown. No one knew who the backers and investors were. 15,000 profiles were pre-loaded from Twitter without the permission of the owners. While it could be considered a brilliant marketing move, for many it felt like abuse of likeness and cost the project a huge amount of goodwill. And lastly, there was no way to sell your BitClout back for Bitcoin.
Now, since the launch, things have evolved and changed. It is known that Nader Al-Naji is behind the project. The backers who invested in the project include every major venture capital firm. Coinbase, Sequoia, a16z, Social Capital, Huobi, Pantera, and many more. Quite a few famous and influential people have also already verified their accounts.
And not being able to sell BitClout back for Bitcoin seems like the team failed in communicating properly. In essence, when buying BitClout from their website, those coins are being freshly minted and can’t be sold back and destroyed. They don’t act like an exchange where you can sell back and forth. Just like when buying Amazon gift cards. Amazon won’t exchange gift cards back for money, but you can use them to buy anything on the platform (in BitClout’s case, creator coins) or you can trade them with other people. And the exchanges and marketplaces for trading BtClout for other cryptocurrencies with other people are being built, developed, and launched, with a couple already online.
So, it seems like most allegations that BitClout is a scam are based on a botched launch and miscommunication or lack of communication by the team. Based on all the information that is known to date, BitClout does look like a legit project.

Who is BitClout best for?

Creators

Anyone who creates and shows their work to the public can take advantage of BitClout and launch their coin. Fans can then become stakeholders and both parts together can create an upwards spiral for the value of the coin.

Investors and speculators

As with any relatively new project that receives a lot of hype, there are plenty of opportunities to be found. Investing in BitClout itself, or finding creator coins that are likely to increase in value can be profitable and satisfy investors and speculators.

Fans of decentralization over Big Tech

BitClout offers a space for those who favor a decentralized social network over Big Tech companies that sell or mismanage personal data – with no more fear of getting banned from a platform.

Who shouldn’t buy and use BitClout?

Risk-averse people

Almost anything involving cryptocurrencies is considered high risk and can be highly volatile. It is not for those who can’t handle high gains and losses in short periods.

Those against monetizing their public perception

Having the public perception of a profile monetized, be it a person or a brand, can have big repercussions. Fake stories created to manipulate the price in either direction can become a reality and would not be easy to stomach for those involved.

Pros and cons

Pros
  • First mover advantage: With only about 150,000 profiles created, this social network is still in its infancy, and has the potential to grow a lot in the coming months and years.
  • Decentralized social network: It’s the first social network with its decentralized blockchain.
  • Free to get started: Creating your profile is free, and by setting a founder reward, you don’t even have to spend Bitcoin to get your creator coins.
Cons
  • Botched launch: The image of BitClout was somewhat damaged because of difficulties during launch, the anonymity of the team, as well as the negative press surrounding the pre-loading of profiles from Twitter.
  • Early investors: Several venture capital firms were early investors with undisclosed amounts in this project. Not knowing at what price they bought in, for how much, and if there is any vesting at all creates unwelcome uncertainty.
  • Early stages of development: There’s a lack of applications and functionalities already built on top of the blockchain because it is so new.

The bottom line

BitClout is decentralizing social media in much the same way as Bitcoin is decentralizing the financial system. Time will tell if this is just another speculative asset, or if this project gets traction and big creators flock to the platform. And while we wait, the platform and all applications built on top of it keep getting better and new ones are developed.

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