What is BitClout? Is It Legit or a Scam?

Cryptocurrency

What is BitClout? Is It Legit or a Scam?

Is BitClout the new crypto gold rush, or just another fad?

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What is BitClout? Is It Legit or a Scam?

BitClout is a combination of a cryptocurrency platform and a social network. Users can buy and sell tokens to essentially invest in another person (or themselves) and their reputation.  According to BitClout, it is “a new type of social network that lets you speculate on people and posts with real money.”

While there are plenty of interesting projects and developments related to cryptocurrency, BitClout stands out because of its meteoric rise. The site launched in early 2021 and traded more than $200 million in its first month to reach a valuation of $1 billion, according to New York Magazine.

Who is Behind BitClout?

BitClout is not a company. It is an open source blockchain like Bitcoin. BitClout was developed by an anonymous group, with a lead creator who goes by the name Diamondhands. According to Diamondhands, the group of creators has chosen to remain anonymous to keep the project decentralized.

Despite being only a few months old, BitClout has an impressive list of investors including Andreessen Horowitz, Sequoia, Social Capital, Digital Currency Group, TQ Ventures, Coinbase Ventures, and the Winklevoss twins.

How Does BitClout Work?

BitClout, at least at the start, is deeply connected to Twitter. The site launched with 15,000 creator accounts, which were the profiles of some of the most influential Twitter users. BitClout allows people to essentially bet on the popularity of celebrities, influencers, and public figures by purchasing “creator coins” associated with that person’s profile. Users pay for these creator coins with BitClout and the value increases or decreases based on buying and selling activity.

According to BitClout, “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.“

If you want to invest in a user, it’s best to get in early. According to BitClout, “As more people buy a profile’s creator coin, the price of the coin goes up automatically at a faster and faster rate. This means that, eventually, it would take billions of dollars to mint even one more coin.”

Every profile on the platform has a creator coin associated with it. Although BitClout was launched with 15,000 creator accounts, anyone can create a profile to get their own creator coin. Of course, the vast majority of the trading activity is related to the coins of high profile celebrities. However, these profiles require a significant investment, so purchasing the creator coin of someone who has no current value presents a bigger potential upside.

Regular users don’t need to have a Twitter profile in order to get started with BitClout. However, the owners of the 15,000 pre-loaded accounts must send out a tweet in order to claim ownership of their BitClout profile. After claiming ownership to the profile, the creator gets a blue check next to their profile name and can begin earning a percentage of earnings from the sale of creator coins associated with their profile, through “founder rewards”.

Buying BitClout

The BitClout blockchain has its own cryptocurrency, which is also called BitClout (BTCLT), and you can use BTCLT to purchase creator coins. BitClout offers an  “atomic swap”, which allows users to purchase BTCLT with Bitcoin.

It’s important to note that the price of BTCLT doubles for every million sold, which is intended to create natural scarcity and limit the amount of BTCLT minted.

Criticism

Although BitClout has no doubt achieved a lot in a very short period of time, it’s also received a significant amount of criticism. By preloading the site with the profiles of 15,000 celebrities and influencers, BitClout allows users to trade on the reputation of high-profile individuals without their consent. It also forces those high-profile people to essentially endorse BitClout by tweeting in order to claim their profile and the coins associated with it.

Many of those 15,000 people have chosen to distance themselves from BitClout instead. Some have reportedly sent cease and desist letters and many others have criticized BitClout for using their likeness without consent.

Other criticism relates to potential manipulation. Since the value of creator coins are based on reputation, swaying reputation will naturally influence the value of those creator coins. Lumi, a blockchain researcher told CoinDesk, “People are incentivized to cancel people. All you have to do is open a short position and then try to mangle someone’s reputation.”

Another major point of criticism relates to the current lack of flexibility after using Bitcoin to purchase BTCLT. Although it’s easy to buy BTCLT, there’s currently no way to convert it back to Bitcoin or any other type of currency. At this time BTCLT can only be used on the site and it serves no purpose outside of that.

And finally, many have called into question the real value of BTCLT. Reporter Jen Wieczner of New York Magazine writes, “Unlike stock in a company, which generally entitles holders to certain voting and other rights, BitClout’s tokens aren’t actually attached to any real-world assets or claims. If you own an Elon Musk token, you don’t actually own any share of his personal fortune or future earnings.”

Should You Invest in BitClout?

BitClout offers some interesting opportunities for investors, but any investment should be seen as little more than a gamble at this point. It’s possible to purchase the creator coins of someone and watch the value of those coins soar, but since it’s based on reputation, the results are difficult or impossible to predict. Even if you do have success, there’s currently no way to take the BTCLT your investment has generated and turn it into Bitcoin or cash. Hopefully that changes soon, and maybe that helps to make BitClout more of a legit option for investing.

Just like investing in NFTs or other options that are just now emerging, you should only invest money that you can afford to lose. You may choose to take a chance at a big gain with some extra money, but don’t take any significant risks.

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Tina S. Rhodes
I’m Tina! I’m an avid hiker, camper, rock climber, and personal finance blogger extraordinaire!

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