Bitcoin and Social Media

Home » Business » Token-based social media BitClout raising lots of money—and eyebrows

Token-based social media BitClout raising lots of money—and eyebrows

Business

Steve Kaaru

A new digital currency project has recently hit the market, launching out of private beta on March 24. Known as BitClout, it has managed to raise hundreds of millions in funding from some of the most prominent venture capital firms. However, it’s also raising eyebrows, and now, faces a cease and desist order.

BitClout brands itself as a social media-based platform where users can buy and sell tokens based on people’s reputations. Blockchain-based social media platforms like Twetch and PowPing are focused on content and allowing users to earn more based on each individual post. BitClout, in comparison, focuses on the person—not the content.

The people behind the project are still unknown, going by the pseudonym ‘Diamondhands.’ In a recent interview, they explained why they have taken a detour from the traditional model.

“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.”

BitClout mirrors Twitter, ranking users based on their following on the social media platform. As Diamondhands revealed, it has already created 15,000 accounts for popular Twitter users. However, it has done this without their knowledge or consent. These accounts have tokens tied to them that in some cases are reportedly worth tens of millions of dollars. This is just a tip of the controversies that surround the project.

The controversial account creation

BitClout has created the accounts for celebrities. From Elon Musk, Kim Kardashian and Katy Perry to Donald Trump, Barack Obama and Beyoncé, these renowned figures all have an account attached to their name, all without consent.

Musk’s account, for instance, has ‘Elon Musk’ tokens theoretically worth $32 million. To activate his account and his ‘new found money’, Musk would have to tweet about the project first. However, other users can still trade ‘Elon Musk’ tokens even without his involvement.

This imposition has not gone down well with most people. In an industry where using people’s images without consent has been the basis of thousands of scams, those whose names have been used by BitClout have distanced themselves from the platform.

https://twitter.com/prestonjbyrne/status/1373835451354775552?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1373835451354775552%7Ctwgr%5E%7Ctwcon%5Es1_c10&ref_url=https%3A%2F%2Fpublish.twitter.com%2F%3Fquery%3Dhttps3A2F2Ftwitter.com2Fprestonjbyrne2Fstatus2F1373835451354775552widget%3DTweet

Brandon Curtis, the chief research officer for decentralized token exchange Radar Relay, has gone a step further. He has issued a cease and desist order to the platform over its use of his name, photograph and likeness. Curtis cited California’s civil code which he believes the platform has breached by pre-loading his profile without his consent.

Curtis, through his legal team at Anderson Kill LLP, addressed the cease and desist letter to Nadar Al-Naji, the former founder of Basis stablecoin. In the order, Curtis doesn’t reveal how Al-Naji is tied to the project, only claiming that BitClout is “a project that we understand was launched by you and is under your control.”

Dark market ties and VC ties

The controversies don’t stop with the account creation. BitClout has a native token, BTCLT, which users can only buy from the developers through BTC. Once they send the BTC to the team, they receive a pre-agreed amount of BTCLT which they can then use to navigate the platform.

Once a user acquires the BTCLT, he’s stuck with them. This is because there’s no market to sell them off or a way to swap them back for BTC. This has led to speculation that BitClout could be a new-age scam.

However, Diamondhands has refuted such claims, stating that his team is working on this and there will be a cash out feature soon. He also claimed to be eyeing Coinbase and Gemini to list the BTCLT token.

It doesn’t end here. Following up on the BTC deposits by those seeking to purchase BTCLT tokens reveals that they end up at one BTC address. This address has received 3,531 BTC, worth $186 million at current prices. The funds are then reportedly being directed to three exchanges as per blockchain investigations firm CipherBlade. Amber Group has received 88.41%, Kraken has received 11.17% and Coinbase a mere 0.42%.

Aside from the exchanges, the only other address BitClout sent funds to has been receiving money from Hydra, a dark net market. “They paid someone sketchy,” Rich Sanders, the CEO at CipheBlade stated.

Despite the controversy, BitClout has managed to attract funding from almost every other major digital currency VC firm. These include Andreessen Horowitz, Coinbase Ventures, Winklevoss Capital, Social Capital and Digital Currency Group.

Follow CoinGeek’s Crypto Crime Cartel series, which delves into the stream of groups-from BitMEX to Binance, Bitcoin.com, Blockstream, ShapeShift, Coinbase, Ripple and Ethereum—who have co-opted the digital asset revolution and turned the industry into a minefield for naïve (and even experienced) players in the market.

New to blockchain? Check out CoinGeek’s Blockchain for Beginners section, the ultimate resource guide to learn more about blockchain technology.