VCs are polarized over controversial new crypto platform BitClout that lets you bet on influencers' popularity

  • Crypto platform BitClout allows you to buy a stake in your favorite social media stars. 
  • The platform made a splash in the last few weeks by uploading people’s Twitter profiles without permission. 
  • It’s left the VC world polarized. 
  • See more stories on Insider’s business page.

Three weeks ago, the venture world woke up to see their reputations for sale.

As one person tweeted, “I own a piece of @chamath and @elonmusk on BitClout. Should I start my family office now or wait to?”  

He’s referencing renowned investor Chamath Palihapitiya and the family offices that handle the finances for the ultra-wealthy. It’s the power of BitClout: buy a share of your favorite VCs and watch your self-esteem skyrocket.

Crypto platform BitClout, founded by a (kind of) anonymous group of developers, certainly made an impression. It essentially cloned a chunk of Twitter, uploading the profiles of 15,000 people without their permission. Twitter CEO Jack Dorsey had publicly mulled over the idea of a decentralized Twitter before, but BitClout beat him to it — with a twist.

BitClout is its own cryptocurrency that you can buy with Bitcoin. You then use BitClout to purchase “creator coins,” tokens issued in the name of popular social media stars. As more and more people purchase a creator’s token, the cost of that coin goes up. So, the more popular a creator, the more their coins are worth. There’s even a leaderboard showing whose coins are worth the most every week (Elon Musk is currently dominating).

If you own one of the accounts that BitClout scraped off Twitter, then you can claim your account — and start profiting from the sale of your tokens — by tweeting out a key BitClout gives you. If you aren’t, you can still create an account and purchase creator coins, but you can’t issue your own tokens.

BitClout is a combination of many things that VCs tend to find irresistible: Twitter, crypto, exclusivity and influencers. But it became even more so once people saw which venture firms had invested: Palihapitiya’s Social Capital, Andreessen Horowitz, Sequoia, and Winklevoss Capital, just to name a few, TechCrunch reported.

Suddenly it seemed like everyone in Silicon Valley had an opinion on BitClout, both positive and negative.

“BitClout is super interesting. That doesn’t mean it will work,” Andrew Wilkinson, cofounder of Tiny, tweeted. “In fact, I’d probably bet money it won’t work.” 

Investor Shaan Puri tweeted, “This platform is going to either explode, or crash. There’s no middle ground.”

 

Palihapitiya, who’s ranked third on the BitClout’s leaderboard, said on the All-In podcast that BitClout gives “people with reputation and trust” a way to “signal that they have it.”

For Ken Seiff, managing partner at Blockchange Ventures and early investor in BitClout, the platform is the future. 

“It’s one of the biggest ideas I’ve seen in a generation of investing,” he told Insider. “This is not just a social network. It’s a social economy. It is a new economical layer for the internet — if it works.” 

He says it has the potential to revolutionize how social media stars make money.

“Some of these men and women are making a lot of money on TikTok and on Instagram,” he said. “But what they’re making is a rounding error.” 

With BitClout, influencers could possibly skip the brand deals and profit off their reputation instead, making money whenever someone buys their token. 

“We’ve already been born into a world where social networks and media companies make money on influencers and celebrities,” he said. “But this is the first time that they can make money themselves.”

They can also bet on others. Chris McCann, a general partner at Race Capital, said he was shocked when Andy Artz, a partner at Social Capital, bought $20,000 worth of McCann’s tokens.

McCann’s reaction was roughly, “Wow, dude. That’s a lot.”

But it paid off: McCann’s coin went up in value and Artz’s stake is now worth around $41,000. 

Singapore’s Prime Minister Lee Hsien LoongReuters

Critics of the BitClout 

Not that Artz can actually cash out — yet. VCs have been critical of the fact that there’s currently no way to exchange BitClout for other currency once you’ve bought it. 

Seiff insists this won’t be a problem for long. 

“It’s always been in the vision that OTC [over-the-counter] desks and exchanges will make a market in the token,” he said. He estimated that there will likely be a way to sell BitClout within a few months. 

But there’s a less clear cut answer to other criticisms, like how the platform pulled Twitter profiles without permission. While the founders themselves have hidden under a cloud of anonymity, people were not happy to see their information, and a token in their name, on the platform when they hadn’t actually joined it.

Brandon Curtis, head of the product team at Radar Relay, sent alleged BitClout founder Nadar Al-Naji a cease-and-desist letter for using his likeness without consent. Prime Minister of Singapore, Lee Hsien Loong, sent a public request for his profile to be taken down.

“I have sent an open tweet out to ask that my name and photo be removed from the site immediately, as I have nothing to do with the platform,” he wrote in a Facebook post. “It is misleading and done without my permission.” 

Lindsay Lin, a partner and general council at Dragonfly Capital, predicts that BitClout’s troubles are far from over. 

“I’d be surprised if BitClout doesn’t see some legal fallout,” she told Insider. “The pseudonymous team behind it, who are actually identifiable by most of the industry, could get sued by influencers for misappropriation of their likeness and perhaps by the SEC for the public [Initial Coin Offering] of the BitClout cryptocurrency.” 

While taking the Twitter profiles landed the platform in hot water, it also made BitClout immediately relevant to the most-followed people on the app.

“You probably needed to do something like that to kickstart and get this going,” McCann said. “But it’s a very, very gray area.”

He pointed out that companies like Uber were accused of doing “a lot of shady stuff” in their early days, but “nobody really remembers that anymore,” he said. “The winners get to rewrite the history.” 

Seiff says that, to his knowledge, anyone can message the BitClout founder’s account, Diamondhands, and ask to be taken off the platform. Besides, he says, he’s seen way more people asking to be verified on BitClout, than requesting their profile be taken down.

It remains to be seen if BitClout can navigate its challenges and maintain the public’s interest. But investor Seiff is confident that BitClout is no fad.

“Only time will tell who is right,” he said. “But I have an awful lot of conviction that I’m right.”

Source: Read Full Article