In this article, I’ll be discussing BitClout, a revolutionary new social media platform disrupting the social space.
I’ll cover what it is, how it works, whether or not it’s a scam, why it’s valuable, and why people are saying it can potentially disrupt Twitter’s long-held dominance as a text-based platform.
Disclaimer: Nothing I say is intended to be financial advice, but merely my own opinion. Do your own research and invest at your own risk.
What Is BitClout?
BitClout is a decentralized social media platform that looks and feels much like Twitter.
In this case, “decentralized” means that it lives on a blockchain (like Bitcoin), for which there is no central owner. Although the platform was invented by the pseudonymous @Diamondhands, he is simply responsible for architecting the idea and code—BitClout itself lives on the internet (as opposed to in a privately-owned server), and therefore, it cannot be shut down.
If you aren’t familiar with how a blockchain works, it’s a topic for another day, but in short, there are computers which verify the network. These are called nodes, and anyone can run a node to secure the network. By distributing the amount of people who run the network, there is no single point of failure. This is how BitClout operates.
You can learn more about how this works in the BitClout White Paper.
BitClout uses its own native currency, which powers the network. In order to buy BitClout, you must pay with Bitcoin.
Why Is BitClout Revolutionary?
BitClout is groundbreaking because for the first time, you can invest in yourself and your favorite influencers with real money through the use of Creator Coins.
Every profile on the platform automatically gets assigned its own unique coin, freely tradable on the open market. The price of the coin is subject to the basic law of supply and demand: As people buy the coin, the price rises, and as people sell, it goes down. Once you own BitClout, this can be done instantly with the click of just a few buttons.
Why Do Creator Coins Have Value?
The next question on your mind is likely this: “Why would anyone want to hold my coin, or any coin for that matter? What’s the intrinsic value behind all of this?”
Great question. First off, I’ll say that much of this is speculative.
We’re still in the very early stages of the concept’s inception, and the market is still evaluating use-cases for people’s Creator Coins. That said, there are plenty of potential value propositions and reasons why you’ll want to own your favorite influencer’s or brand’s Creator Coin.
Let’s say you follow your favorite influencer on BitClout. Owning their coin may allow you to benefit from one of the following outcomes:
- Receiving a free giveaway of some kind, such as an NFT (non-fungible token, or a piece of digital art).
- Participating in live meet-ups, virtual AMAs, or coaching.
- Being entitled to a certain percentage of their income from their salary or investments.
- Getting access to their product or service.
There are already real-world examples of this popping up on BitClout, such as BitCloutList, a private community that gives you insider access to their community of whales where you can discuss the hottest upcoming profiles. In order to join their community, you must own $99 worth of their token. The profile is one of the biggest on BitClout.
Ultimately, the value of a Creator Coin is tied to the person or corporation behind it. A bet on a coin is putting trust into that person that they will be a good actor and deliver value to their coin holders. Bet accordingly.
What Do Creator Coins Do Within BitClout?
Creator Coins also have other practical use-cases. When BitClout rolls out new features, Creator Coins will allow users to do a variety of things, such as:
- Make it so that only stakeholders can comment on posts or send DMs, thereby reducing spam.
- Adjust message prioritization, allowing you to filter your inbox or comments by who holds the most of your token. This incentivizes people to buy and hold the coins of the influencers whom they want to interact with most (driving up the price) in order to get a chance to speak with them.
- Align incentives. Imagine a social media where you can get paid in the influencers currency to like or ‘reclout’ their post. That’s all made possible with crypto.
This is really just the beginning. There are all sorts of use-cases that the free market hasn’t thought of yet because this technology hasn’t had time to mature. It’ll be fascinating to see what develops in the coming years.
What You MUST Know About BitClout Creator Coins
The Creator Coins use what’s called a “bonding curve.” Without getting too deep into the math (which you can read about on page 5 here), what you need to know is that the price growth is exponential, not linear.
This is a profound difference. To provide some context, Albert Einstein famously said the most powerful force in the universe is compounding interest. This same force drives the pricing mechanism behind BitClout coins.
Another example: Take 30 steps linearly (1, 2, 3, 4), and you’ll arrive at 30 after two-dozen-and-a-half steps.
On the other hand, take 30 steps exponentially (1, 2, 4, 8, and so on), and you’ll arrive at a billion faster than you may think.
This exponential growth is how the price of Creator Coins work at the early stages.
Here’s how the BitClout Creator Coin’s pricing mechanism works.
This graph assumes a BitClout token price of $16. Right now it’s $156. To play around with the tokenomics, make a copy of this spreadsheet.
As you can see, the more people invest in a token, the more the price goes up. The same is true when people sell. Selling coins removes coins from circulation, lowering the price.
You’ll also notice that you can buy the first five coins for $1.20 each, but once 100 coins are issued, the same five coins will cost you roughly $1,000 each.
In short, it pays to be early.
What Gives Creator Coins Their Value
It’s important to understand the relationship between value and Creator Coin price.
If you’re speculating on an influencer, realize that their coin’s price will be determined by the value they bring. In other words, a coin price’s appreciation is the result of the influencer doing their job: providing value to their audience. That’s what ultimately drives the price up or down.
Some other best practices are to find innovative ways to provide value to your audience, not only with the content you post, but also by incentivizing people to hold your coin.
Consider this example that I posted on the platform:
Here are other creative ways to give you coin value:
- Access to your inner circle if you’re a leader, thinker or coach.
- Airdrop NFTs or early releases of your music if you’re an artist.
- Share Buybacks: You can buy your token every day to secure it’s value and incentivize adoption.
- Invest in your audience: buy $10 of one of your followers tokens every day.
- Offer a product or service: whoever holds $X amount of your token receives something of value. (Ex. Netflix could do this for their streaming service).
The possibilities are endless. Of course, avoid dumping your coin if the price goes up just to make a quick buck (known as a “rug-pull”) at the expense of your followers. It will ruin your reputation, and they’ll never forgive you for it. Only sell if you have to, and be transparent about why you’re doing it.
BitClout Strategy for Buying Creator Coins
When it comes to the best strategy to implement on BitClout, there are many approaches.
You can buy verified accounts that are active (less risky), buy verified accounts in hopes they come to the platform (riskier), or buy cheap influencers and hope they blow up (this is the most long term choice and the riskiest, but it could potentially offer the greatest rewards).
My Personal BitClout Investment Strategy
My first recommendation is to always bet on yourself.
If you’re not going to, who will? That’s why I invested thousands into my own coin from day one and have never sold—I want my followers to know I’m in it long term. I also believe my coin will be worth many multiples of what it is today, and I want to personally benefit from that upside.
Aside from going all-in on myself, I have two strategies: take a big position early (not necessarily in dollars, but in number of coins), or take a small position if the influencer is already big.
I don’t have a one-size-fits-all strategy for how much I invest into any one influencer, simply because the bonding curve dictates the optimal bet size. The lower the price, the more I’m incentivized to bet bigger because I’ll receive more coins and therefore more asymmetric upside.
Personally, I like the massive asymmetry of buying multiple coins early, something that becomes cost prohibitive for most as an influencer grows. I’ve already made 10x on one coin, the sole reason being that I was one of the first to buy.
With bigger influencers, I own fewer coins, but I see these as less risky. My criteria for whom to buy from is a combination of whom I support, who I want to interact with and be part of their social circle in the future, and of course, whose token I believe will appreciate in value.
I’m typically looking for all these things before pulling the trigger. And to keep track of all my Creator Coins buys and sells and profits and losses, I use a spreadsheet. You can make a copy of the one I use here.
Buying Your Own Creator Coin
The rule of Creator Coins is that once you create your account, you must decide how much you want to bet on yourself.
The optimal strategy is to buy as many of your own coins as you intend to in the beginning since they will cost the least. Only then should you make your profile public and start promoting it.
Game theory incentivizes you to buy early and bet big, as each additional coin issued will become more expensive. In short, you’ll never get the same opportunity to buy your coins at today’s price. The bonding curve is very steep, meaning coins get expensive quickly, highly incentivizing people to adopt their own coin.
This makes perfect sense and aligns both the creator’s and their followers’ incentives. If someone invests a lot in their own coin, they’re committed to growing their profile. That gives followers the confidence to invest in the influencer, creating a virtuous feedback loop.
Investing in my own coin was the best investment I made on the platform. If you’re strapped for cash and want to get creative, I’ve seen accounts set the founder percent higher in the beginning until they build up their token, promising to lower it over time. So long as you’re transparent with your following, I think it can work. Get creative.
Alternatively, read on to learn more about my BitClout Scholarship Program.
Cashing Out Your BitClout
You can buy and sell a Creator Coin, your own included, at any time.
Be aware that when you do this, your investment will return to BitClout, not BitCoin. Right now, BitClout is currently a closed loop, meaning you cannot cash out your BitClout back into Bitcoin.
Your BitClout essentially remains in your wallet. It’s believed this will change in the future, and it’s typical for projects of this nature to have an initial lock-up period. This also happens in traditional finance as well, such as how when someone invests in a seed stage, they cannot cash out until the company goes public or is acquired.
While it’s different here, the same principle is at play. I personally believe that we’ll be able to cash out out BitClout and exchange it back into Bitcoin sometime in the future.
In other words, you use BTC to fund your BitClout, then convert your BitClout into individual creator coins. At any time you can sell creator coins to convert back into BitClout, but cannot sell BitClout for BTC.
Be aware of the risks. While there is opportunity if you bet on the right creators early, it’s not a free lunch. There is currently a legal suit against BitClout for a cease and desist.
Invest at your own risk, do your research, and bet accordingly to what you believe.
What Are Founder Rewards?
Creators can keep a percentage of the coins that other people purchase from them, called a “founder reward.”
It’s up to the influencer to set this founder reward at whatever price they choose, although the default is 10%. I recommend keeping it at this level, as it properly incentivizes people to adopt your coin.
You may ask, “Why not set the founder percentage higher?”
People will see this as greedy and a money grab, and they may potentially be disincentivized from buying. What if you don’t have money to invest in your own token? Realize that even with $10-$50, you can make a huge gain in your own coin.
If I hadn’t been able to invest in myself immediately after opening a profile, I’d have waited until I could. I’d regret it later if I didn’t invest right away.
What Is the Power of Clout?
Having a high token price, or “Clout,” is extremely valuable on the platform.
Not only is it the ultimate digital social proof, but the algorithm rewards those with a higher token price. In short, the rich get richer.
This happens in a number of ways, most notably in the comments.
When you leave a comment on someone’s post, they are automatically ordered by token price or market cap. That means that more valued accounts have the most visibility, which creates a virtuous cycle of adoption by others, further increasing their token price.
What this means for new influencers is that you both want to get on the platform as soon as possible and also grind hard in the beginning to get your token price up. Remember, token price ultimately stems from the value you’re providing to your audience and the ways you’re incentivizing them to hold your token.
You’re in luck—we’re still in the beginning of the first inning.
Is BitClout a Scam?
People typically follow a progression when it comes to BitClout, starting with “it’s a scam” or “it’s a ponzi scheme,” and fairly quickly (after using the platform for a few days), they end with “it’s the future of social media.”
While I agree that there will be rug-pulls, bad actors, and people who lose money, that doesn’t intrinsically make decentralized social media a scam.
It’s well believed that BitClout is backed by the biggest VCs in the crypto space, including CoinBase and the Winklevoss twins (founders of Gemini, and the brothers who co-founded Facebook).
Considering that they’ve accumulated so much buy-in from reputable names in the finance space—with some of the leading VCs backing it—I personally think it’s unlikely that it’s a scam. Nevertheless, do your own homework and invest completely at your own risk.
There are some legal risks surrounding BitClout. With that said, not only do I think they’ll be resolved, but I also believe that there’s simply too much asymmetry not to play the game. As an asymmetric investor, this is exactly what I look for.
In my opinion, it’s a classic situation where one can lose what they put in, but that risk exists simultaneously with the opportunity to gain multiples of what they invest. My personal advice is to never risk what you can’t afford to lose.
In other words, either this all goes to zero, or it becomes one of the biggest social media platforms in history. I don’t see a middle ground.
Personally, I like betting on these types of things. That’s why I’m all in.
The Future of Social Media
To better understand the future of social media, you must first understand the way it currently works and the problems or friction within the system.
Frankly, the current model behind social media is highly inefficient. It relies on centralized third parties who siphon value from the creators to line their own pockets. This isn’t evil—it’s just business.
BitClout, through its decentralized nature, fixes this. BitClout aligns the incentives of the creators with their audience by allowing both parties to thrive and reap the benefits. You also don’t have to pay to have your content shown to your audience, which reduces friction within the system and creates a better user experience.
For example, as an Instagram user whose goal is to be seen by as many other users as possible, I have to pay money to have my posts boosted and reach more of the audience I’ve worked hard to cultivate. I don’t receive any reward from this that can be measured monetarily—just more followers. Unless I’m selling a product and intimately know marketing (such as how to build sales funnels), I can’t profit from this, and as a result, it’s unaffordable and impractical for 99% of content creators.
But imagine an ecosystem where the creator retains the value accrued from their account.
Naturally, any rational, self-interested content creator will prefer that system. On social media, the creators are the asset—followers are a dime a dozen, and they don’t come to the platform if there aren’t great creators putting out content they want to consume.
For the first time in history, a platform exists where anyone (not just those who are marketing savvy) can achieve financial freedom if they become big influencers. This is all empowered by the Creator Coin.
I know we’re early and this will sound crazy and wildly ambitious, but I believe that BitClout will disrupt Twitter, and in the future, all social media will be decentralized.
I know this because of how I’m incentivized to behave as both an influencer who wants to grow his own brand and as a consumer who wants to be rewarded for betting on his favorite influencers.
Since discovering BitClout, I’ve spent nearly zero time on Twitter, or any other social media.
The BitClout Culture – BitClout for Good
As early adopters, I believe we have a responsibility to create the environment we want on BitClout.
A social media platform, like any technology, is neither good nor evil, but merely a tool through which its users accomplish a goal. Social media simply amplifies who we already are.
If your self-worth is tied to your follower count, then BitClout will likely be a depressing place. However, if you truly want to align your incentives with your audience and provide value to them, the BitClout is an extortionary platform with the potential to do the most good.
Remember: We set the rules. Let’s all create a positive-sum community where we support influencers we believe in, think long term, and act as a force for good.
Together, I’m confident we can do great things, and I’d like to lead by example.
If you’re an awesome influencer destined to do big things, send me an email to email@example.com with a short write-up of who you are and why I should bet on you.
If I receive something inspiring, I’ll help you get set up on BitClout, buy you your own coin, and be willing to bet on you early so we can both win together long term.
I’m also onboarding major influencers and helping them learn the ropes, helping them determine the proper allocation of their own coin, and investing in them. If that sounds like you, DM me on Twitter at @AlecTorelli or shoot me an email at firstname.lastname@example.org.
Final Thoughts on BitClout
Ultimately, if you believe in yourself and want to make an asymmetric bet, then BitClout may be for you.
Again, invest at your own risk, and be smart. As I’ve already said multiple times, I sincerely believe it has the potential to disrupt Twitter, especially from millennials who are more crypto savvy, leaving Twitter to be a legacy platform used by an older crowd.
I already know from personal experience that I’m behaving this way, and there are already reports of major influencers, such as ShaanVP, promising to cancel his Twitter when his BitClout reaches a certain threshold.
If you found this post valuable and want to bet on someone who’s committed to the platform, check out my BitClout at @AlecTorelli (which you can find by clicking here). I plan on offering value to my community and token holders and finding creative ways to align our incentives.
If you want to find out more about signing up for your own BitClout account, head here for a video walk-through I created.
Let me know your thoughts in the comments. Is BitClout a scam? Or is it the future of social media?
Thanks for your continued support, and I’m grateful to be on this incredible journey with you.