Some people think it’s a joke. Others swear it’s a scam. It’s hard to use, confusing how it works, and it serves as a medium for nefarious activity. The creator is pseudonymous. It’s called Bit-something. In the beginning, few have heard of it and far fewer care to learn more once they have. And yet, in hardly more than a decade, it grows to a market cap of over $1 Trillion. Of course, I am talking about Bitcoin.
BitClout is not Bitcoin, obviously, but Bitcoin’s story helps to demonstrate why it might be worth betting a small amount of money on this controversial new platform which looks like a type-writer text version of Twitter and which some believe is the decentralized social network that the crypto world has been waiting for. It seems like a joke. It could be a scam. It’s hard to use, confusing how it works, and it serves as a medium for nefarious activity, but it could probably be worth $100 billion dollars in a few years, if not more, if not sooner.
BitClout’s Biggest Issues
Before I explain briefly why I believe BitClout has enormous upside, let me address the three biggest issues which must be overcome in order to have any chance at achieving that upside. I summed them up in a tweet on April 7th:
The first and biggest issue right now is that there is no way to sell BitClout’s native currency, also called BitClout. To be clear, a user must deposit Bitcoin (“BTC”) in exchange for BitClout (“BTCLT”) in order to use the platform and buy people’s “creator coins”, but there is currently no way to then convert BTCLT back to BTC or any other liquid cryptocurrency which one might in turn like to convert into dollars or another fiat currency of the like (foolish as that may be). This is obviously a significant issue so long as it persists, but it seems doubtful to me that it will. It is not uncommon for new crypto projects to begin with this bug (feature?), and while you certainly don’t have to trust him, BitClout’s pseudonymous creator Diamondhands told CoinDesk that it is only a matter of time before exchange is made possible.
The second and third issues are irrelevant if the first and biggest one is never solved, but assuming that it will be, the next biggest issues from my perspective are the prevalence of “fake” accounts on BitClout and the v0 feeling platform which could lose its early lead to something cleaner and quicker. Again, these are issues that I would expect could be relatively easy to overcome.
On the fake accounts issue, it is easy to imagine the platform using Twitter as a verification method to start, though of course it would be ideal to find a way to do something independently eventually. In fact, BitClout is already using Twitter as a verification method for a select number of “reserved” accounts. In the case of these reserved accounts, the rightful owner (i.e. Elon Musk for the @elonmusk profile) has to tweet out their BitClout address in order to activate their BitClout account. The issue is that this verification process is only intact for those relatively few reserved accounts, so any other profile is free to be claimed by a phony pretender. This is why I am followed by people like Travis Kalanick and Marissa Meyer, both of whom you might not be surprised to see for an episode of my podcast, but whom I must confess did not actually follow me (the accounts in their name are clearly not actually them). Less fakes should make for more market cap, everything else being equal, and again, it shouldn’t be a hard problem to solve.
The v0 platform is the least significant issue of the three. I don’t actually mind the blocky, minimalist, mostly black and white aesthetic. What I mind is a loading time that is slower than any other website I use on the internet. Still, I am more than willing to put up with that lag time if it is the only way I can use a decentralized social media alternative that enables me create value for myself and for my followers, if that is in fact what BitClout proves to do.
The Bull Case For BitClout
So let me now close by addressing the upside and explaining why I am generally bullish on BitClout. To be clear, being bullish, the way that I use it at least, does not mean that I believe BitClout is certain to succeed. Far from it. In fact, I would estimate that there is a better than not chance that BitClout will be worth less in 3 years than it is today. Still, I am bullish in the sense that I believe it is worthwhile to invest a small amount of money that one is willing to lose in BitClout and some of the creator coins one can invest in using the platform. If BitClout is worth something that rounds to nothing in a few years, you could lose as much as all of the money that you invest, but if it is worth more than it is today, I would be hard-pressed to imagine that it would not be worth at least double, and more likely 10x or 100x as much. Simply put, I view an investment in BitClout as having degrees of magnitude more upside (10-100x) than downside (1x), an asymmetric bet with a reasonable probability of being successful. For that reason, it is a bet that I am willing to make.
The fundamental value proposition of the platform is one that I personally am excited about, whether BitClout is the one to best offer it in the long-term or not. I am excited about the ability for people to invest in people. I have been excited about this idea for a long time. Years ago, before I knew anything about crypto, I considered starting a company which would have taken a different angle at making this possible. I have never understood why I should be able to invest in companies, real estate, other assets, and now crypto, but not people. I’ve always thought I would be better at evaluating people than any of those other things. With BitClout, I might soon have an opportunity to prove it. For now, whether or not an investment on BitClout works out in the end will depend more on the fate of the platform than on one’s ability to pick good people to invest in. That said, if and as BitClout becomes a fixture as the primary crypto social media platform, the decentralized Twitter of sorts, it will increasingly provide the opportunity for individuals to demonstrate their ability to identify other individuals whose value is poised to appreciate, to find them early, and to bet on them big.
It would be refreshing to finally have a social media platform where people can create value for themselves and for their supporters. Today, the monetary value goes not to the people but to the platform (i.e. Facebook or Twitter). You as the user are the product and the advertisers are the customers to which your data and attention are being sold. It’s been overwhelmingly obvious for years that there must be a better way, and yet, no one has done it. Perhaps BitClout will never be perfect, but I for one would settle for better.
Lastly, I tend to outsource portions of diligence I can less easily comprehend. In other words, I am comfortable leaning on some social diligence where technical diligence may be beyond my scope. Secondarily, I have no qualms trusting some of my favorite investors, giving them the benefit of the doubt, and figuring that if it is good enough for them, it is good enough for me. These investors often have significantly more context and information than is available to the public, including maybe most importantly having usually had the opportunity to meet the team.
In this case, Diamondhands sent CoinDesk a list of BitClout’s investors including “Sequoia, Andreessen Horowitz, Social Capital, TQ Ventures, Coinbase Ventures, Winklevoss Capital, Arrington Capital, Polychain, Pantera, Digital Currency Group (CoinDesk’s parent company), Huobi, Variant and others.” That is an impressive list to say the least.
Early people on the platform include Chamath Palihapitiya (who made his fortune helping grow the largest social network in the world (Facebook) and betting big and early on controversial investments like Tesla and Bitcoin), WhaleShark (the single best social token creator by far from my perspective), 3LAU (a previous podcast guest who is super smart on crypto and is revolutionizing the way artists get paid through NFTs), other smart people like the Winklevoss twins (also investors), Chris Dixon, and Ashton Kutcher, and many others, plus celebrities like Steve Aoki, Bella Thorne, and Pamela Anderson who could hint at the beginning of a broader hype cycle to begin BitClout’s potentially short-lived or long-lasting life in the spotlight.
Thus far, the relatively small amount of time that I invested in writing this piece has been worth more than the amount of money I invested in BitClout. I invested a grand total of $94, all into my own creator coin “blogofjake coin”, and that $94 is now evidently worth more than $2,000 according to BitClout. I say this so that you do not misunderstand me as saying I am all in on the platform or anything like that. I am simply sharing my perspective for whatever it is worth. Beyond writing this piece, I have hardly invested much of any time into BitClout either. I have merely been “clouting” a copy of whatever I tweet whenever I remember to do so. I may decide to invest more money (no more than I am willing to lose) into my creator coin, BTCLT generically, and/or the creator coins of others, but as of now, that is all that I have done.
This is not investment advice. This is just what I think about BitClout. You can follow me @blogofjake.