Compare this to the stock market. Think of a share of AAPL, for a moment, as being the combination of two things: the ownership of a tiny sliver of Apple, and a bet that Apple will increase in size.
The first part, buying a little slice of the company, requires Apple's participation. The speculation part, however, doesn't. I could write a webapp that simulates the stock market, declare that it contains X "shares" of Apple at Y price, and people could speculate on them, much as they do in the real stock market, all without Apple knowing or caring.
That is, of course, exactly what Bitclout is: it replicates the "bet this company will do well" part of the stock market, without the "own a little slice of this company" part. But for people, rather than companies.
I draw this analogy in order to try to answer the question: is Bitclout really stupid? And it seems like the counter-intuitive answer is, maybe not totally. These days it seems like investors don't really care about the ownership conferred by stock. I mean, they do for a small startup or LLC, but for blue chip stocks with no dividend, the "ownership" part is kind of vestigial; they're just vehicles for speculation.
So what would happen if you made your own "stock market" app, where people could speculate on "shares" of stock that don't include any actual ownership? Would it work? It seems like it might. There are certainly problems: for one, there's no moat - nothing stops 100 developers from making 100 more such speculation sites. For another, they wouldn't be rational; my Apple "stock" might go up when the real AAPL stock goes down, for one reason or another. But the real stock market seems kind of irrational at times too.
Not sure where I'm going with this; Bitclout still seems stupid to me, but less so than when I started typing this...
There's also some really dark patterns with BitClout like the founder being anonymous and virtually no information on the company. Also heavily pre-mined coin and no market to get your money out. The prices and value are all very opaque
> So what would happen if you made your own "stock market"...
Let's say someone like Elon Musk wanted to launch a personal IPO. He raises $1B for a share of his personal wealth. There's instantly a value floor, because if his total market valuation becomes less than the amount he raised he can always buy back his own stock and he gets a bargain on the money raised.
E.g. if the IPO price was $1 per share, and now the market is $0.90 per share, he effectively gets a 10% discount on money he originally raised back at the IPO -- hence the value floor.
Bitclout is nothing but a popularity contest with the participants hoping a greater fool will buy in after they do.
Good points. This seems to be the case for the vast majority of ERC/BEP-20 tokens, as well, for example, and for plenty of other sorts of things.
I don't know how I feel about them. Actually, I do know how I feel about them: instinctive distaste and sometimes revulsion. But that's just an emotion. What do I think about them? Is it all just a microcosm of finance in general? Is pointless zero-sum gambling really so bad, given it induces a sense of excitement and entertainment, if nothing else? I'm not quite sure, at the moment.
I feel about the same, regarding ERC tokens and also most "real" financial derivative instruments; and the revulsion comes not from an aversion to gambling per se, but from the sheer size of the market for it and its distance from the tangible world. I know that some of those instruments produce value beyond their returns, by facilitating the management of risk and so forth, but the scale seems out of whack - akin to a town of 100 people, comprised of 10 farmers and 90 guys devoted to finding exotic new ways to speculate on this year's harvest.
> So what would happen if you made your own "stock market" app, where people could speculate on "shares" of stock that don't include any actual ownership?
You'd get shut down by the SEC for running a "bucket shop".
> These days it seems like investors don't really care about the ownership conferred by stock. I mean, they do for a small startup or LLC, but for blue chip stocks with no dividend, the "ownership" part is kind of vestigial; they're just vehicles for speculation.
This is exactly the kind of thing you read before a bubble pops.
> I could write a webapp that simulates the stock market, declare that it contains X "shares" of Apple at Y price, and people could speculate on them, much as they do in the real stock market, all without Apple knowing or caring.
This already exists. It's called a CFD (Contract For Difference)
That's very different from what I'm describing. CFDs are financial instruments pegged to (real) stock market prices; I'm describing a market that, like Bitclout, is entirely divorced from any objective measure.
Entirely divorced from any objective measure + unregulated by the government = what's stopping the webapp owner from just setting the price and fleecing you? Scout's honor?
This is a hypothetical; my post (charitably) presumes the market is safe in order to discuss other problems with it, but it could certainly be implemented in a way that allows the author to fleece the investors, which I gather is one of the complaints about Bitclout as well.
That's what SpotOption, based in a suburb of Tel Aviv, offered. They powered multiple scams, all bucket shops. Originally they pushed "binary options", but branched out into "contracts for difference" and "forex". [1][2]
I think this is pretty much what FTX.com is doing? It's trading derivative contracts on stocks; so if I understand correctly you can trade stocks (or even not-public companies) without the actual stock ownership.
That's what an option is on the stock market. It's not so much trading stock, as it is making a bet on whether the stock goes up or down by a certain date.
You don't have to exercise the contract, you can just sell it to someone else.
Derivatives typically have mechanisms that forces them to stay pegged to the underlying asset. So it's not quite the same, even if you don't own the underlying asset. For example, perpetual futures (like those on FTX) have funding rates that vary based on price difference of the future vs underlying.
> Think of a share of AAPL, for a moment, as being the combination of two things: the ownership of a tiny sliver of Apple, and a bet that Apple will increase in size.
That's not accurate though. It's a bet that the expectation of future dividends from the stock will rise. Popular stocks these days don't really do dividends, but that's because they can better spend the money to grow rather than pay out.
But there's still the general sense it might happen eventually and that's why it somewhat makes sense to give these companies high valuations. A fake share has a guaranteed lifetime dividend of $0.
> In particular, Buffett prefers to reinvest profits in the companies he controls in order to improve their efficiency, expand their reach, create new products and services, and improve existing ones.
> In one of his famous letters to shareholders, Buffett said that perhaps Berkshire Hathaway might institute a dividend 10 or 20 years down the road. This was in 2018 when Buffett was 88.
This article just reiterates exactly what I said. Berkshire can do better than just giving money back to shareholder by investing the money in itself. The reason shareholders are ok with this is because the growth fuels the potential for larger future dividends. Even if the company grows until the heat death of the universe, the logic behind increasing the valuation of the company is that the ability of a company to give dividends has theoretically increased. You don't need to bet on actually receiving them. But the stock has value because if the company stops growing, the company will pay out instead.
If it were all about size, then a shrinking company would have negative value. This is obviously incorrect.
> "BitClout uploads your keys to their server on every API request. Any employee with access to that server can steal all the money on the platform at any time"
Its sad how many articles get made on how Bitcoin is a scam where it has potential to transform the way people use traditional finance/money/investing. But an obvious scam like this gets front page praise.
Everything about BitCloud screams scam and as the comment linked above said, the New Yorker should be ashamed of themselves for publishing garbage like this.
The idea of tabulated reputation as a currency dates back to at least 2003 [0] (and I'd speculate is probably much older than I know about). It's an interesting discussion, independent of the coin-of-the-week trying to cash in on the idea of it.
> Wen didn’t have any money of his own. (This past January, he had a balance of negative sixteen dollars in his Royal Bank of Canada savings account.) But his mom had some bitcoin, which she’d bought a few months earlier after hearing about it from a friend on WeChat. She lent all of it to her son, and he then converted a hundred and fifty dollars’ worth of it to bitclout. His first move on the platform was to persuade some of his friends to join, and the group proceeded to buy shares in one another. Next, Wen invested in the TikTok stars Dom Brack and Jeremy Hutchins. Three days later, he had made around six thousand dollars. He started planning to buy a new MacBook and a pair of AirPods Pro. “Back then, it was a lot, right?” he told me, a month later, over Zoom. Wen has an undercut topped with a mop of floppy hair, which he constantly runs his fingers through. He smiles often, the left corner of his mouth slightly higher than the other, producing an impish effect. We spoke on April 30th. At that point, he owned multiple BitClout profiles, which he told me had reached a combined estimated value of half a million dollars. Today, he’s grown that figure to approximately $1.7 million, or nine thousand and four bitclout, or sixty-eight hundred pairs of AirPods Pro. “To me, it’s just numbers,” Wen said.
It's unfortunate that anecdotes like these will cause so many more people to lose their money, who don't understand that they're gambling, and with more than they can afford to lose.
>Wen didn’t have any money of his own. (This past January, he had a balance of negative sixteen dollars in his Royal Bank of Canada savings account.) But his mom had some bitcoin, which she’d bought a few months earlier after hearing about it from a friend on WeChat. She lent all of it to her son, and he then converted a hundred and fifty dollars’ worth of it to bitclout.... We spoke on April 30th. At that point, he owned multiple BitClout profiles, which he told me had reached a combined estimated value of half a million dollars. Today, he’s grown that figure to approximately $1.7 million, or nine thousand and four bitclout, or sixty-eight hundred pairs of AirPods Pro. “To me, it’s just numbers,” Wen said.
Wow, the article read like it was written by BitClout PR. Stories like this with no balance are incredibly irresponsible.
Glosses over the fact that its closed source and anonymous founders. Towards the end they also mention that there's no official way to get your money out:
> When he discovered that there was no official way to get his money out of BitClout, he saw an opportunity.
Is it just me that sees all these things as red flags? The article compares the founder to Bitcoin's founder, although they do mention the possibility of "the beginnings of grift"
> It is unclear why the main founder insists on anonymity, though it may have something to do with mimicking Satoshi Nakamoto, the pseudonym used by the unknown founder of Bitcoin. Whatever the reason, diamondhands runs the risk of creating a kind of Elizabeth Holmes effect: like her Steve Jobs-inspired black turtleneck, the BitClout founder’s mimicry of Nakamoto may appear less like a signal of validity and more like the beginnings of a grift.
> (On June 12th, the supply of bitclout will be capped at fewer than 11.5 million coins, at which point the price of the currency will be determined purely by supply and demand.)
It's no coincidence this came out 2 days before the advertised "deflation bomb". What happened to journalism?
[EDIT] I think the prices are made up... Someone is "worth" $1,000, but you can't get your money out and they mint new coins. Every account has a different amount of coins associated with it. So if I want to buy a share, they (BitClout) just pick a price, they mint new supply and that's the new price. Again, you could have coins "worth" a lot, but that doesn't mean you can get that value. I tried checking out BitSwap, the exchange mentioned in the article, but there's no market, just a button to "Get Priority Access". It seems incredibly scammy.
Its unfortunate that there are a ton of articles on how Bitcoin is a scam where (despite its flaws) it has potential to transform the world, but an obvious scam like this gets glowing press.
On top of all of that, let's assume the benefit of the doubt on things like being able to withdraw, etc. Even then..
It seems like the article is written to make the reader to feel like they missed out. This is almost certainly not the case. I actually happened to have come across Bitclout around the same time the article stated Sigil Wen did. And a few friends and I all put in a couple hundred dollars worth of btc into it, exactly as Sigil Wen did. Over the next couple of months most of us saw our bitclout balance drop. No one had a balance grow to thousands, then millions. We all put those bitclout tokens into various celebrity accounts and they mostly dropped over time. Sigil Wen is either one of the lucky ones or he knows a lot more than this article leads you to believe. A quick search for him shows he eventually became the founder of BitSwap, so take what you will about what this article might be getting you to think.
BitClout says they have funding from Sequoia Capital, but Sequoia Capital's site doesn't list them as funded by them. Hm.
I wonder if that huge transaction volume is the same money going round and round.
While you can't redeem BitClout tokens from BitClout, two sites claim to have a secondary market. One is "down for maintenance." The other has an order book with one ask and zero buy offers.[1]
It's interesting to compare this to something like Circles UBI... they're very similar in some ways, except in Circles everyone's personal currency is given equal value, enforced by a social web of trust kinda thing.
(The URL is "join circles" but I'm not telling you to join, I haven't even joined, just sharing the info...):
https://joincircles.net/
The first part, buying a little slice of the company, requires Apple's participation. The speculation part, however, doesn't. I could write a webapp that simulates the stock market, declare that it contains X "shares" of Apple at Y price, and people could speculate on them, much as they do in the real stock market, all without Apple knowing or caring.
That is, of course, exactly what Bitclout is: it replicates the "bet this company will do well" part of the stock market, without the "own a little slice of this company" part. But for people, rather than companies.
I draw this analogy in order to try to answer the question: is Bitclout really stupid? And it seems like the counter-intuitive answer is, maybe not totally. These days it seems like investors don't really care about the ownership conferred by stock. I mean, they do for a small startup or LLC, but for blue chip stocks with no dividend, the "ownership" part is kind of vestigial; they're just vehicles for speculation.
So what would happen if you made your own "stock market" app, where people could speculate on "shares" of stock that don't include any actual ownership? Would it work? It seems like it might. There are certainly problems: for one, there's no moat - nothing stops 100 developers from making 100 more such speculation sites. For another, they wouldn't be rational; my Apple "stock" might go up when the real AAPL stock goes down, for one reason or another. But the real stock market seems kind of irrational at times too.
Not sure where I'm going with this; Bitclout still seems stupid to me, but less so than when I started typing this...