Last night community website Reddit unveiled a new blockchain-powered rewards system. The combination of Reddit’s audience and Tencent as a backer could mean this is an inflection point for blockchain, much like Libra’s unveiling.
Here’s why: Reddit has a massive user base and Tencent owns one of the biggest payment apps in the world. In order to use the Reddit reward points which are Ethereum tokens, users have to create a Reddit Vault, or a wallet. It’s not a big leap to speculate the tokens and wallet could be used for other purposes in the future.
In terms of scale, Reddit has 430 million registered users, is a top 20 site in the world, and in the U.S., Alexa ranks it as seventh after Google, Youtube, Amazon, Facebook, Yahoo and Zoom.
The Tencent factor
Reddit, controlled by Conde Naste, raised $300 million in Series D funding last year, of which half came from Tencent, the owner of WeChat Pay. The Chinese wallet processes one billion payment transactions per day.
In a whitepaper last year, Tencent said that Libra was a potential threat to WeChat Pay and Alipay and that Libra’s unveiling was the most important blockchain event since Bitcoin’s birth.
Meanwhile, in order to use the new Reddit points, it’s necessary to use the Reddit Vault, which is part of the Reddit app. See any parallels between WeChat, WeChat Pay and Reddit?
The offering is using open source Ethereum, and that might surprise you given the Tencent link. But Tencent is a big promoter of open source and along with WeBank, one of the initiators of the Chinese open source blockchain FISCO BCOS.
Turn the clock back to June 2019 and imagine the reaction if Facebook had announced a rewards blockchain platform instead of Libra.
There’s also the potential for the rewards points to bring income to Reddit. The company receives 20% of the monthly token distribution. The points, because they’re tokens, are transferrable and can be sold for revenue.
Even if the rewards program is the ultimate endgame, this is still an attractive blockchain sector. NYSE owner ICE started Bakkt, which recently raised $300 million in a Series B. A large slice of that was to pivot to rewards and buy Bridge2 Solutions which operates 4,500 loyalty and employee incentive schemes. Amex has also started to use blockchain in its massive rewards program.
That’s the big picture. Here’s the nitty gitty.
Reddit unveiled its blockchain-based ‘community points’ system as a way to reward users based on their contribution. Reddit envisions a free internet, where its members will control independent online communities.
Community points are essentially transferrable tokens on the Ethereum blockchain. They can also be spent on premium features or special memberships for badges, emojis and GIFs. These points are earned by contributing to the community, such as writing a post or a making comment. So far there seem to be two ERC-20 tokens, moons for the cryptocurrency community (called a subreddit), and bricks for the FortNite gaming community.
Only 250 million tokens are available, which will be distributed piecemeal every month. A user gets a certain amount of these points based on their monthly activity or contribution score, measured in Reddit Karma.
Users need to open a Reddit Vault, essentially a blockchain wallet, to hold the community points. They can also use any other Ethereum wallet. But for first-time users, will they?
Democracy in action
The community has the final say on who gets how many tokens, and they can hold polls for making changes to a list of planned recipients that Reddit will publish.
“Reddit karma provides a basis for measuring people’s contribution, but the final decision is up to the community,” said Reddit.
Users can also tip, gift, or transfer community points. A user with a popular comment will thus get more points, which will increase their reputation in the community. Additionally, the community can vote to remove a user from points distribution if they are spamming posts for Reddit Karma.
While the points can be spent on memberships and other premium content, they do not go to Reddit. They are instead ‘burned’ or destroyed, and half of that amount is reintroduced on the blockchain to be distributed the following month. However, Reddit does receive 20% of all the tokens.
For now, the system is in beta and will be using the Ethereum testnet.
Others are using distributed LEDGER technology (DLT) as a way to democratize social media, and give back users the control of the content they consume. Some examples include Steemit, All.me, and the EU-backed Helios, among many others.