Can BitClout (CLOUT) make money?

BitClout (CLOUT) is a new blockchain social media platform driven by speculation.

Essentially, Bitclout participants can speculate in social media content by buying tokens. Content creators can earn the BitClout cryptocurrency, which they can sell for US dollars. Creators earn CLOUT by receiving Diamond Likes from followers.

Interestingly, content creators can bribe people into following them on BitClout by “gifting” followers Clout. Medium writer Tim Denning claims these gifts are free money.

However, as anybody who follows politics knows bribes are never free money. The briber always expects something in return. With BitClout the something is placing messages before followers.

For example, a fashion designer could bribe BitClout influencers to promote her clothes. Hence, I consider BitClout an advertising platform or an attempt to disguise advertising as “social media.”

 One obvious use of these Bribes will be to pay influencers to promote products or services. Hence, I think BitClout could be an advertising platform.

How BitClout Works

BitClout gives every profile on its platform its own creator coin that anybody can buy or sell.

Interestingly the builders gave BitClout a readymade audience by loading the top 15,000 Twitter (TWTR) influences into the platform. Hence, you can buy coins from Kim Kardashian, Elon Musk, Hillary Clinton, and other celebrities. Sorry, MAGA nation Trump Coins are not available because Twitter banned former President Donald J. Trump Senior (R-Florida) from its platform.

Creators get to keep a certain percentage of the Coins. The hope at BitClout is that creators could make money by selling the coins. Denning claims he has made money on BitClout. However, I suspect most creators’ coins will find no market.

Another hope at BitClout is to monetize likes by allowing users to buy Coins or gifting. I think the plan here is to give influencers an incentive to monetize the platform. The hope is to create enormous numbers of creator coins they can sell for enormous amounts of money.

Can BitClout work?

I think there is a huge reason BitClout (CLOUT) could never work. BitClout may not be scalable.

To work, enormous blockchain platforms need scalability. Scalability is the ability to grow fast and process enormous numbers of transactions fast. BitClout needs to be scalable if its operators want to process all those social media transactions.

However, the BitClout website admits BitClout’s architecture resembles Bitcoin (BTC). Despite its vast popularity, Bitcoin is infamously unscalable. Notably, the Blockchain Council estimates it takes 10 minutes to process the average BTC payment and notes Bitcoin can only process seven transactions a second.

Lack of scalability is a problem because the hope at BitClout is to build a successful Social Media Network. Even small social media networks have hundreds of millions of users. Twitter, for example, had 353 million monthly active users in June 2021, The Search Engine Journal estimates.Twitter was the ninth largest search engine in the world in June 2021.

Is BitClout scalable?

The BitClout team is trying to get around Bitcoin’s clunky architecture by using the Lightning Network’s Atomic Swaps.

An Atomic Swap is a smart contract that uses sidechains to move funds or information between blockchains. A sidechain is a less-encrypted shortcut between blockchains.

A Smart Contract is a digital robot that performs a task on the blockchain, such as transferring money. The most popular use for Atomic Swaps is to exchange or swap one cryptocurrency for another. For example, trading EOS (EOS) for Bitcoin (BTC).

My guess is that the BitClout team uses Atomic Swaps to power the gifting and liking. Hence, I think BitClout users will make an Atomic Swap every time they buy or transfer a Creator Coin.

The Lightning Network is Lightning Labs’ project to make Bitcoin (BTC) scalable so ordinary people will use it. I think BitClout will need something as scalable as the Lightning Network to become a successful social media platform.

Does BitClout have value?

Hence, BitClout’s builders seem smart. Plus, I think BitClout has attracted some impressive investors.

Denning notes that BitClout investors include the legendary Silicon Valley venture capital firm Andreessen Horowitz. Andreessen Horowitz financed Airbnb, Lyft, Pinterest, Slack, Instagram, Stripe, and Oculus in their early stages.

Other BitClout investors include the Winklevoss twins of Facebook (FB) and Gemini Dollar (GUSD) fame, Coinbase (COIN), Sequoia Capital, and Reddit co-founder Alexis Ohanian.

I think these investors hope Bitclout can capture a small portion of the immense value of social media. Facebook (NASDAQ: FB), for example, had $64.476 billion in cash and short-term investments and $163.523 billion in Total Assets on 31 March 2021.

Can Social Media Make Money?

Similarly, Twitter (NYSE: TWTR) had $8.608 billion in cash and short-term investments and $15.323 billion in Total Assets on 31 March 2021. Hence, even small social media can accumulate money.

On the other hand, there is no guarantee BitClout will make money any time soon. Remember, they founded Twitter in 2006 and it took 15 years to accumulate $15.323 billion in Total Assets. Hence, it could take decades for BitClout to make money.

Denning, however, thinks people could make money on Bitclout now. He claims to have made $700 on his first day on the platform, a claim I doubt.

Plundering Social Media

Note as a long-time freelance writer I have seen this scenario before. Some new platform appears and attracts enthusiasts who claim the platform can give creators total independence, wealth, and a steady income.

Over the years, I have heard such claims about Word Press, Twitter, Medium, STEAM, Clubhouse, Patreon, Substack, and others. Notably, none of these claims comes true. Instead, a few clever or lucky people make money. Everybody else does more work for less money.

One problem is that platforms plunder older platforms. For example, Medium writers move to Substack and take their readers with them, pillaging Medium of its market. Similarly, bloggers move to Medium, stripping Word Press of value.

Instead of building an audience. They move the older audience around. The same people reading the same content from the same creators at a new place. For example, Matt Talibi’s fans roam from Rolling Stone to Substack.

What Value Does BitClout (CLOUT) have?

Mr. Market gives BitClout some value. Notably, CoinMarketCap gave BitClout (CLOUT) a Coin Price of $103.88 on 1 August 2021.

Conversely, BitClout was CoinMarketCap’s 3,129th most valuable cyprotucrrency on1 August  2021. Overall, CoinMarketCap gave BitClout a Fully Diluted Market Capitalization of $1.23 billion and a 24-Hour Market Volume of $293,798 on that day. They based their numbers on a Total Supply of 10.808 million CLOUT.

On the other hand, I see efforts at monetizing BitClout beyond Content Coins. In particular, I cannot see how they can adapt BitClout to e-commerce or gaming. Although there is a vague plan for BitClout non fungible tokens (NFT).

I cannot see what value BitClout NFTs could have. However, the success of CryptoKitties proves people will buy anything. One potential user of BitClout NFTs could be first son Hunter Biden. Hunter could sell influence with his father President Joseph R. Biden (D-Delaware) for CLOUT along with his “artwork.”

Hence, BitClout could have some utility as a money transfer mechanism. However, BitClout will undoubtedly attract the attention of authorities because it could be a money laundering, bribery, and tax evasion mechanism.

Ultimately, the only value BitClout (CLOUT) has now is theoretical. I advise speculators to avoid BitClout until people use it as a social media. Until then, the Crypto Social Network is nothing but an idea.

Originally published at https://marketmadhouse.com on August 2, 2021.