The Mysterious Influencer Stock Market Worth $1 Billion
When BitClout arrived on the internet last month, it befuddled much of the cryptocurrency world. That was not least because the company, which describes itself as “not a company,” but a “new type of social network” — a sort of bitcoin-meets-Twitter — had ripped off some 15,000 profiles of famous people and influencers from actual Twitter and opened accounts in their names without their permission.
President Biden has a coin on BitClout you can buy for $3,900 — though tokens for YouTube star MrBeast trade for eight times as much. There are coins reserved in the names of Snoop Dogg and Ariana Grande; Joe Rogan and Beeple, the digital artist; Spanish football clubs and venture capitalists; Jonas Brothers, Kardashians, and Clintons; even some journalists, including — much to my surprise — myself. None authorized the creation of their profiles nor claimed the coins BitClout set aside for them.
The basic idea behind BitClout is to create a token-based marketplace for shares in someone’s (or something’s) reputation and influence. Go viral on Instagram for something delightful? Bull run. Say something stupid on Twitter? Could be the start of a bear market. In theory, every public action and utterance from anyone becomes tradable by anyone else.
The draw for those taking possession of their profiles at BitClout is about 10 percent of their own coins. But the question of what that virtual money is and what it’s worth is still an open one: BitClout accepts bitcoin — more than $225 million has flowed in so far — but it doesn’t have a mechanism yet for taking it out, creating a kind of crypto roach motel. And while cryptocurrency typically lives securely on a blockchain, BitClout’s holdings reside on its own server, making some people wonder who really owns the money. Perhaps the most suspicious part, though, to many outsiders, was the insistence by BitClout’s founders that they themselves remain anonymous — with the CEO answering only to “Diamondhands,” his moniker on the platform. It has all added up to a sense among many sophisticated tech observers that there is something — in the words of one venture capitalist who was pitched to by the founders — “borderline scammy” about BitClout.
And yet, BitClout’s backers have poured more than $100 million into it. They include a roster of blue-chip Silicon Valley venture capitalists — Andreessen Horowitz, Sequoia, Social Capital — along with high-profile crypto investors Digital Currency Group and the Winklevoss twins.
The anonymity BitClout’s founder has assumed is an apparent homage to Satoshi Nakamoto, the pseudonymous founder of bitcoin whose true identity has never been revealed. But the decision to hide who he is surprised some of BitClout’s own investors. After all, it wasn’t Diamondhands who pitched them, but a familiar entrepreneur named Nader Al-Naji, best known for starting an ambitious but unsuccessful cryptocurrency company several years earlier. Al-Naji, using his real name, began posting job listings for a new operation sometime last fall, but since launching BitClout, he has refused to confirm his identity even to reporters who have interviewed him. He did not respond to multiple messages seeking comment, sent both to accounts under Al-Naji’s name as well as the Diamondhands pseudonym and to BitClout itself.
A Princeton alum, Al-Naji interned at D.E. Shaw, the quant hedge fund, and later worked at Google. In 2018, at age 26, he raised $133 million for his first start-up, Basis, which launched a cryptocurrency whose price it intended to govern through an “algorithmic central bank.” Less than eight months later, Al-Naji abruptly shut Basis down, citing tightening U.S. securities regulations, and returned the remaining funds to some investors.
Many of those investors are backing Al-Naji again on BitClout. The promise of allowing users to monetize their own — and make money off others’ — social-media clout in some ways looks like an irresistible opportunity: Here’s a way to finally capitalize on the viral power of Twitter, where virtually anyone can have skin in the game; if it catches on, it could upend social media as we know it. The idea is not dissimilar from what Klout, a start-up that garnered significant attention about a decade ago, tried before shutting down in mid-2018.
“For example, if Elon Musk succeeds in landing the first person on Mars, his coin price should theoretically go up. And if, in contrast, he makes a racial slur during a press conference, his coin price should theoretically go down,” explains a white paper posted to the BitClout website.
It’s an audacious theory anyway. But unlike stock in a company, which generally entitles holders to certain voting and other rights, BitClout’s tokens aren’t actually attached to any real-world assets or claims. If you own an Elon Musk token, you don’t actually own any share of his personal fortune or future earnings. One venture capitalist passed on Al-Naji’s pitch because the idea “didn’t seem to make sense,” he says: “What does it mean to own someone’s token? There is no economic value or tie to them or their business.”
Most of the people for whom BitClout took the liberty of creating accounts, using their names and photos, have so far not wanted anything to do with them — despite the fact that the accounts, if claimed, offer their owners a share of the crypto coins, ranging in value from a few hundred dollars to millions. That’s probably because claiming such “reserved” accounts requires taking on some reputational risk: You have to tweet about it, a built-in marketing gimmick for BitClout. This is what it looked like when musical artists JVCKJ and Kygo claimed their profiles:
Some of the people for whom BitClout created accounts not only have little interest in claiming them, but are actively trying to distance themselves from the whole affair. A California law firm called Anderson Kill has sent Al-Naji a cease-and-desist letter demanding that the name and likeness of their client Brandon Curtis, a Bay Area tech executive, be removed from the site. Meanwhile, James Prestwich, a San Francisco–based crypto entrepreneur, says his profile suddenly disappeared after he complained loudly enough on Twitter. At least one of BitClout’s own investors, Scooter Braun’s TQ Ventures, has had their profile scrubbed from BitClout. The VC who passed says he’s glad he did: “Since then they’ve acted scammy,” he says.
Investors say Al-Naji’s decision to conceal his identity never came up in their meetings, but the Satoshi shtick has irked many who don’t care for the idea of their own profile pics being tied to a cryptocurrency scheme. “It is cowardly and stupid to think that you can put everyone else’s name on this except your own,” says Prestwich, whose coin’s market value approached $14,000 before his profile was taken down.
Still, people are buying into BitClout on the promise that early investors can get in on the ground level of someone else’s fame and profit as their star rises. There’s an algorithm backing this up, relying on what’s known as a bonding curve: If someone wants to create their own BitClout tokens, their profile “will happily mint them out of thin air,” explains the white paper, with the price quickly ballooning as more people buy in.
Many of BitClout’s investors declined to comment publicly, but those who were willing to discuss it raised concerns about its practices, from security flaws to the inability to withdraw funds. “I definitely wouldn’t put more money in it than you have to lose,” says Joey Krug, co-chief investment officer of Pantera Capital, which invested a relatively minor sum in BitClout, despite having lost its investment in Al-Naji’s first company, Basis.
Still, Krug thinks the controversy around launching an admittedly half-baked platform pre-populated with profiles scraped from Twitter could help BitClout take off faster: “I wish I thought of that,” he adds. (The amount of bitcoin that BitClout has received so far would give the company a valuation exceeding $1 billion, he notes.)
There are users who claim to be making money off their BitClout accounts — even if it involves a major workaround. Sigil Wen, a high-school senior in Toronto, says he put just 150 Canadian dollars (less than $120) into BitClout, including some in his own tokens as well as coins of friends. As they returned the favor, his own market cap has surpassed $600,000, and he made several times more in three days than he did in a month of interning at Y Combinator. He got a boost from helping to lure a few TikTok celebs to BitClout; “being an early investor” in their coins “helped grow my portfolio,” he says.
Of course, the 17-year-old, who was just accepted to the University of Pennsylvania, had to go elsewhere to actually sell. He says he unloaded $5,000 worth of BitClout to a willing buyer on Discord, where the coins go for a 40 to 50 percent discount. He spent some of the money on a new MacBook Pro and AirPods. The experience gave Wen an idea for his own business: He built his own trading site called BitSwap as a back door to BitClout’s lack of liquidity, and plans to launch it to the whole network in mid-April.