Author: Jaleel, Joyce, BlockBeats

On October 18th, according to TechCrunch, Reddit has decided to terminate its nearly three-year-old blockchain-based community points service. Tim Rathschmidt, Reddit's Consumer and Product Communications Director, stated, "While we see some future potential for community points, the required resource investment is too high to sustain. In addition, the regulatory environment has added to the difficulties in this area."

Reddit will cancel community points on November 8th. These points are essentially interchangeable Ethereum tokens stored in Reddit's Vault, which operates as a cryptocurrency wallet.

Following the announcement, the native tokens of the Reddit r/CryptoCurrency community, Moons (MOON), dropped by 85%, while the B ricks (BRICK) token of the r/Fortnite subreddit dropped by 67%, and the Donut (DONUT) token representing the community points of the r/ethtrader subreddit dropped by 66%.

Black Swan Event in Reddit's Crypto Community

In the r/CryptoCurrency community, the announcement of the discontinuation of the community points beta and special membership qualifications was marked with [SERIOUS]. The post stated that due to regulatory environment and resource limitations, the community points tokens will be discontinued no later than November 8th.

The sudden announcement caused the MOON token to drop by 82% in three minutes. Many users promptly disposed of the tokens, while users in other time zones were not as fortunate. "After waking up in Australia and Asia, the price was already chaotic, and token holders welcomed the new day in this way," the community said.

The post gathered over 3,000 comments, with most community members expressing dissatisfaction. The announcement did provide an explanation for the new plan, the "New Contributor Program," where eligible users can earn cash based on the Karma and gold they earn through qualified contributions. However, the community members were not convinced.

Speculation about rug pulling followed, "The price crashed hours before it reached my inbox, so something shady definitely happened," and "It's annoying if Reddit sold before the news was released. They do hold a large amount of tokens." The community saw very suspicious on-chain transaction records, pointing out that addresses completed large sell-offs before the "Cancel Token Points" notice, achieving an "escape."

The community further accused the centralization of the tokens and even considered reporting the matter to the US Internal Revenue Service for investigation: "Reddit operates on POS, and they don't care about their community at all."

One of the hardest-hit by this Black Swan event in Reddit's crypto community was the cryptocurrency exchange Kraken. Therefore, in the "[SERIOUS] Points Topic" post, Kraken co-founder Jesse Powell replied, "I personally don't think it's a regulatory issue, but I know regulatory issues are complex and evolving, maybe Reddit doesn't want the hassle."

In Jesse Powell's view, Reddit should at least provide a compensation method and redemption path. Allowing people to purchase collectible avatars with points in some proportion or other ratio. It shouldn't just destroy the value of the holdings and provide no return.

Moving from Ethereum to Arbitrum Nova

Three years ago, Reddit, with its novel blockchain-based points system built on Ethereum, received a lot of attention. It was initially revealed in a video posted by a community manager of the decentralized domain project Unstoppable Domains that Reddit was setting up an Ethereum wallet for each user and using ERC20 tokens.

Reddit officially announced this news shortly after, which also sparked a huge response in the crypto space. According to some descriptions from Reddit, these so-called "community points" actually represented ownership of Reddit subreddits. The points system initially went live on r/CryptoCurrency and r/FortNiteBR, with the tokens being MOONS and BRICKS, respectively. The total number of users in these two communities reached 2.4 million, making it a very important starting point.

Reddit's mechanism was quite straightforward: it allocated tokens based on users' monthly contributions to subreddits. Four weeks later, Reddit would announce each user's contributions during that period and give the community a week to provide feedback or suggest modifications. Once the final list was determined, the tokens would be directly distributed to the users' wallets. These community points had multiple uses, from unlocking special features to displaying users' "reputation" online.

However, when things seemed perfect, problems began to emerge. The use of Ethereum for transactions was evidently a huge issue, as Ethereum's transaction fees were high, and the bandwidth was limited, making it a significant challenge for Reddit to scale the community points.

"For example, putting all Reddit users on the Ethereum main network is not feasible and is prohibitively expensive," further explained the community points page. Therefore, they researched, adapted, and migrated to Arbitrum Nova.

Arbitrum Nova is a solution provided by Arbitrum specifically for facilitating gaming and social applications, making it Reddit's obvious choice.

Token Shutdown at the Peak

After migrating to Arbitrum Nova, coupled with Reddit's influence, the subscriber counts of r/Bitcoin and r/Ethereum set new records. In the week from June 4th to June 11th, the r/Bitcoin subreddit gained over 364,000 new subscribers, and the r/Ethereum community gained 461,000 new subscribers. Currently, r/Bitcoin has over 5 million subscribers, and r/Ethereum has over 2 million subscribers.

Even more shocking, when Reddit's community tokens Moons and Bricks were listed on Kraken, the prices skyrocketed.

After the cryptocurrency exchange Kraken announced the listing of Reddit community tokens BRICK and MOON and enabled deposits and withdrawals on the Arbitrum Nova network, the Reddit r/CryptoCurrency community tokens MOON and r/Fortnite subreddit community tokens BRICK saw price increases of 42.1% and 83.4% respectively within 24 hours.

Although there has been impressive growth, the fatal flaw in the development of community tokens lies not only in regulatory issues and resource limitations, but also in the difficulty of achieving cross-platform applications. Additionally, the token points mechanism has to some extent deteriorated the atmosphere of community discussions, with meaningless content being discussed across various subreddits in pursuit of tokens.

Over the past three months, the prices of Reddit's community token points have been on a continuous decline. The peak moment from six months ago seems unlikely to be repeated, and this outcome may be inevitable.

How Does This Enthusiastic Husband and Crypto OG Impact Reddit?

Reddit co-founder Alexis Ohanian is an enthusiastic husband, deeply in love with the renowned tennis superstar "Serena Williams." Behind this Reddit pioneer, there is also a lesser-known identity: a senior player in the cryptocurrency and NFT fields.

Alexis Ohanian and his wife, image source: internet

In 2014, Ohanian bought 50,000 ETH for only $15,000 when the price of ETH was only 30 cents. This descendant of Armenian heritage said that his ancestors lost all their property in World War I, and cryptocurrency made him see the potential of inalienable property, so he participated in Ethereum's ICO. However, looking back on this transaction, he still feels that he bought too little.

Subsequently, in 2020, Ohanian used the proceeds from his early investments in ETH and Coinbase to establish the venture capital firm 776, which has invested in 29 early-stage companies related to cryptocurrency, with assets under management exceeding $750 million.

In an interview with Yahoo Finance in 2020, Ohanian stated that more and more top engineers, product developers, and designers are building real solutions on the blockchain, and the crypto market is entering spring. Ohanian also revealed in the interview that he would continue to invest a portion of his assets in cryptocurrency.

Hundreds of Millions of Users Learn About NFTs and Web3 Through Reddit

Not only that, but everyone has also discovered many exciting things in Ohanian's wallet. His investment vision is not limited to Ethereum alone. Since its establishment in 2018, Ohanian's OpenSea account has collected 548 NFT works involving 34 different projects, making him a true collector.

On September 14th, Reddit co-founder Alexis Ohanian tweeted, "Taking my wife's CryptoPunk (I bought it for her) to the Met Gala." In the accompanying picture, he wore a CryptoPunk #2950 pattern lapel pin on his suit.

From the selection of NFT attributes, it is not difficult to see his love for his wife. The attributes such as headband, skin color, facial features, and accessories in many ways match those of Serena Williams. There are only 406 Punks with headbands, and even fewer with brown skin and female attributes. He bought seven of them, gave one as a gift to his wife, and turned it into a lapel pin to accompany her to the gala.

From his collection sources, it is evident that he actively participates in NFT project sales, directly purchasing NFTs from the project parties, with only a few NFT works purchased from the secondary market.

And Reddit, the social media giant, seems to have been influenced by Ohanian, venturing into the NFT space. In July 2021, Reddit sold four 1/1 avatar NFTs for prices ranging from 42 to 115 ETH, with the highest contract reaching $261,000 at the time.

In August 2022, Reddit began airdropping its four "Collectible Avatar" series based on the Polygon blockchain, allowing NFT buyers to use them as personal photos on Reddit and other platforms, or sell them on secondary markets like OpenSea. When selling NFTs, Reddit fully considered the needs of Web2 users in the community, allowing users to easily create wallets through familiar password settings without having to purchase through cryptocurrency exchanges—40,000 collectible NFTs could only be purchased with fiat at a fixed price.

The first generation of NFTs sold out within weeks, with nearly 2.8 million Reddit Collectible Avatar NFT holders. Reddit subsequently released the second generation of 40,000 collectible avatars, which sold out within 24 hours. By December, the total sales of Reddit Avatar NFTs had exceeded $10 million, with approximately 40,000 transactions. During the NFT launch, Reddit created about 3 million wallets, while OpenSea had only created 2.3 million wallets at the time.

This year, Reddit seems to have gone even further in exploring "new ways" in NFTs. It collaborated with Ubisoft to release Rabbids-themed Avatar NFTs for Reddit users to claim for free.

In addition, Reddit has taken a series of measures to prevent malicious purchases. When deploying the fourth generation NFT contract on the Polygon blockchain in July, purchases were restricted based on "account age and other indicators," and a CAPTCHA verification system was implemented to prevent newly created accounts from making large purchases of NFTs for flipping.

The fourth generation NFTs were as popular as ever, selling out on the day of release. On October 8th, the number of holders of the Collectible Avatar NFT series exceeded 20 million, with a total minting volume approaching 25 million, and the market value returning to over $100 million, with total sales exceeding $41 million. It can be said that hundreds of millions of users have learned about NFTs and Web3 through Reddit.

Was Vitalik a Regular, and Is Reddit No Longer Crypto?

Regarding Reddit's community points, a partner at Pantera once highly praised its clever connection of user interests and community engagement, which could bring 400 million users to the crypto space.

As the "lighthouse" of the crypto community, Ethereum founder Vitalik was often active on Reddit, interacting with the community. On January 8, 2022, there was a post by Vitalik Buterin on Reddit: "I am optimistic about the future of multi-chains, but not so much about cross-chains."

On January 11, 2023, Vitalik appeared again, participating in the ninth AMA hosted by the Ethereum Foundation (EF) research team on Reddit. This AMA had several important figures answering questions, including Ethereum founder Vitalik Buterin, as well as researchers such as Danny Ryan, Dankrad Feist, Justin Drake, and Domothy. Vitalik mainly discussed the future development direction of Ethereum, the challenges and opportunities of DeFi (decentralized finance), the progress and expectations of Ethereum 2.0, and his views on the current cryptocurrency market.

Interestingly, not only Vitalik Buterin, but also the San Francisco branch of the United States Secret Service has held an AMA session on Reddit.

According to a post on r/cryptocurrency, the public display of the event was aimed at educating cryptocurrency users to protect them from criminal activities: "In San Francisco, we have a team dedicated to protecting cryptocurrency and its users. We are made up of agents and analysts who embrace the future of currency, and we are eager to share our work with this cryptocurrency community and provide resources and education to help protect your funds. We also want to learn from you."

As the community tokens are being banned, the once close relationship between Reddit and the crypto community seems to be gradually fading. Many are questioning, "Is Reddit no longer crypto?"

Although in the past, this social platform has made countless contributions to the entire cryptocurrency and NFT field and had a deep connection with it, the real-world compliance requirements have forced Reddit to take a more cautious approach. In order to avoid potential compliance risks, the connection between Reddit and the crypto community has become increasingly scarce, ultimately choosing to isolate itself from it.

This is undoubtedly a regrettable decision, but it also reflects the challenges and tensions that still exist between regulatory requirements and the crypto world. Not only token and NFT holders, but many others also hope that Reddit can regain the intimacy and passion it once had with the crypto world.

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