Original author: Jaleel, Joyce, BlockBeats

Original editor: Zhang Wen, 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 Director of Consumer and Product Communications, stated, "While we see some future potential for community points, the resources required are too high to justify continued development. Additionally, the regulatory environment has added to the difficulty."

Reddit will be discontinuing 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 communities, Moons (MOON) of r/CryptoCurrency, Bricks (BRICK) of r/Fortnite, and Donuts (DONUT) representing the community points of r/ethtrader, experienced price drops of 85%, 67%, and 66% respectively.

Black Swan Event in Reddit's Crypto Community

In the r/CryptoCurrency community, the announcement of the discontinuation of the community points test version and special membership qualifications was marked as [SERIOUS]. The post emphasized that due to regulatory constraints 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% within three minutes. Many users promptly disposed of their 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 remarked.

The post garnered over 3,000 comments, with the majority of community members expressing dissatisfaction. While the announcement did provide an explanation for the new "Contributor Points Program," which allows eligible users to earn cash based on the Karma and gold they earn through qualified contributions, the community members were not convinced.

Speculation about rug pulling followed, with comments such as, "The price crashed hours before it reached my inbox, so something fishy definitely happened," and "It's annoying if Reddit sold off before the news was released. They do hold a significant amount of tokens." The community observed highly suspicious transaction records on the chain, pointing out that addresses completed large sell-offs before the "Community Token Discontinuation" notice, effectively "escaping."

The community further criticized 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."

One of the hardest-hit by this Black Swan event in Reddit's crypto community was the cryptocurrency exchange platform Kraken. Therefore, in the "[SERIOUS] Points Topic" post, Kraken's co-founder Jesse Powell responded, "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. People should be able to purchase collectible avatars with points in some proportion or other ratio. It shouldn't just destroy the value of the holdings without providing any return.

Moving from Ethereum to Arbitrum Nova

Three years ago, Reddit's introduction of a novel blockchain-based points system built on Ethereum sparked significant discussion. It was initially revealed in a video posted by a community manager of the decentralized domain project Unstoppable Domains that Reddit was configuring an Ethereum wallet for each user and using ERC20 tokens.

Reddit officially announced this news shortly thereafter, sparking 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 launched on r/Cryptocurrency and r/FortNiteBR, with the tokens being MOONS and BRICKS, respectively. The combined user base of these two communities reached 2.4 million, making it a very significant 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 provide the community with a week to provide feedback or propose modifications. Once the final list was determined, the tokens would be directly distributed to users' wallets. These community points had multiple uses, from unlocking special features to displaying a user's "reputation" online.

However, when things seemed perfect, problems began to emerge. The use of Ethereum's transaction fees was evidently a major issue. The high transaction fees and limited bandwidth of Ethereum posed a significant challenge for Reddit in expanding the community points.

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

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

Tokens Shut Down at Their Peak

After migrating to Arbitrum Nova, combined with Reddit's influence, the subscriber counts of r/Bitcoin and r/Ethereum reached new records. In a 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 astonishingly, when Reddit's community tokens Moons and Bricks were listed on Kraken, their prices skyrocketed.

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

Despite its impressive growth, the fatal flaw in the development of community tokens lies not only in regulatory issues and resource constraints but also in the difficulty of achieving cross-platform applications. Additionally, the token points mechanism has to some extent deteriorated the community discussion atmosphere, with meaningless content being discussed across various sections for the sake of tokens.

Over the past three months, the prices of Reddit's community token points have been declining. 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 Influence 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 seasoned player in the cryptocurrency and NFT fields.

In 2014, Ohanian purchased 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 the Ethereum 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 over $750 million in assets under management.

In an interview with Yahoo Finance in 2020, Ohanian stated that more and more top engineers, 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 will continue to invest a portion of his assets in cryptocurrency.

Informing Millions of Users about NFTs and Web3 through Reddit

Not only that, but there are also many exciting discoveries 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 that he took his wife's CryptoPunk (which he bought for her) to the Met Gala. In the accompanying photo, he wore a lapel pin with the CryptoPunk#2950 design on his suit.

It's easy to see his love for his wife from the NFT attributes he chose. The attributes of the Punk, such as the headband, skin color, facial features, and accessories, match those of Serena Williams in many ways. There are only 406 Punks with a headband, brown skin, and female attributes, making them even rarer. He bought seven of them, gave one as a gift to his wife, and turned it into a lapel pin to accompany her at the gala.

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

Related reading: "Reddit Founder Turns Out to Be an NFT 'Veteran,' with 548 NFT Works in His Wallet"

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 Avatars" series based on the Polygon blockchain. Those who purchased NFTs could 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, and the number of Reddit Avatar NFT series holders approached 2.8 million. Subsequently, Reddit released the second generation of 40,000 collectible avatars, which sold out within 24 hours. By December, the cumulative sales of Reddit Avatar NFTs had exceeded $10 million, with a total of about 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 launch Rabbids-themed Avatar NFTs, available for free to Reddit users.

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 tokens, and the market value returned to over $100 million, with total sales exceeding $41 million. It can be said that millions of users have learned about NFTs and Web3 through Reddit.

Vitalik Used to Be a Regular, Is Reddit No Longer Crypto?

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

As the "compass" of the crypto community, Ethereum founder Vitalik Buterin was often active on Reddit, interacting with the community. On January 8, 2022, Vitalik Buterin shared his optimism about the future of multi-chains but expressed skepticism about cross-chains on Reddit.

Then, on January 11, 2023, Vitalik appeared again and participated in the ninth AMA hosted by the Ethereum Foundation (EF) research team on Reddit. Several important figures, including Ethereum founder Vitalik Buterin, as well as researchers such as Danny Ryan, Dankrad Feist, Justin Drake, and Domothy, were present to answer questions. 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.

Interesting to note, it's not just Vitalik Buterin; the San Francisco branch of the United States Secret Service also held an AMA session on Reddit.

According to a post on r/cryptocurrency, 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 money, 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."

With the banning of token points, 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 made countless contributions to the entire digital currency and NFT field and had a deep connection with it, real-world compliance requirements have forced Reddit to take a more cautious approach. To avoid potential compliance risks, the connection between Reddit and the crypto space has become increasingly limited, ultimately choosing more isolation.

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 people hope that Reddit can regain the intimacy and passion it once had with crypto.

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