The Death of Reddit’s Community Points — One For The History Books

Reddit has been on a warpath against itself and its own user base since the start of the year. With questionable decisions such as skyrocketing API prices, discontinuing Reddit coins and awards, and more recently, cancelling their entire cryptocurrency reward system program called Community Points — if bad decisions could win a Darwin award — the friendly Reddit mascot would take the leading spot, sniffing glue right on the podium.

With the gun pointed firmly at their feet, all decision-makers at Reddit took one last sniff out of the glue bags provided to them by Reddit HR, before announcing their latest decision — to sunset their 3-year-long Ethereum-based Community Points system, by November 8. This decision may have single-handedly decimated some of the biggest communities on Reddit and has caused over $37 million dollars in losses which extend beyond Reddit users.

More specifically, the announcement caused the value of tokens such as $MOONS▼ 80.9%$BRICKS▼ 42.3%, and $DONUTS▼ 53.4%, used by some of the biggest Reddit communities such as /r/cryptocurrency (6.9m members), /r/fortniteBR(3.0m members), and /r/ethtrader (2.3m members) to plummet shortly after.

So let’s dive deeper into Reddit’s Community Points, and how Reddit managed to wipe out over $37 million dollars in wealth, affecting Reddit users, Cryptocurrency exchanges such as Kraken, and many non-Reddit users too.

What are Reddit’s Community Points?

The Reddit Community Points (RCP) were initially promoted as a chance for community members to “own” a piece of their community. Community members would also participate in governing the community, through voting or creating proposals. This would effectively create self-governing communities and a greater sense of being in this together. Because Community Points are essentially ERC-20 tokens, they would have an actual value and can be exchanged for another cryptocurrency.

As you can imagine, people were rather hype on this idea, especially considering how users would earn their community points. Tokens would be distributed each month, to all members of the community with an active wallet, based on how many upvotes they have received during the last 30 days. The ratio would often differ from month to month depending on the total number of upvotes generated during that time. The more upvotes you got, the more $MOONS, $BRICKS or $DONUTS you would stand to gain at the end of the month.

What you did with your tokens was up to you. You could keep them in your vault and use them as governance tokens, since the more tokens you have, the more weight your vote would have in governance polls. Or you could simply exchange them on Sushiswap, and more recently on exchanges such as MEXC and Kraken.

Making a living on MOONS (and other community tokens)

For some people, posting on Reddit turned into a full-time job, when the true potential of community tokens became apparent.

For instance, just over a month ago top contributors on r/CryptoCurrency were earning the equivalent of $4000 a month in $MOONS, simply by posting news, comments, and other content that would get upvoted on the subreddit.

Of course, other users eventually got wind of the money-making opportunities in these communities and thus Moonfarming started to become more and more prevalent — that is posting content for the sheer purpose of getting $MOONS (or other community tokens depending on the community they’re in).

Other active members of the community blamed RCPs for contributing to low quality content due to tokenfarming. You can’t please everyone but the community was active and people were actively creating content.

Adoption of $MOONS and other RCPs

Things were going so right for MOONS, and even in the middle of a bear market, they managed to reach a new all-time high, just earlier this summer, in August 2023, trading at over $0.57 per MOON. This was largely due to the fact that Reddit has managed to get its Community Tokens listed on several exchanges, including Kraken.

That’s right — not even 3 months ago, Reddit was going full steam ahead, looking to create more adoption for their RCPs, and by extension more value for users who would create content on communities using them.

It was almost too good to be true — creating monetization opportunities without spending your own dough, and I’m sure that while the majority of the board members didn’t understand the concept, they all got a tingle in their wrinkly genitals just thinking about how this is going to push the Reddit brand into the stratosphere. Maybe even hoping that one day, everyone will be happy with Reddit management, and forgive the numerous attempts to screw over their user base.

Well… it’s safe to say this temporary sense of peace, happiness, hype, and shitposting didn’t last very long.

Reddit’s Message to “Sunset” Community Points

Just 2 days ago, Reddit Admin (paid employee of Reddit), not to be confused with a Reddit Moderator (volunteering user)/u/cozy__sheets made the dreaded announcement that Reddit will be sunsetting the Community Points project by November 8, citing scalability issues due to the current regulatory environment.

“The regulatory environment has added to scalability limitations. Though the moderators and communities that supported Community Points have been incredible partners — as it’s evolved, the product is no longer set up to scale.”

In his original post, cozy__sheets continued by saying:

“Part of why we’re winding down Community Points is because we’re able to scale several products that accomplish what the Community Points program was trying to accomplish while being easier to adopt and understand. One example is the new Contributor Program, actively rolling out, which will give eligible users the ability to earn cash based on the karma and gold they’ve earned on qualifying contributions. Other examples include shipped features that were originally part of the Community Points beta that we believe any community should have access to, like subreddit karma and gifs.”

In other words, Reddit decided that they didn’t want to deal with any kind of regulatory challenges by having the Community Points system as part of their product. Yes, this is the same company that adopted crypto 3 years ago, and NFTs just earlier last year.

If you struggle to find any sense in this decision, that’s because there isn’t any. Reddit has been lobbying and paying good money to exchanges such as Kraken and MEXC to have their community tokens listed, as soon as 3 months ago. It’s not like Reddit or anyone else on this Earth thinks that there weren’t going to be any regulatory challenges to come out of it.

The risks were well known, well ahead of time. Regulatory uncertainty has plagued crypto since its inception and it’s gotten a lot worse since 2021. Reddit could have pulled the plug a long time ago — there is nothing in the recent regulatory framework that Reddit is responding to.

If you ever want to write a case study on how groupthink can turn intelligent adults capable of critical thinking, into a mindless circle-jerk of unenlightened dimwits — my God Reddit leadership is a goldmine for that.

The decision was that rewarding users for good content is a great thing, but crypto is bad, so Reddit is going to rebuild this system with Fiat and have it be managed exclusively by Reddit.

Irresponsible behaviour and damages caused

For many people, including the author of this post, this was a painless loss. Most people in those communities didn’t look at their community points as worth something. But some people did, and many people spent a lot of time on Reddit because of the monetary incentive.

It’s safe to say that the sentiment was predominantly negative, as everyone who contributed to the subreddit feels like they’ve been rug-pulled and wasted hundreds of hours for literally nothing.

Reddit single-handedly pumped their community tokens getting them listed on exchanges, generating hype around it, and getting the general public invested, only to pull the rug from everyone’s feet less than 3 months after peak hype. This is nothing but a corporate rug pull, with no regard for everyone who lost time, money, or both engaging with a product that Reddit itself encouraged you to use.

The aftermath

In the wake of this announcement, people started dumping their Moons as soon as they could, selling at a fraction of their value just the previous day. Some wanted to get out with more than others it seems —

One hour before the announcement was made public, Reddit Admins were in a big conference call with Reddit Moderators — who were made aware of this decision on this call for the very first time. Most mods rolled with the punches, however at least 2 moderators were proven to sell right during that call before the announcement officially went live.

Here is a list of moderators from the r/CryptoCurrency community that dumped their $MOONS before the announcement.

Millions of MOONS were dumped by the above mods, causing the price to crash by around 70% — even before the announcement had taken place. This naturally caused a panic sell, and combined with the announcement finally going live — the price of moons dropped around 85%, before jumping back up by 45% the next day.

Most of these moderators were de-modded or immediately resigned after dumping. Yes, what the mods did is bad, but what Reddit itself did is way worse.

Next Steps for MOONS, BRICKS and DONUTS

Moderators and community members are now discussing the next steps for the soon-to-be-homeless community tokens. It looks like the communities are trying to get ownership over the smart contracts at least in MOONS case. The alternative is to hard fork andcreate a new token.

Whatever the chosen path, one thing still remains to be sorted out — what utility will MOONS and RCPs have, now that they will no longer be supported by Reddit?

If the community manages to keep ownership of the contract, and if a use case is found — there might just be a way forward. As for Reddit, I have no doubt that they will continue to disappoint their userbase at every opportunity.


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