There is still half a month left. On November 8th, the American forum platform Reddit will officially cancel the Community Points system.
This blockchain-based tokenized community reward system has been running for 3 years, producing three types of encrypted tokenized points: DONUT, MOON, and BRICK, aimed at rewarding users for constructive activities in certain sub-forums.
On October 17th, within 24 hours of Reddit's announcement, the prices of the three tokens plummeted like waterfalls, with MOON dropping by 85%, BRICK by 67%, and DONUT by 66%.
Reddit cited the reason for terminating the community reward program as encountering a more severe regulatory environment, which has led to many restrictions on expanding the use of the product.
As a social media platform with a crypto culture gene, Reddit suddenly revealed unfavorable news in the exploration of Web3. While the left hand is stopping the points reward program, Reddit's right hand is pushing forward with the IPO progress.
Official Termination of the Community Reward Program
"We see some future opportunities in community points, but unfortunately, the resources required for this project are too high and it is difficult to become reasonable," said Tim Rathschmidt, Reddit's Director of Consumer and Product Communications, in an interview with TechCrunch. "The regulatory environment has also added pressure in this regard. The moderators and community members who have supported community points have always been great partners, but as the product has developed, it is no longer feasible to scale."
Reddit's community points program began testing in October 2018, initially creating ERC-20 standard tokenized points on Ethereum, and later moving to the Ethereum scaling network Arbitrum Nova.
Reddit first introduced DONUT in the /r/ethtrader sub-forum. Subsequently, in May 2020, two more tokens were introduced, with the first token MOONS being distributed to members of the /r/Cryptocurrency sub-forum, and the token BRICKS being distributed to members of the /r/FortniteBR sub-forum.
On October 17th, these tokenized points experienced drastic fluctuations after Reddit announced the cancellation of the community reward program. Within 24 hours, the prices of the three related tokens all plummeted, with MOON dropping by 85%, BRICK by 67%, and DONUT by 66%.
On October 23rd, BRICK tokenized points experienced a 7-day decline of 56.5%.
It is worth noting that some people seemed to have known about Reddit's plan to cancel the points reward program early.
Before the news broke, at least two Reddit moderators related to cryptocurrency liquidated a large amount of MOON: an administrator named Mcgillby transferred over 100,000 MOON, which was then converted into over $23,000 worth of ETH; and 17 minutes before the announcement was made public, another moderator "rider_of_the_storm" transferred 345,422 MOON (worth over $69,000 at the time) to a trading address.
After these actions, one moderator deleted all historical posts, while another simply deactivated their account. Such suspicious behavior by individual Reddit moderators has severely undermined the confidence of cryptocurrency-supporting users on the platform.
It is important to note that Reddit has been the most active forum platform for cryptocurrency enthusiasts, investors, and developers for the past decade, bringing together over 500 cryptocurrency enthusiast communities, with numerous sub-forums dedicated to discussing cryptocurrency, blockchain technology, and related topics. As of the fourth quarter of 2022, Reddit has a total of 57 million daily active users, and the sub-forum r/CryptoCurrency, which uses the tokenized points MOON, has 6.9 million members.
As recently as July of this year, influenced by rumors of being listed on the cryptocurrency exchange Kraken, the price of MOON skyrocketed several times. However, this did not seem to save the ultimate fate of the points program.
The original intention of the community points was to increase user engagement, gradually becoming a measure of community reputation. Users would receive rewards based on their contributions to their favorite channels, and the amount of points each user received would ultimately be determined by the community. Users could use these points to exchange for community badges, emoji packs, and other gifts.
At one time, Reddit's introduction of cryptocurrency-style community points was seen as an important sign of its transition to Web3. By 2022, Reddit had also issued NFTs, not only becoming a bright spot in the NFT bear market, but also bringing new community activity to Reddit.
According to data from Dune Analytics, Reddit's NFT user base exceeded 5 million in December 2022, all within just six months.
Whether it was the community points program or NFTs, Reddit has shown enthusiasm for exploring Web3 social, but new challenges quickly followed.
Community Plans to Take Over Tokenized Points
As early as the beginning of this year, insiders revealed that Reddit might abandon some Web3 attempts related to cryptocurrency to reduce potential additional regulatory burdens and investor risks, as it prepares for its upcoming initial public offering (IPO).
As early as June 2019, Reddit discontinued Bitcoin payments, which it had accepted since 2013. In 2021, Reddit began actively preparing for the IPO. According to foreign media reports, Reddit has been updating its IPO documents, preparing to advance the listing process when market conditions improve, with a high likelihood of going public by the end of this year. However, these claims have not yet received an official response.
Reddit's pursuit of going public may be due to the pressure from its investors.
At the end of 2021, just after escaping the meme stock frenzy, Reddit secretly submitted an IPO application with a valuation of $15 billion, planning to go public in the fourth quarter. Prior to this, Fidelity, the lead investor in Reddit, valued it at $10 billion, and the stake it acquired for $28.2 million is now worth only $16.6 million.
This write-down has raised doubts about whether Reddit has the ability to go public at the desired valuation and allow investors to exit. In hindsight, it seems that Reddit was late in wanting to go public in 2021, as the IPO market cooled off with the Federal Reserve beginning to raise interest rates, and tech stocks were particularly hard hit in 2022.
Reddit's financing rounds
Under such pressure, if Reddit were to focus its capital operations on the IPO, cryptocurrencies, which have been controversial in the financial market, would certainly be a focus of regulatory scrutiny. In this light, it is only natural for Reddit to stop the community points program related to cryptocurrencies.
Regardless of how MOON, BRICK, and DONUT were packaged as community points or rewards, it cannot change the reality that these blockchain assets can circulate in the secondary market, and Reddit is the issuer of these assets. Based on past precedents, these points are likely to be viewed by regulators as illegal securities.
According to Tim Rathschmidt, Reddit's Director of Consumer and Product Communications, the community points program not only requires operational costs but also faces regulatory pressure. Cutting it off seems to be more favorable for Reddit's IPO journey.
Reddit's co-founder Alexis Ohanian once stated that the "community points" feature would attract 400 million Reddit users to the cryptocurrency field and demonstrate the value of digital assets and cryptocurrencies to people in an inherent and easy-to-understand way.
Now, Ohanian's grand plan is coming to an end. An interesting phenomenon is that the cryptocurrency enthusiasts nurtured and gathered on this platform have started to take action.
The administrator of the Reddit crypto community CryptoCurrenyMoons stated, "MOON will not be destroyed, the transfer function in the smart contract will not be disabled, Reddit will cancel control of the contract, and Reddit's token shares will be destroyed."
This administrator proposed a possibility, "We will continue to independently develop Moons, whether through taking over ownership of the smart contract or airdropping new tokens at a 1:1 ratio with the current balance, but the current solution is still undecided, depending on Reddit's internal decision."
After November 8th, Reddit's MOON is destined to come to an end, but perhaps the community's MOON will rise again and continue to be active in the community reward scene.
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