Reddit Plans Cryptocurrency to Give Back to Its Users After $50M Raise | Hacker News Reader

Reddit Plans Cryptocurrency to Give Back to Its Users After $50M Raise

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233 pointsbanderon88 comments

This seems like an interesting but risky experiment if Reddit really does tie something like this to user contributions.

First it seems like a massive regulatory headache. From Reddit's perspective, are they going to send out 1099s to their users? Will they require them to have real names and addresses on file? From a user perspective, will I need to worry about my Reddit activity when filling out my tax returns.

It is also a gamble for Reddit as there is a psychological principle know as the overjustification effect [1] that is at play here. Once a person is paid for a habit they previously only did for enjoyment, the habit will generally become less enjoyable. Reddit turns from a hobby to a job.

Finally there is the issue of "circle jerking". Reddit is already notorious for its annoying and dangerous group think. Can you imagine if people could actually turn their karma into straight cash? The incentive will be even higher to simply echo back to the group what you think it wants to hear.

[1] - http://en.wikipedia.org/wiki/Overjustification_effect

I have to ask, how notorious? Is this a documented effect (on Reddit, not in general) or just the noise that people on the site are repeating much like any other meme?

Most accusations of "circle jerking" I hear there consist of shock and horror that certain communities seem to have certain beliefs/thoughts/ideas in common and that they were dared to be disagreed with. (I.e, you really should not be all that surprised when you try to float progressive ideas in /r/republican, or vice versa, and find your comments downvoted)

It's to the point where I almost reflexively downvote anyone on Reddit who brings it up, since 99 out of 100 times, it's a complaint that they were disagreed with, rather than anything that adds to the discussion at hand. (Which, IMO, is the explicit purpose of downvotes)

Right, so you end up with these subreddits full of people reaffirming each other's viewpoints. Nobody wants to hear anything challenging their views, but at the same time they stomp their feet and whine without a hint of irony, "why doesn't the other side just get it?" This also leads to schisms resulting in vicious infighting. It's pretty much the complete opposite of an environment conducive to intellectual development.

There is extreme group think in subreddits like /r/politics and /r/libertarian. The main problem is that the quality of content degrades extremely quickly as the community grows. It has been eternal september there since Digg v4.

What is the difference between describing something as extreme group think, and describing it as a circle jerk? How does one differentiate between this being a valid description, and an unwillingness to accept that one's position is the unpopular one?

Is that unexpected though? Or even a necessarily negative thing? I don't think so - especially in the case of a political ideology discussion forum like /r/libertarian, most of the people who went there to seek it out and subscribe to it, more likely than not, share those beliefs.

I have to ask, how notorious? Is this a documented effect (on Reddit, not in general) or just the noise that people on the site are repeating much like any other meme?

I think there have been some incidents which were dangerous and notorious. In particular, the misidentification of the Boston Bomber was one case that attracted mainstream attention[1].

[1] http://www.cnet.com/news/reddit-regrets-role-in-online-witch...

Funny, since i find that to be the best example of communal remorse and reflection that i can dredge up for reddit. Compare reddit's turnaround to how quickly and thorough redactions take place in establishment in-groups of journalists or business leaders or politicians. The fact that an amorphous group of humans can come to have reddit's institutional memory and remorse is astounding imho. The boston bombing error is known and passed down like folklore from old members to new, keeping similar actions on check.

Yes, that's true, and it's good that Reddit recognizes its mistake.

It doesn't make the incident any less notorious though (which I guess is why it was remembered so well).

If by "Recognizes its mistake", you mean "have a majority of people who were not involved talk about how the other guys fucked up using the 'we' pronoun".

It sure is easy to point out your own flaws when you're in someone else's body.

Feeling remorse about being so wrong is not laudable, it's just normal. The problem is that they got it wrong in the first place.

> The boston bombing error is known and passed down like folklore from old members to new, keeping similar actions on check.

No it's not. The Boston bombing thing was just the most high-profile example in a long line of similar problems. Here's one from before the Boston Bombing:

http://gawker.com/5751581/misguided-internet-vigilantes-atta...

And here's one from after:

http://www.theawl.com/2013/09/i-was-a-hated-hipster-meme-and...

There's a hilariously sad current bandwagon effect going on about the user Unidan, a "reddit-famous" biologist who, after a petty argument with another user, turned out to have less credentials than he claimed and to have manipulated votes using sockpuppets.

This is possibly the most hated guy on Reddit right now. Not whoever started the whole boston bombing witchhunt. Not someone who actually did anything harmful. Just a guy who got "unfair karma". And unlike with the boston bombing, there is zero self-awareness about how idiotic this whole thing is (and how common it is for anyone remotely popular on that site to manipulate votes in some way). It's a sad display, and I cannot imagine what this would turn into with more concrete monetary incentives.

> This is possibly the most hated guy on Reddit right now.

Which I find strange, since he actually delivered very high quality content and was overall a boon to the community.

If you think it's about the karma, you are seriously misinformed.

Voting accomplishes two things - giving/taking meaningless points, and determining where (and if) your posts are ranked on the board.

The problem with Unidan is that he used a botnet to cheat the system. When you're on the new queue or have just commented in a large thread, a single vote or two can be the difference between ending up at the top of the thread (or board) or never being seen at all.

It's not about the points, it's about the fact that the voting system is pretty damned sacred to Reddit. By breaking pretty much one of the only global rules, he cheated people out of a chance to have their own posts/comments seen. We can only speculate as to how long it was going on.

Creating "useful content" is not a valid excuse for usurping community for your own self-aggrandizement. Even HN has a voting ring detector. Why do you think that is?

I'm curious where it was determined he used a botnet? I thought he just made alternate accounts.

I'm not saying he doesn't deserve to be banned and what not. I'm saying it is stupid and pathetic that he is despised to the core more than a pedophile strangling kittens would be on that site.

Know any pedo-kitten-stranglers that made the front page via one of the default subreddits? You seem to be very quick to disparage a lot of people who are mad for very understandable reasons.

Can you imagine if people could actually turn their karma into straight cash? The incentive will be even higher to simply echo back to the group what you think it wants to hear.

Sure, but this is differs little from cable news, content mills, or many blogs. Fortunately, subreddits make it easy to filter-out the shallow echo chambers.

> Finally there is the issue of "circle jerking". Reddit is already notorious for its annoying and dangerous group think. Can you imagine if people could actually turn their karma into straight cash? The incentive will be even higher to simply echo back to the group what you think it wants to hear.

This was the first thing I thought about.

If you check /r/subredditdrama and /r/karmaconspiracy you can see literally hundreds of exemples where people go absolutely nuts for imaginary internet points: coordinate and downvote other people's content, mods with massive subreddit bans, etc. Can you think about what they will do for cash?

While I agree with your point completely, I want to point out that /r/karmaconspiracy is a joke/satirical subreddit.

slg really hit the nail on the head here. the overjustification effect is well known and hints at how potentially dangerous this idea is to Reddit's future.

I see the point Sam's trying to make by doing this, but does Reddit have a contribution problem? Hardly! If millions of people contribute to make a site awesome voluntarily, for no greater reward than the attention of their peers (and a desire to build a great community), introducing a new incentive might very well alter the magic bit that makes Reddit so great.

What about directing this 10% towards philanthropic or political goals instead? So by contributing my time towards making Reddit better, I'd get that attention I want and help make the world a better place.

This could have a dramatic impact on reddit's raison d'être, making it a powerful (and defensible) power for good.

Exactly, all evidence suggests this could easily reduce user contributions by 50% or more. Why not instead do something that would actually increase intrinsic motivation? E.g. since IIRC people still retain copyright over the writing they publish, why not make it easier for people to turn that content into newspaper articles, blog posts, books, etc.

I'd be happy if I could just download all my comments. Right now it's restricted to the most recent 1000. I've been complaining about this to the admins for years and they keep saying they're working on it.

What evidence?

Even attaching a charity financial incentive to what I do is enough to trigger my time-for-money logic and conclude my time would be better spent working, eg, 1 hour of contracting a day instead of 1 hour of redditing a day would do WAY more for charity than my reddit contributions would.

The problem is that once you monetize my time explicitly in any way, it both transforms the class that activity is in (no longer recreational!) and causes me to evaluate how successful that time is at being monetized (worse than mowing my neighbors lawn!)

The reality is that the mere suggestion of reddit doing this has already caused me to start reevaluating my relationship with reddit, because they've made it so obviously commercial.

I think reddit may have seriously blundered in this idea.

I wonder how this would effect future users who behave like unidan did.

They don't really define what they mean by contribution. Maybe it's karma maybe it's not.

What if they mean to reward non karma based activities on the site? Moderators for instance.

I think the issue of setting false incentives is enough to kill this idea off very quickly.

Karma is not mentioned at all in the article. They may have in mind a more "liquid" version of Reddit Gold (which you can pay in Bitcoin for some time already, btw).

The regulatory aspect only comes in when shares are cashed out probably. The new RedditCoin wouldn't legally be shares so it's not bound to the same regulations. Only once the Coin is cashed into a share would it transfer and get bound to the same regulatory hurdles. At least that's the way that they'll probably try to set it up to avoid those issues.

IANAL

"Securities" includes more than stock--it includes debt instruments (i.e., bonds), equity instruments (i.e., stock), and derivatives of debt or equity instruments (i.e., options).

A cryptocurrency backed by shares in reddit would probably be treated as a derivative security, and would almost certainly be regulated by the Securities Exchange Commission.

Additionally--not sure what "former SEC" lawyer they talked to, but unless they structure this offering very carefully, they will run afoul of both state and federal securities registration laws. If they structure the offering to avoid those laws (which is legal, i.e., as a private or in-state offering), then the cryptocurrency would be so limited in its availability that only an extremely tiny handful of users would ever be able to own it unless Reddit goes public.

So if they give vouchers to 100 Mio users that are redeamable if the company gets public. This would work? I mean if they give 10% of the company to reddit users via vouchers and the company gets worth 100 Billion that would be 100 Dollars per person.

This seems incredibly strange. Personally, I don't see how it's going to add value to Reddit and help build the community. Mixing money into the site is going to complicate things, bring forward a lot of challenges, and it's going to be a large time sink.

I think Reddit has more important things to focus on, and I don't find this to be a good use of resources. Reddit is also slow to roll out changes, so if this has a negative impact, it'll take them a long time to pivot back on track.

Perhaps it's going to be a minor feature that the majority of users never know exists, and things will continue as they do now. If it's a major feature, I think it'll be a flop, and open up room for competition.

Edit: To expand a little more, what's the best case scenario they're hoping for here? They think the community is going to grow and more people will flock to the site because of this change? Reddit is anti-corporate, the community likes to feel small, even though it's one of the largest communities on the internet. When they associate money with the site, people will look at it as more of a business, and I think that'll drive more people away than it brings in.

Why doesn't Reddit just launch an image hosting platform? Why do they send all this traffic to imgur and gfycat, when they could roll out their own solution for the community? They can spin it off into a separate service to attract non-Redditors, and with all the incoming visitors from other sources, they can refer more people back to Reddit. To me, this seems like a no-brainer, since a large portion of their site revolves around images, and they're giving that traffic and monetization away to third parties at the moment.

Not to mention it sort of defeats one of the main value propositions of cryptocurrencies - their decentralized nature. If reddit created such a currency you would need to trust reddit to trust its value. And if it's backed by reddit shares, then it seems like a proxy for allowing public trading of the shares of a private company. I wonder what the SEC would think of that.

Perhaps they're hoping the cryptocurrency would become widely adopted It certainly has a large enough audience in the right demographics to pull something like this off

Reddit invested in imgur alongside a16z, so there's no reason for them to roll their own image host.

"as well as individual investors like ... Calvin Broadus Jr. AKA Snoop Dog [sic] (also randomly)"

Snoop Dogg is actually a pretty active reddit user: http://reddit.com/u/Here_Comes_The_King - especially in a certain..err.."plant-based" subreddit.

He's done several AMAs that are actually amazingly fun to read. In some ways, AMAs can provide a better "celeb-to-fan" interaction than Twitter so I can see why they got a few celebs in this round.

I dislike being cynical, but I don't see many posts by Snoop that aren't in an article without his name in the title... or that aren't promoting one of his products. I'm smelling good PR work here, not an authentic interest in reddit.

It is depressingly rare nowadays to see AMAs of celebrities that are not purely for advertising $upcomingthing and low on content.

I haven't looked too deep in that sub, but maybe there are some going on that just don't make the front page? There are some weird ones occasionally, mostly people who've had some sort of surgery or health problem, from what I've seen. But really, can we just focus on Rampart?

Well, that explains why they were looking for a Cryptocurrency Engineer.

http://www.reddit.com/r/redditjobs/comments/2c9d61/cryptocur...

That is a neat profession

They shouldn't use a new cryptocurrency, instead, https://medium.com/@barisser/an-open-letter-to-reddit-why-yo...

They will probably be using colored coins (assets issued and exchanged on the Bitcoin blockchain), not their own blockchain/altcoin. Otherwise, they would have to worry about keeping enough miners to make their blockchain secure.

Colored coins also offer some cool features, such as trustless trading. It's possible to construct a transaction that sends Alice's Reddit shares to Bob, and also send's Bob's Bitcoins to Alice. Since they are in the same transaction, either both sides of the trade happens, or neither do.

Or you could just not use a blockchain. I think some guy named Chaum is rolling in his grave.

In favor of Reddit managing the ledger centrally? That doesn't allow for the public transparency that they would like, and it would probably be much harder legally (they would be stuck doing a bunch of KYC/AML stuff, which doesn't really make sense for a company like Reddit to need to deal with).

I thought blockchain transparency is a bug and anonymity is a feature; it's hard to keep this stuff straight.

If you need KYC, a blockchain doesn't provide that anyway so you can either add hacks or just admit that it's not the right solution.

By transparency, I mean for example Reddit manipulating the ledger if it was on a central database. They could take away someone's shares, or give someone extra shares, and the community would have no way of knowing. If they issued someone more shares on the blockchain, everyone could see it happening and prove it. Anonymity isn't a factor here.

The point I was making on KYC is that with blockchain-based shares the government doesn't even have an idea of how to regulate it yet, and Reddit can probably sidestep the KYC entirely. Anyway it's not them managing the books, it's the Bitcoin network doing it for them.

Blockchain transparency isn't a bug or a feature per se, but the fact that it's truly decentralized is a feature. For Chaumian ecash, anonymity is a feature, but it's centralized. Stellar (or colored bitcoins, if they ever get around to implementing that) actually provides an interesting combination of features.

Chaum's alive.

You wouldn't know it based on the blockchain frenzy these days.

>a transaction that sends Alice's Reddit shares to Bob, and also send's Bob's Bitcoins to Alice

Could you elaborate on why this might be desirable? Don't both end up where they started?

Seeing as the Dogecoin community is so active on Reddit, this could be an interesting use case for Dogeparty.

Dogeparty is an crypto-token (e.g. securities) application layer built on top of the Dogecoin blockchain. Now that Dogecoin is merged with Litecoin's asic hashrate, the network is pretty secure against attack.

There are other options built on top of Bitcoin (such as Mastercoin, Colored Coins & Counterparty), but certain Bitcoiners have been worried about blockchain bloat, so Dogeparty could be a decent shout on top of another secure blockchain. Other options exist on new blockchains, but I think these are too unproven this point.

Dogeparty: http://www.dogeparty.io

Web wallet: https://wallet.dogeparty.io (note: I do not endorse this, it's beta and as with anything in cryptocurrency be careful!)

So you just copy/pasted Counterparty's code too? Do you have any plans on providing something of value, or only copycats?

I´ts interesting, however the idea of Reddit to allocate 10% of their shares back to the Reddit community for me it´s more than something "cool" as Sam Altman said, and beyond the "a new way to think about community ownership".

From another perspective, It´s just a good strategy to do your own IPO (go public) without the legal/bureaucratic way. It´s creating your own NY Stock Exchange with the idea to increase your value based on what your users are doing now (because it will be possible to buy, sell and trade between users).

So, beyond the message that it´s for “giving back to the community”, Is it more a clever strategy to increase the company value, and even more the stockholders value? or I´m incorrect?

Everything you said is totally true, which is why the SEC will block it. The most they could do is set aside 10% of the shares and let users proxy vote them, but I don't think that using them to back a cryptocurrency is going to fly with the SEC. I know a lot of people like Bitcoin because it's magical internet money with no rules, but financial markets are regulated for a reason.

I don't think the SEC would have a problem with the method (using a cryptocurrency) but rather the reason (using a cryptocurrency to avoid SEC IPO/ownership rules). If Reddit were public, I don't see a problem with using their stock to back a cryptocurrency. But it's a loophole big enough to drive a truck through, so the SEC needs to close it before the con men descend.

As long as they don't tie this to imaginary internet points I can't see a problem. If karma is involved they better have a pretty advanced anti-gaming algorithm.

That is an interesting move to empower users with a feeling of ownership. Although, it would be more interesting, to me, if they tried to push towards a distributed autonomous corporation instead. The type and amount of operations that could be fully automated is up for debate, but the attempt would be very interesting.

Dogecoin is already the cryptocurrency of Reddit... why not just buy a bunch of Doge?

The point is that this cryptocurrency will be exchangeable for (backed by) shares of reddit, which is rather unlike current cryptocurrencies.

The fun thing is that as soon as I saw the plans to distribute ownership earlier today, I figured why not use their own cryptocurrency? I guess I'm starting to predict the future, albeit only a few hours in advance

Because it's stupid? Why peg millions of dollars to a currency with no security?

They can create their own crypto-currency on top of an existing one, using dogeparty or counterparty. This is most likely their best bet, because they won't fall into a lot of the security/hashrate traps with a lot of new coins.

Why are you trying to spread that falsehood? How is dogecoin "already the cryptocurrency of Reddit"? It wasn't created by Reddit, no one in Reddit is using it (except r/dogecoin and related subs), and it's supposed to be a joke. I don't think Reddit wants its shares to be a joke too.

Just what we need! Another Cryptocurrency!

I find it very unlikely this will happen, for legal reasons- They want to link their currency to shares in reddit corp and the SEC isn't going to be happy about that. (Though if they can pull it off that would be positive development in my book.)

The last person who tried a bitcoin based IPO outside of established legal frameworks and existing stock exchanges ended up having to renounce his citizenship, move to panama and was fined by the SEC

http://www.satoshidice.com http://en.wikipedia.org/wiki/Erik_Voorhees https://www.sec.gov/litigation/admin/2014/33-9592.pdf

ITT: Rich people finding ways to avoid giving money to people directly.

I'd love some extra money. I would use it to fix up the emissions system on my car so I don't spend twice as much as I have to on gas. Then I'd use that to drive to where the jobs are and get one.

I might write fewer comments on Reddit once gainfully employed, but is that such a bad thing? It seems like half the problems on Reddit are from people having too much free time to troll and make low-effort comments.

I think it's a great idea. I think redditcoin failed because of copyright issues. Myself I had the idea for "hoinz" but never really pursued it, although I'd like to.

"Embracing the new spirit of cryptocurrency. Obtain hoinz from your reputations and contributions on various websites. Because you owe it to yourself."

http://www.reddit.com/r/hoinz (nothing there)

Things like moderation tasks can be paid in hoinz.

So, what kind of crypto currency would this be? Does anyone know if there are plans for a mining operation like bit/lite/doge coin that one could participate in, or is it just a block chain that is allocated to reddit "shareholders" by some other means? (all of this is assuming that "considering a cryptocurrency" == "planning to implement a cryptocurrency")

It sounds more like a "cryptosecurity" than a currency.

If reddit figures out how to get past the legal and technical hurdles this brings, I'm very excited to see what comes of it and if other online communities will do something similar. Communities which produce a lot of content/value for free such as open source developers can begin getting equity in the companies they are helping.

I'll be "that guy." My guess: Reddit releases a small fraction of a new crypto currency (likely a simple BitCoin clone) to its users. Reddit recipient interest in the currency then supports a large price for what Reddit retains and Reddit ends up net-profiting from the transaction.

I wonder if they've been planning this for a while? https://twitter.com/redditcoin/status/428947176002056192

I was hoping Reddit would create some sort of Reddit Trust that would re-invest it's earnings based on what the Reddit community thought best.

That is of course not without it's own problems, but still, I prefer my idea.

Hope they use existing systems to issue their currency and don't try to create a new currency. Stellar could do the job perfectly IMHO!

Stellar? What kind of joke is this? Why go with some small, centralized currency created by a private company (and owned by it to some degree), instead of going with the most adopted, most secure, most serious of all, and decentralized: Bitcoin.

Cause bitcoin does not let you issue your own currency + Stellar is a not for profit.

Not true. https://coins.assembly.com

Seems like you don't know what Counterparty is.

What will happen to reddit gold?

If they don't call them creddits they've missed a trick.

so "Thinking about" == "plans to"? Nice journalism.

Except they have a specific plan and have even ran that plan past a lawyer to check its broad legality. I'd say they're doing both, thinking about AND plan[ning to.

It's definitely a plan? There's no certainty the plan will work or even be executed, but yes, it's a plan... Semantically I see no issue.

"The investors have explicitly agreed to this in their investment terms."

So the investors have it in their contract and the actually talked to an ex-SEC lawyer, pretty sure that constitutes intent.

They have agreed to give up 10%, not to do the crypto thing.

"We are thinking about creating a cryptocurrency"

Maybe they can use an existing coin like Karma...

http://karmacoin.me/

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