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Scam or Promising Project? How BitClout Works - A Social Network for Crypto Investors

Amid the overwhelming hype surrounding Non-Fungible Tokens (NFTs) and the recent entering of traditional fine art brokers Christie's and Sotheby's in decentralized markets, a new project called BitClout promises to be the celebrities' crypto network.

So, it could be an alternative for investing in crypto, instead of simply going to buy bitcoin.

The website permits users to acquire tokens pegged to the social media accounts of almost 15,000 influential accounts on Twitter. So far, the list includes the controversial billionaire Elon Musk and singer Kate Perry.

Nonetheless, the project did not have the permission of any of these celebrities, according to the expert website Decrypt.

In one week, BitClout made $ 160 million, which attracted the interest of major investors and personalities. However, crypto security companies say the website seems to be fraudulent.

What is BitClout? - Explaining the Project

BitClout is a blockchain-based social network, powered by its native token BitClout (BTCLT), permitting users to speculate and profit according to the reputation of influential personalities like they would speculate with stocks, ETFs, and cryptocurrency.

The platform's Beta version was developed by a group of anonymous individuals, being launched less than a month ago. Despite the fact, the project already managed to gather support from several leading venture capital firms in the crypto scene.

The list of investors includes important players in the crypto industry, such as Sequoia Capital, Andreessen Horowitz, Social Capital, TQ Ventures, Coinbase Ventures, Winklevoss Capital, Arrington Capital, Polychain, Pantera, Digital Currency Group, Huobi, and Variant.

Based on Twitter's mechanism, BitClout's algorithm was designed to track each celebrities' numbers, including followers, posts, likes, comments, and other stats that serve as a proxy to evaluate if a certain celebrity is either well-liked or not.

Potential Issues

Although the project is open-source (it can be accessed by anyone), it is not hard to spot that there may be some problems with the platform's approach, especially when it comes to valuing each celebrity and rewarding users based on such as mechanism.

As with any trading platform, BitClout users need to create an account and make an initial transfer of digital assets before being allowed to invest. However, the platform has two specific peculiarities.
Firstly, the user account must be associated with a Twitter account and is only activated after the user makes a tweet with his BitClout profile link.

Also, the platform only accepts Bitcoin deposits, which are converted to BitClout's tokens once they are inserted into the platform. Many experts in the crypto industry believe that such points indicate some type of scamming or fraudulent factors associated with the platform.

Further Investigations - Is BitClout a Big Hype Train Only?

In the case of BitClout, the site downloaded 15,000 of the most popular Twitter accounts and created thousands of BTCLT tokens for each one. The cryptocurrency price of tokens is based on the popularity of each profile, meaning users are basically investing in the popularity of a specific celebrity.

To participate in the platform, it is necessary to buy BitClout tokens, which is not a big deal. Yet, some experts have discovered that all users' funds are deposited are in only one address, which raises suspicious thoughts.

The lead investigator of blockchain research firm CipherBlade, Rich Sanders, confirmed that almost all funds retained at BitClout are re-directed to three main brokers- Amber Group (88.41%), Coinbase (0.42%) and Kraken (11.17%).

However, one of the payments made by BitClout went to the dark web market Hydra. According to Sanders, the main hypothesis is that a Nigerian individual has been paid to raise Twitter bots to promote BitClout on social media.

London-based Coinfirm also distrusts BitClout's operations. Coinfirm executives described the site as "Bitconnect 2.0" - a reference to a major Ponzi scheme, where tokens reached a value of almost $ 400 during the crypto fever in 2017. Nowadays, these tokens are utterly worthless.

A weird aspect of BitClout is that purchased tokens cannot leave the network. Hence, it is only possible to send BTCLT tokens to other users within the platform or use them to buy coins from creators.

Thus, there is no way to convert the platform's tokens into fiat currency or Bitcoin. Plus, there is no way to check the platform transactions on a blockchain nor is there any programming code available from the project.

Final Thoughts

BitClout built a unique social network where users profit from the reputation of a wide array of celebrities. Many experts and enthusiasts within the crypto industry did not like the idea, especially after several shreds of evidence that point out a possible scam ahead.

Indeed, the platform offers potential profitability for users who have the guts to expose to heavy-risk operations. Yet, even though the project is not perfect, it can serve as an inspiration for future projects to re-build the idea and create similar platforms with a more reliable approach.

Jeudi 10 Juin 2021

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