Tokens sharply plummeted! Reddit will shut down community points, community aims to continue independent development.

Community Points Suffer Sharp Decline! Reddit to Cease Support, Community Strives for Independent Development

On October 18th, the American social media giant Reddit announced that it will be closing its blockchain-based community points program, as the team has launched or is actively investing in some more easily adoptable products. This news caused quite a commotion in the community because, you see, back in July of this year, Reddit announced that it would redesign its existing reward system and make the points tradable, and these community tokens saw a skyrocketing rise in value after being listed on several exchanges. But just three months later, Reddit’s stance took a drastic turn, and the official reason behind it was the changing regulatory environment and high operational costs.

Due to cost and regulatory reasons, Reddit is about to terminate community points services

Reddit released a statement saying that although the team sees some future opportunities in community points, the required resources are too high, and the platform is not able to scale it to the entire platform. Therefore, Reddit recently decided to end its nearly three-year-old community points program, which will be concluded by November 8th of this year.

Community points tokens were first introduced by Reddit in May 2020. This feature allows subreddit moderators to distribute tokens as rewards, aiming to encourage users to post and create high-quality content. These tokens can unlock special features such as purchasing special memberships, using exclusive features like special loyalty badges, colored usernames, posting comments with GIFs, participating in governance voting, or rewarding other content creators. The points earned by users are stored in the Reddit Vault encrypted wallet as ERC-20 tokens.

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Currently, Reddit’s points tokens include $MOON from the r/CryptoCurrency subreddit, $BRICK from the r/Fortnite subreddit, and $DONUT from the r/ethtrader subreddit. In July of this year, community tokens like $MOON experienced a massive surge in value due to Reddit’s changes in its terms of service.

According to previous reports from LianGuaiNews, these points were initially based on the xDai Ethereum sidechain and later migrated to Arbitrum Nova to improve efficiency and reduce costs. However, from Reddit’s statement, it seems that such strategic changes still impose high operational costs on the platform.

Furthermore, the announcement mentioned that the regulatory environment has increased the difficulty of expanding community points and that such products no longer have scalability. However, Reddit still acknowledges the concept of community points and wants to find better ways to improve community governance and enhance community capabilities and contributions. One of the reasons for Reddit’s abandonment of this type of product is that they have already launched or are actively investing in several products that can achieve the goals that the community points program aimed to achieve, and are also more easily adoptable and understandable. For example, the newly launched “contributors program” allows eligible users to earn cash rewards based on their karma (Reddit’s rating system) and coins earned through qualified contributions.

It is worth mentioning that previously Reddit had suspended two Web2-style reward mechanisms, Coins (previously known as Creddits, a non-tokenized virtual currency) and Awards, and only kept Avatars NFTs and community points. However, now even the points have been suspended.

In response to this decision, a Reddit online crypto community moderator, CryptoCurrencyMoons, expressed disappointment, stating, “We are disappointed with Reddit’s decision and only learned about it when Reddit made the announcement. $MOON will not be burned, the transfer function will not be disabled in the smart contract, Reddit will no longer have control over the contract, and Reddit’s token shares will be destroyed. Additionally, we will continue to independently develop Moons, whether it’s by taking over ownership of the smart contract or by airdropping new tokens in a 1:1 ratio to the current balance. However, the solution is still uncertain and depends on Reddit’s internal decision.” The other two subreddits’ tokens have not made any statement at the time of writing.

Tokens Experience a Major Crash, Reddit Criticized for Ignoring User Interests

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In fact, after Reddit announced months ago that community points would be tradable, these tokens were gradually listed on multiple cryptocurrency exchanges, including well-known platforms like Kraken and Crypto.com. They even experienced a FOMO-induced surge with significant price increases. For example, renowned anonymous trader GCR once purchased 450,000 $MOON tokens at an average price of 40 to 45 cents each. However, with the imminent closure of Reddit’s community points, several related tokens experienced a major crash, resulting in significant losses for investors. According to CoinGecko data, in the past 24 hours, $MOON fell by 85.5%, $BRICK dropped approximately 50.6%, and $DONUT decreased by 53.4%.

$MOON price performance in the past 24 hours. Source: CoinGecko

In response to this, Jesse Powell, the co-founder of the cryptocurrency exchange Kraken, also commented, “I personally do not see any regulatory issues, but I know it’s complex and evolving, and maybe Reddit doesn’t want to deal with the hassle. But Reddit should at least provide a compensation plan for users, such as allowing them to purchase collectible Avatars in a certain proportion, convert points into power, or provide special badges when tokens are destroyed based on the holding quantity, instead of offering no reward and damaging the value of the tokens they hold.”

However, some community members pointed out that Reddit’s actions were in preparation for an IPO, aiming to reduce any additional regulatory burden and risks to investors. As early as the beginning of this year, there were rumors that Reddit was updating its initial public offering (IPO) documents and preparing to advance the listing process once market conditions improved. It is highly likely that they will go public in the latter half of the year, but there has been no official confirmation.

In conclusion, the recent incident of Reddit canceling community points further highlights the challenges faced by cryptocurrencies as incentive mechanisms, including high operating costs and a complex regulatory environment.

Related readings:

《Reddit’s overseas popularity with NFTs may bring nearly 2.7 million new users to Polygon》

《Rise in value of multiple community tokens on Reddit: a redesign of existing reward systems, clarifying the tradability of Avatars and points》

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