On October 17, social media platform Reddit announced that it is closing its blockchain-based Community Points rewards service from November 8. Amid the news, the price of tokens associated with the program (DONUT, MOON, BRICK) plummeted 60-90%. As it turned out later, there also was insider trading by several moderators.
Let's learn about what Community Points was, the reasons for stopping the program, and Reddit's future plans on similar initiative improvement.
What are Reddit Community Points
Reddit Community Points (RCPs) was a service launched on Reddit in late 2019. It was aimed to reward content creators, who then could swap these points for bonuses: emojis, badges, and other features that emphasised their status on Reddit, e.g. attaching GIFs to comments or setting a banner at the top of the subreddit.
Community Points were initially ERC-20 tokens on Ethereum. Later, in 2022, the service migrated to Arbitrum Nova blockchain. Like regular tokens, they were also traded on exchanges and had their own tokenomics.
Those assets appeared at different times, and the privileges granted by RCPs did not work for the entire site but on individual forums (so-called subreddits). There were three tokens on three forums during the existence of RCPs:
Closure of Reddit Community Points and Contributor Program development
On October 17, Reddit published a post about the discontinuation of Community Points from November 8. They cited regulatory uncertainty for crypto projects as one of the reasons. Also, the administration said that RCPs had difficulties with scalability; they were essentially a niche solution available to cryptocurrency users.
Now, the Reddit development team's resources will be focused on improving a similar content creator incentive program that existed earlier and had been available to all users called the "Contributor Program". It does not use cryptocurrencies. The payout to top authors comes in dollars, requiring identity verification.
Community reaction on killing Reddit Community Points program
Users reacted to this news negatively. The Reddit administration has devalued tokens and users' savings through its actions, both financially and in the status on Reddit. The co-founder of the Kraken exchange, Jesse Powell, formulated the main criticism succinctly.
Firstly, he noted that it is not very clear what exact problems in the crypto regulation initiatives influenced the decision. Secondly, he called on the administration to somehow compensate token holders for their losses rather than simply destroying "the value of the holdings while offering nothing in return".
Insider trading by Reddit moderators before DONUT, MOON and BRICK collapse
The three tokens reacted to the news with a strong decline. Reddit has not yet reported on the further fate of the assets and their utilities.
An account on X, @lookonchain, drew attention in the thread to large sales of MOON tokens minutes before the announcement of the RCPs closure. According to Coindesk, citing Reddit administration, the moderators involved have been removed from the team.
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