Reddit Ending Community Points: What Does it Mean for Mainstream Crypto Adoption?

On October 17th, Reddit announced it would sunset its Community Points product. This blockchain-based solution tokenized the website’s popular “karma” system of peer-voted rewards for users who contributed content to the platform. Though this is undoubtedly a devastating setback for mainstream cryptocurrency adoption and has crashed the price of Community Point cryptocurrencies, all hope may not be lost for eventual everyday crypto use. In this article, we’ll explain Community Points, speculate on why the decision to end them was made, and how blockchain can make a comeback soon.

Community Points were a feature that gave users of specific subreddits their cryptocurrency wallet and rewarded them for contributions. Initially rolled out in the r/CryptoCurrency and r/Fortnite communities, they were distributed monthly to users based on their karma, a measure of content value decided on by upvotes and downvotes from users. However, unlike karma, Community Points were blockchain-based and could be accessed, traded, and withdrawn through a native Reddit cryptocurrency wallet, the Vault, available in the Reddit mobile app.

The two most popular Community Points cryptocurrencies were Fortnite’s “bricks” and CryptoCurrency’s “moons,” which received all-time high valuations of $40 million and $50 million, respectively. Initially, these coins were based on an Ethereum testnet and launched in mid-2020, but were eventually deployed to the Arbitrum Nova Layer 2, known for prioritizing cheap transactions and high speeds. Getting these tokens deployed on Arbitrum was a massive success for their business development team, as they successfully aligned with one of the most well-known and popular Web2 sites. 

The concept of the Community Point was meant to reward users for their contributions to the forum-based website, which aggregates content based on user submissions and provides a place for comments and discussion. The use case of these tokens was limited to paying for features in their Subreddits, like colored names and stickers. Though this is far from comprehensive or especially useful, it was a great use case for cryptocurrency tokens. It promoted the decentralization and ownership of digital assets, explicitly representing social capital, in a way that had never been seen before on a popular social network.

Reddit cited scaling issues, user complexity, and regulatory difficulties as reasons for sunsetting the program. They are instead focusing on Web2 initiatives that fulfill the same goal of providing users with more flexibility and rewards for contribution, like allowing their Reddit Gold tipping system to be exchanged for fiat currency.

This announcement is a massive blow to the cryptocurrency space, especially given the recent dreadful market conditions. This program was a fantastic way to introduce the average internet user to blockchain and cryptocurrencies. It could have been the primary cryptocurrency interaction used by most of the internet. It is especially frustrating that the unfriendly regulatory environment, spearheaded by SEC chairman Gary Gensler, prevents companies from innovating with blockchain and instead makes them afraid of potential backlash from creating a token, which has little to no value and would likely not be classified as a security, that ultimately benefits users and improves the technology of US-based companies. On the bright side, Reddit is continuing its NFT-based collectible avatar program.

One of the significant flaws with the Reddit Vaults was the mobile-only experience and the requirement for users to store their private keys separately from their Reddit accounts. If a user lost their key, they would be unable to access their wallet. The introduction of account abstraction to Ethereum should fix this problem shortly, and user experience will become a much more pivotal part of the seamless Web3 experience soon. Ideally, a token holder would not need to know anything about cryptocurrencies, tokens, or blockchain to take advantage of its benefits and features.

Reddit abandoning tokens is a strong indicator of the current market environment, both culturally and economically. As hard as it may be to admit, cryptocurrencies have taken a back seat to newer, more exciting technologies like artificial intelligence. Fortunately, not all hope is lost, and blockchain will hopefully be integrated into our existing systems in a user-friendly manner thanks to account abstraction.

By Lincoln Murr

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