In the wake of the popularity of cryptocurrencies and NFT, another project appeared – BitClout. It is similar to a social network where users can purchase tokens linked to celebrities and generate income from their growing popularity.

In just a week, BitClout raised $ 160 million and attracted the interest of prominent investors and cultural figures. But crypto security experts are already pointing out flaws in the project and signs of a fraudulent scheme.

Risk assessment

Jack Dorsey’s first tweet NFT stakes recently hit $ 2.5 million. These prices have sparked a trend towards converting anything into tokens. BitClout uploaded 15,000 profiles of the most popular Twitter users, and then linked thousands of tokens to each. Their price depends on the popularity of the profile. In other words, investing in tokens is like investing in the social status of a celebrity. 

At the same time, an influencer who publishes a tweet about BitClout will be able to claim part of the tokens associated with his personality. In theory, Elon Musk could get $ 2.96 million worth of BitClout tokens. Lesser-known celebrities will receive several thousand dollars.

BitClout looks like an attempt to assimilate the Twitter feed and works in the same way as Steemit – the crypto version of Reddit or – the blockchain counterpart of Facebook.

The first step for those looking to enter the BitClout market is to buy BitClout tokens with Bitcoin. And this is already a serious reason to be wary: the block explorer shows that funds pass through only one address before entering the crypto universe.

Rich Sanders, head of blockchain research firm CipherBlade, confirms that the site is sending funds to three exchanges:

  • 88.41% – Amber Group,
  • 11.17% – Kraken,
  • 0.42% – Coinbase.

After that, the funds are transferred to other exchanges and wallets.

The only non-exchange address that BitClout paid directly to received money from the Hydra darknet market. Sanders believes that the creators of the project paid some dubious user.

There are indications that the address belongs to a suspect in Nigeria, whom BitClout may have paid to create Twitter bots to promote the project.

“The more users are invited to the social network, the more income,” says Sanders.

Online media outlet Decrypt contacted BitClout’s Twitter account, but received no comment.

Meanwhile, London-based Coinfirm, which specializes in tracking suspicious crypto transactions, has also voiced suspicions about BitClout. In an interview with Decrypt, Coinfirm management described the site as Bitconnect 2.0. During the 2017 crypto boom, tokens on this platform rose to $ 400. Now they cost nothing.

Where’s the money?

Presumably, BitClout tokens can be bought with bitcoins, but BitClout cannot be withdrawn from the network. They can only be sent to other users or used to create author coins. However, you cannot exchange them for cash or bitcoins.

It is impossible to update your profile photo, post a status or write to a chat bot without purchasing coins in advance. And when Decrypt transferred about $ 20 in bitcoins to the platform, the site did not allow the money to be used to buy BitClout tokens. Updated: BitClout now allows you to create a profile and get some tokens by sharing your phone number.

There is also no way to check which transactions will be going through the blockchain. There is no obvious way to create a node or mine coins yet. The anonymous team did not publish the project code.

Shadow army

Despite the support of influencers, only a few accounts have been verified. However, even this does not guarantee that the influencer associates his name with the project. Neither Chamat Palihapitiya nor Ashton Kutcher, two of the most influential “verified” accounts, posted tweets about the project, although this is a prerequisite for account verification.

The two largest Twitter accounts, r / WallStreetBets, are also marked verified. However, they say they have nothing to do with BitClout.

The majority of BitClout’s Twitter fans, each with a small following, do little to nothing but promote the project.

For example, @Ssh_Just_Buy, created in February, pumped altcoins from time to time, and from March 12 switched to BitClout. Two days later, the account posted a link to its own website, which explained in detail the nuances of the project.

Moreover, the BitClout network still operates autonomously. Diamondhands, who appears to be running the project, attributes this to the fact that nodes are constantly rebooting and missing transactions.

First investors

One of the first investors was Chris McKenn, a Silicon Valley investor and general partner of Race Capital, who learned about the project from friends. He says that he is not associated with the project or its founders, but participated in an early version that was launched last week.

Now the capitalization of his tokens on the platform has reached $ 55,400. McKenn says he invested too much in the project, but notes that the anonymous team managed to create a well-designed website.

One of his friends, Silicon Valley investor Andy Artz, invested $ 18,000 in BitClout.

“As soon as you kind of get involved and start investing in people at the start, and they get verified, it’s fun. I want to take advantage of this, ”says McKenn.

He received nearly $ 34,000 worth of non-refundable tokens on BitClout after he posted a tweet about the project to verify his account.

Michael Arrington, a well-known Silicon Valley investor and media figure, received the equivalent of $ 290,000 in authors’ coins. He did not respond to Decrypt’s request for comment.

McKenn believes there is now a demand for social crypto projects like Rally or Roll, and BitClout is taking advantage of it. Over the weekend, Roll was attacked by hackers who crashed token prices pegged to influencers from the platform.

McKenn is well aware of the risks, especially the inability to withdraw money from the platform and the impostors’ ability to profit from fake accounts. This is far from the first of McKenna’s investments – he also invested in crypto exchanges FTX and Binance, which had problems at the start, and then began to flourish.

But for CipherBlade’s Sanders, it doesn’t look very good and resembles one of those ICOs that investors spent billions of dollars on in 2017 and 2018. “This is a complete mess,” he concludes.