- Reddit is ending its community token program.
- The company blamed regulatory uncertainty around cryptocurrencies.
- Reddit’s handling of the situation has drawn concerns from the community.
Reddit crypto tokens are a novel way to reward content creation and community participation. Several subreddits have implemented their own tokens, such as r/CryptoCurrency’s MOON or r/ethereum’s DONUT, providing users with easy, low-stakes options to participate in the grand crypto experiment.
In a shocking move, Reddit has announced that it plans to phase out the crypto community token program. This has sparked a backlash from holders, with some expressing frustration and disappointment having invested time, effort, and, in some cases, money into these reward programs.
Reddit Scraps Crypto Tokens
Despite the user backlash, Reddit explained that the community tokens program, including special membership privileges like badges and custom emotes, will end by November 8.
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From that date, Reddit will no longer display tokens and special membership perks in users’ Reddit Vault wallets. Additionally, from November 8, tokens cannot be earned, while the tokens held in the community tanks have been scheduled to be burned by the end of the year.
However, Reddit’s announcement leaves uncertainty around the fate of community tokens stored outside Vault wallets. The company did not provide information about what would happen to balances held on personal wallets such as MetaMask after the sunset date.
Why the Sudden Change?
Reddit suggested that the decision to pull the community tokens program boiled down to the uncertain regulatory environment surrounding cryptocurrencies. The platform stated that as crypto regulations evolve, there is no clear path to scale community tokens broadly across the platform.
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In a further death knell to Reddit community tokens, the social media platform stated that complying with potential future crypto laws and restrictions would require more resources than Reddit is willing to commit.
Rather than continue investing in the infrastructure needed to keep the program alive, the company intends to shift resources to other reward products like its new Contributor Program. This will reward users with cash payouts based on karma and awards earned.
No Escape From Regulators
Although Reddit is exploring alternative ways to reward user participation, the regulatory scrutiny surrounding social platforms and their foray into digital assets underscores the potential risks of offering cryptocurrencies.
In 2020, the Telegram messenger platform settled with the Securities Exchange Commission (SEC) by agreeing to return $1.2 billion to investors and paying an $18.5 million civil penalty. The SEC alleged that Telegram’s GRAM token was a security and that the sale of GRAM tokens to raise capital constituted an unregistered securities offering.
Likewise, Facebook’s Diem, formerly Libra, first came into the public spotlight in 2018 to serve as a global medium of exchange. However, the project faced strong opposition from EU and US politicians who raised objections over Facebook’s potential to become a shadow central bank and the financial influence the company would wield due to the Diem token.
Given the tense regulatory landscape, Reddit is sunsetting its own community token program to stay on the right side of authorities, which is somewhat understandable. However, this decision offers little consolation to the Redditors who invested in the program.
Redditors Up in Arms
Users who bought into the Reddit community token concept are left in a lurch following the company’s decision to discontinue the program. This is especially concerning for users who purchased community tokens only to witness plummeting prices as holders abandon ship.
“That’s sad. Glad all mine were free moons. I had been thinking about buying them but so glad I didn’t- would have been devastated”, commented a Reddit user.
Affected Redditors have voiced a general sentiment of betrayal, as summed by the countless comments that express bad faith on the part of Reddit, severe financial losses, and comparisons with the FTX and Terra scandals that lost billions through fraud, among other similar comments about breach of trust.
The underlying issue is that Reddit has reaped the benefits of increased engagement driven by its crypto incentives program, only to scrap the project after users helped establish stronger communities off the back of these incentives. Some would argue that Reddit has reneged on its commitments to users, short-changing those who trusted that these programs would continue.
On the Flipside
- There is talk of reviving Reddit crypto tokens as a community-led project.
- Kraken co-founder Jesse Powell criticized Reddit’s handling of the sunset, blasting the company for not offering any way for users to recoup some value.
- As a matter of principle, affected users are likely to reduce their participation in subreddits impacted by the discontinuation of the community token program.
Why This Matters
Although Reddit deemed crypto rewards too risky to continue, sunsetting community tokens carries its own risks in disillusioning users opting out. The fallout shows that companies must consider community relationships before building engagement around experimental incentives or risk eroding trust.
Learn more about the benefits of community-driven tokens here:
Reddit Moons and Bricks Soar 50%: Are Community Tokens the Future?
Find out if the evidence of Ripple going public stacks up here:
Is Ripple Going Public? New Job Posting Suggests So
