BitClout’s creator didn’t raise $200M for a ‘new’ blockchain — it’s the same old shit

In a bid to hype his stale blockchain project BitClout (now DeSo), founder Nader Al-Naji repackaged his token sale as a new funding round.

BitClout mastermind Nader Al-Naji has rebranded his social media blockchain project to “DeSo” (short for “decentralized social”) only six months after its launch.

Al-Naji — who previously attempted a pseudonymous identity under “diamondhands” — simultaneously pulled off another marketing ruse: successfully repackaging his original token sale as a fresh $200 million funding round for the same blockchain he’s peddled all year.

Crypto media ate it up. “BitClout creator launches ‘Decentralized Social’ blockchain with $200 million in funding from a16z and others,” wrote The Block in an article that made it to tech-hipster aggregator Techmeme.

“Bitclout Founder Reveals DeSo, a $200M Blockchain to Take on Facebook,” announced Decrypt.

The thing is, Al-Naji already launched his blockchain way back in March.

We already knew his unrealistic plans to take on Facebook with a social media platform powered by a permissionless Proof-of-Work blockchain (which will eventually transition to Proof-of-Stake to entice whales to stop dumping).

Back then, he was still selling tokens on an up-only bonding curve — which doubled the price of CLOUT (now DESO) for every million tokens sold.

And in March, we already knew major venture capital firms like Andreessen Horowitz (a16z), Coinbase Ventures, and Sequoia had bought tokens on the bonding curve.

A sale to inflate BitClout’s price, as fast as possible

Al-Naji finalized his token sale in June when he arbitrarily capped CLOUT’s supply to 10.8 million tokens, about a week before his first exchange listing. He stopped selling tokens directly on the platform around the same time.

He initially said he’d cap the supply at anywhere from 10 million to 21 million. Presumably, retail demand dried up quickly due to the extreme rate at which they’d been priced out (to the benefit of project insiders).

At that point, Al-Naji was selling CLOUT for $180 each, while he likely first offered tokens to VC funds and other early backers at anywhere from $0.80 to $3.

Notice how quickly the price of CLOUT increased after 8 million tokens were sold to its earliest backers? That was pre-programmed.

So, by the time BitClout hit an exchange, the project’s earliest backers could unlock returns of over 5,000% by immediately selling their tokens to retail buyers — just months after their initial contributions.

Boy, did they unlock those returns. CLOUT debuted at $180, briefly spiked to $192, before collapsing 70% to a low of $60.

Today, CLOUT (again, now DESO) trades for just under $80, still nearly 60% below the last price at which Al-Naji last sold through his website.

And this is what makes framing Al-Naji’s rebrand as a fresh $200 million funding round for a new blockchain, led by the likes of a16z, especially offensive.

Al-Naji reportedly raised around $100 million from VCs at the tail-end of last year for a blockchain he launched in March.

Not to mention, he’s already siphoned and sold around 950 BTC ($40.5 million) from BitClout’s operational wallet, equal to nearly 20% of all funds raised to date.

In total, that wallet has received over 5,000 BTC ($213 million), which gives us the $200 million figure bandied about in Al-Naji’s marketing activities today.

The top 20 genesis block recipients received over 4 million tokens (37% of the entire supply).

He then spent the past nine months flogging an inflated token via his website; a price-anchoring exercise that gave insiders a liquidity event from which the project is yet to recover.

Indeed, BitClout has floundered since its exchange listing. The market at large has clearly rejected the price at which Al-Naji last sold his tokens precisely due to the structure of his token sale.

In a bid to alleviate selling pressure, Al-Naji re-initiated token sales on the BitClout site shortly after its price collapsed.

Selling pressure into buying, you can’t explain that

On BitClout, Al-Naji offloads CLOUT/DESO from the platform’s own stash, and uses the exchange price as a lagging oracle.

The buyback scheme goes that he will rebuy any tokens he sells by placing orders on exchanges.

Whales are also encouraged to run their own versions of the BitClout site, which allows them to offload their tokens (and set their own over-the-counter fee).

Those transactions do not affect the token’s price. This has multiple implications:

  • Al-Naji can sell the platform’s own tokens and not impact the price in any way,
  • it exerts upward pressure on the token’s price when tokens are rebought,
  • and encourages existing holders not to sell, as BitClout itself will act as support.

No doubt, this scheme impacts the price of CLOUT.

Strangely, CLOUT was propped up at $100 for over a month by some mysteriously stubborn support.

When BitClout distributed tokens at its genesis block, 6 million tokens were given to the earliest buyers. Protos understands 2 million tokens were kept by project insiders as a founder’s reward.

This leaves just 2.8 million CLOUT left for the general public, or about 25% of the supply.

That public (which includes the BitClout community developing apps for Al-Naji on a mostly volunteer basis) must now endure seemingly endless selling pressure.

Indisputably, all that pressure comes directly from a VC class eager to capitalize on potential profit served up by Al-Naji’s up-only bonding curve.

BitClout activity hasn’t sustained any growth since it launched in March (source: BitCloutPulse)

Read more: [A critic’s guide to BitClout, this cycle’s most hated Bitcoin project]

It was on that bonding curve they were sold Al-Naji’s vision of a decentralized but almost exclusively lucrative social media platform.

There was nothing new about BitClout in March (we already have blockchain-powered Steem and now Voice), and there’s nothing new about DeSo in September.

Make no mistake: this was no $200 million funding round.

It was an early access token sale with retail interest tacked on the end — the intended marks in one of the more outlandishly greedy acts of decentralization theater in recent memory.

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