MOON crashes down to Earth • Letter 120

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Rugged by Reddit

Ever since the debut of FriendTech, the term SocialFi (social finance) has been buzzing. On Monday there was an interesting SocialFi segment in The Block's Data & Insights newsletter, analyzing the spike in this chart:

Given the general torpor of the bear market, why the sudden surge of comments on /r/EthTrader, "the most new weekly comments seen since June 2022"? Because that community "is where you can earn DONUTs (Decentralized Ownership Network Utility Tokens)," which are ERC-20 tokens. There's been some price action of late:

These tokens are not worth much, sitting below 1 cent from May 2021 to August of this year. But there was a massive rally in the DONUT market recently. In late August, the token exceeded 3 cents, the most valuable it's been in over two years. While DONUT is currently priced around $0.014 [now $0.007], it still marks a significant upgrade from where it was earlier this year.

It's not surprising that with an uptick in the value of DONUT, we'd see a corresponding increase in activity on r/EthTrader. It is now more lucrative to post since earning DONUTs is now worth more.

Money shapes behavior. "Show me the incentive, and I will show you the outcome," as Charlie Munger famously put it. Always fascinating to see a microcosm of this timeless truth. Community + liquidity = alchemy. The mutated result isn't always good, but it isn't always bad either. See: DAOs.

But wait, there's more: Data & Insights went on to explain that /r/EthTrader was lobbying Reddit-beloved exchange Kraken to list DONUT. The prospect seemed promising since /r/FortNiteBR's BRICK and /r/CryptoCurrency's MOON have been listed by Kraken.

However… every "Reddit token," including BRICK and MOON, just crashed. Both are soon to be deprecated by Reddit, which is ending the whole Community Points experiment:

The regulatory environment has added to scalability limitations. Though the moderators and communities that supported Community Points have been incredible partners — as it's evolved, the product is no longer set up to scale.

In other words, Reddit would prefer to avoid an SEC smackdown. The platform plans to replace Community Points with a new Contributor Program — the announcement of which elicited universal opprobrium. (Granted, that is the typical reaction to Reddit announcements.)

The mods of /r/CryptoCurrency will keep on keepin' on:

We plan to continue with Moons independently, whether that be through taking over smart contract ownership (if possible), or airdropping a new token 1:1 with current balances. What the solution will be is currently up in the air and dependent on Reddit coming to an internal decision, but we are happy to discuss this with the community and come to a decision together on how to move forward.

Circling back to /r/EthTrader, the mods of that sub declared that Reddit's decision is only a momentary speed bump, since the community "already made the decision to stay outside of Reddit's control by keeping the Donuts on mainnet and Gnosis chain and decentralized."

This story is a snowglobe of current crypto narratives. SocialFi, regulatory angst, the push and pull between centralization and decentralization… I guess that's just the icing on the donut.