In 2020, Reddit introduced Community Points, a novel initiative that rewarded content creators with Ethereum-based tokens for their contributions, allowing them to showcase their achievements with badges and emojis on the platform. While this experiment initially added a fun and rewarding aspect to the Reddit community, it has since been discontinued. The decision to end it was primarily due to the high cost of maintaining scalability, which was considered unsustainable.
Tim Rathschmidt, Reddit's director of consumer and product communications, announced that the program would conclude by early November. He explained that the expense of keeping the system operational outweighed its benefits. This discontinuation would significantly impact only a few subreddits, as the original vision of bringing every Reddit user into the world of blockchain technology proved to be financially impractical.
Rathschmidt mentioned Reddit's exploration of alternative solutions that are decentralized, secure, and highly scalable. In 2022, an attempt was made to reduce costs by migrating the project to Arbitrum Nova, but even Layer-2 solutions proved to be prohibitively expensive.
Uncertain regulatory conditions surrounding cryptocurrencies also played a role in this decision. The evolving regulatory environment and its associated uncertainties added to the challenges of sustaining the Community Points program. While it's improbable that the SEC would specifically target Reddit, the overall unpredictability of regulatory changes led Reddit's administration to reconsider the program.
The discontinuation of Community Points had repercussions on cryptocurrency tokens associated with Reddit, such as the MOON token from r/CryptoCurrencies, which saw a significant drop in value. MOON, for example, experienced an 86.4% decline, and DONUT, the community points token of the EthTrader subreddit, also plummeted by over 50%.
Reddit's decision to wind down the blockchain-based Community Points program was influenced by scalability issues, high costs, and regulatory uncertainties, ultimately leading to a significant impact on affiliated cryptocurrency tokens.
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