The last few decades have seen unprecedented innovation and progress in how we connect, interact and socialize with one another. The further we push into the future, the more difficult it becomes for the platforms we use every day to both grow and retain their existing user bases. Amid the chaos that erupted following Elon Musk’s acquisition of Twitter (now renamed X), we’ve seen countless clones spawn. Most notably, we have Instagram’s new Threads app aiming to capture what appeared to be market share that was up for grabs.
But there’s a clear problem nowadays related to the acquisition of market share. Few platforms are willing to explore uncharted territory. Instead, consumers are continually pushed to adopt products that lack any sort of novelty or utility. When leaders in the space do take a risk and start exploring something new, there appears to be a fear of commitment. Case in point: the shutdown of Reddit’s crypto rewards program, effective today. Reddit attributed its decision to sunset its Community Points program to concerns about the current regulatory environment for digital assets and business consolidation. While all those things might be true, the most critical issue that ultimately closed the curtains for Reddit’s crypto rewards program is that it seems to have been engineered solely for profitability, rather than usability.
There’s a huge opportunity for crypto to revolutionize how we transmit value and collaborate within shared worlds. But this potential can’t be realized until we have valuable real-world use cases. The non-fungible token (NFTs) boom of 2021 was a brief moment that showcased just how transformative this technology can be. Despite continued progress within the ecosystem and increased regulatory clarity, we’ve struggled to apply the technology in other meaningful ways.
The pursuit of money and growth naturally enticed many to enter the space, with the hopes of securing staggering financial returns. Unfortunately, because this technology was looked at through the lens of expanding revenue streams above the utility of the technology itself, an opportunity has been missed. Reddit’s crypto rewards program, which the company plans to shutter on Nov. 8, is the latest example of this.
This is best evidenced by the fact that the rewards program was significantly more performant than the one that eventually replaced it, due to the scalability concerns surrounding the Ethereum blockchain on which it was built. Reddit ultimately migrated to Arbitrum to address these concerns, nearly two years later. This is disturbingly late — considering discourse around the need for scalable blockchains (and alternatives) dated back to well before then.
To be frank, these concerns pre-date this program altogether, signaling that Reddit’s foray into crypto might have been premature or at the very least, uninformed. Even the most casual of crypto fans know that a seamless user experience would be challenging to achieve in this context. If anything, Reddit’s blunders show that big brands are quick to hop on new tech trends without conducting proper due diligence. And that’s despite having near infinite resources to get smart on said technology.
One step forward, two steps back
The pressures of nonstop innovation and financial growth often drive enterprises to make rash decisions, but there are always implications that need to be carefully considered prior to any move taking place. In the specific case of Reddit, the sunsetting of its crypto rewards program not only imposed great financial hardship on its closest supporters (who spent hard-earned money supporting the program) but it also bears heavy weight on crypto’s long term growth adoption trajectory.
It’s important for us to factor in just how impactful big enterprise’s role in crypto’s adoption is. Successful business use cases only help support crypto’s journey through the intense scrutiny that regulators around the world will continually impose on the blossoming asset class. What’s even more impactful than success stories are failures. While it’s far from easy to predict how an initiative might be received by the market, it is fairly obvious that replacing an existing business line with a “new” one that does the exact same thing will never lead to growth in usage. Add in countless, unnecessary friction points and you are doomed. In the case of Reddit, shortsightedness and the fixation on greater profit margins got in the way of the potential to revolutionize the model for rewards programs and potentially crypto as a whole.
Reddit, from its inception, has always looked to innovate, question and do things unconventionally in the name of progress. So this makes its decision to wrap up its crypto rewards program disappointing, and it was likely due to the crypto knowledge gap that informed its strategy. Ultimately, this was the right direction for the business (and the social media industry as a whole). At its core, the rewards program addresses growing concerns of platform equity as users acknowledge that social media companies have built evergrowing empires fueled solely by the individuals that grace them. The vast majority of these platforms offer users very little, if anything in return for their time and the content they contribute.
A world built on the bedrock of digital assets creates endless opportunities to both gamify and drastically improve the barren incentive models that exist in Web2 paradigms. In order to unlock that value, one must truly understand the world of Web3 so that they can properly navigate it.
In the end, one could chalk up the failure of Reddit’s crypto rewards program to the company being a bit early to the game. Despite this, however, Reddit’s efforts need to be commended. As a major industry player with a history of innovative products, it is natural for the public to hold them to a higher standard. More than a distraction, this development should serve to encourage other projects looking to develop novel, utility-based crypto products by leveraging Reddit’s learnings for their benefit.