For those who have been active contributors to social communities we’re sure you’ve heard of Reddit – debately the biggest platform to discuss an endless variety of topics using different /r subreddits.

Earlier this week, Reddit quietly introduced its newest version of Community Points – ERC20 tokens which reward users for their contributions to different communities.

While it’s no secret that Reddit has been a long proponent of tokenization and blockchain technology, this announcement comes as big news in the wake of different governance movements currently taking storm in the wider Ethereum ecosystem.

What’s To Know?

For your convenience, we’ve synthesized the points from this post to give you a better understanding of what this new system entails. In short, Community Points are:

  • A unit of measurement representing ownership of a given subreddit.
  • Opt-in only to specific subreddits. Different subreddits will have different forms of community points – Bricks, Doughnuts, etc.
  • Earned every month by making contributions such as posting and commenting. Only those who claim their points will receive them.
  • Used to unlock benefits and rewards such as special memberships and governance power on specific polls.
  • Displayed next to a username, as a sort of social flex.

Most importantly, Community Points are based on the Ethereum blockchain and entirely dictated by that individual community. What’s important to note is that different communities will find different uses for their points. This is exponentially more powerful than one Reddit-wide point system (like the current Karma) as it becomes much easier for communities to incentivize different actions.

The Mechanics

Perhaps the most unique mechanisms of this system are the novel approach to try and prevent users from abusing the system. While there are sure to be edge cases, preventive measures to malicious activity include voting records and monthly burns.

As for how points are collected:

  • Every 4 weeks, Reddit will publish a list of karma amounts earned by each user in that subreddit during that period. This list can be challenged and updated if necessary.
  • A decreasing fixed amount of points will be issued every month.
  • 10% of the Community Points go to Mods, 20% to Reddit and 20% to the broader Reddit community. This leaves 50% of each monthly distribution to be earned by a given community.
  • Users must claim their Community Points. If 6 months go by and Points have not been claimed, they will expire.
  • Half of the burned points (for memberships, badges, etc.) are reintroduced in the following cycle.

The Power of Reputation

Just as we’re now seeing within different DAOs with the advent of tokenized reputation systems like SourceCred, POAP, Mule.XP and 1UP, Community Points can be used to unlock special community-specific rewards like badges, animated emoji and GIFs. Similar to how Fornite requires players to purchase cosmetics and emotes in V-Bucks, its likely that Community Point-enabled subreddits will have loot which can only be purchased with reputation.

Beyond the social power of introducing gamified mechanics to reward contributions, community moderators now have the ability to earn points for their value-added actions.

How Is This DeFi?

Seeing as the notion of an ERC20 token is not necessarily novel to anyone reading this, you may find it interesting that one of the most popular Ethereum DeFi subreddit /ethtrader is integrating their Community Points – Doughnuts – to sell the rights to their banner.

Once connected with MetaMask, anyone can purchase the banner using Doughnuts.

This is an extremely novel approach to Communtiy Points, largely due to the incorporation of Harberger Tax. For those unfamiliar, this means that:

  • The owner sets the price for the banner
  • They pay a daily tax of X% by burning Community Points (in this case Doughnuts)
  • If the owner cannot pay the tax, the price goes to 0
  • Anyone can buy the banner at its advertised price
  • The owner cannot refuse to sell it at that price

What arises is a system in which the banner is continually transferred among different entities based on their willingness to pay the base rate and a daily tax on top.

Be on the lookout for cool companies leveraging this capacity in the near future 😉

Closing Thoughts

Perhaps the biggest takeaway from this story is the question of value-added content. With Community Points, many have argued that users are likely to post just to post, rather than posting to incite meaningful conversation.

Moving forward, we’re quite excited to see how Community Points make their way into the wider Reddit landscape – namely observing how this may introduce an entirely new wave of users to web3 wallets like MetaMask.

if one thing is for sure, we’ll almost definitely see secondary markets pop up on DEXs like Uniswap – directly tying into the wider notion of permissionless liquidity that we’ve been a big proponent of here on DeFi Rate.

In the meantime, we recommend staying up on all things Reddit via their official Twitter.