At the end of September, reddit announced it had closed a $50 million dollar round of venture funding lead by Sam Altman with participation from Alfred Lin of Sequoia Capital and Marc Andreessen of Andreessen Horowitz. Led by Sam, the investors in that round proposed to give 10% of their shares back to the community. With this announcement, the birth of a potential reddit cryptocurrency became a hot topic across the internet.
A few short weeks ago, reddit asked the community via the /r/AskReddit subreddit how the distribution of capital should take place. The thread saw well over 4,000 responses from community members who quickly offered up a plethora of suggestions.
On December 10th, reddit introduced some of the latest hires which included Ryan X. Charles, an active member of the /r/bitcoin subbreddit. Ryan joined the company as a “cryptocurrency engineer.” Ryan joined reddit just a day before the first announcement. He had no idea when he had been hired that he would be working on a potential cryptocurrency project for the company–just that it would be his role to work on bitcoin-related projects for reddit. When the company announced it would be working on a cryptocurrency style project, he volunteered to help make it happen.
While the company is not calling it a “cryptocurrency,” they are calling it a digital asset and it is based on blockchain technologies with Ryan remarking,
For legal reasons, it is unlikely we will make the cryptocurrency exchangeable for actual shares, since we are not a public company, and therefore it would be illegal to give shares to millions of people. Howevever, we are working on a legal strategy and I’m sure the cryptocurrency will be exchangeable for something of value.
Also, we used the word “cryptocurrency” originally, but a better term is “digital asset”, since in many ways notes will not be like a currency at all. For instance, we are not planning on letting users buy gold with the cryptocurrency (although we haven’t eliminated that possibility).
Ryan said he spent over a month learning about the extensible nature of bitcoin and the new protocols that were available to build such a technology. He looked at sidechains, colored coins, Counterparty, Mastercoin, Ethereum, Stellar, Ripple, NXT, Open Transactions, and creating an alt coin. After reviewing many of the options, the company nor Ryan have yet to officially announce in which direction they will be going ultimately. We do know that Ryan has eliminated their options to either a sidechain option or a colored coin.
Many had believed the digital asset backed by reddit shares would be built upon either Counterparty or NXT, but Ryan stated,
Counterparty is awesome and is the right tool for a lot of projects, but there are a few reasons that make it less than ideal for reddit.
After several months of speculation, the picture regarding this new digital asset is becoming a bit more clear with the announcement of reddit notes.
Many questions still remain, but we now know the official name and we have been provided an official explanation about how distribution of the notes will take place.
reddit will give away reddit notes in a random lottery with approximately 950,000 reddit notes to divide among active user accounts. Since that number of notes is smaller than the number of active user accounts, not every user will receive one. To make sure that notes are only given to active user accounts–and not those created after the announcement–the company will decide which accounts are eligible to receive notes based on activities prior to September 30th of 2014 when they first made an announcement regarding the plans.
The notes will be distributed to random users in the fall of 2015.
The reddit notes will be divisible so users should be able to tip, give, donate, trade, or even use them on exchanges. It is Ryan’s hope that they will see activity on an exchange.
Although this new asset opens up a large chunk of potential legal concerns, the attorneys at reddit are working hard to be sure that the new digital asset is completely legal and falls within all regulations. The company is ready to block New York users if necessary with BitLicense in a worst-case scenario, but as Ryan stated,
In a worst case scenario, NY citizens would have to be excluded from the project. However, I’m pretty sure that won’t happen. We will work with the regulators to make sure this project is compliant.
We still don’t know the technical details or other large aspects about reddit notes, but we know that the company is still actively pursuing earlier promises and is working tirelessly to make them a reality with this announcement.
Images courtesy of reddit.