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Many people use Twitter and other social media channels to connect with friends, family, and the world. The cryptosphere, along with almost every other emerging tech industry, has used these channels as their primary marketing platform and news agencies. As the mainstream public has yet to adopt blockchain technology or cryptocurrencies, many people interested in these innovations get their information from the likes of Twitter, Reddit, Medium, YouTube, Telegram, and a few others.
Social Media, Advertising, and Startups
One method that has truly shaped the cryptocurrencies advertising market is a “bounty campaign.” Here, people are offered rewards for different social media posts, from Twitter to YouTube videos. Bounty rewards are often measured by the quality of a person’s posts as well as the quantity of them. It is also often seen that bounty programs will take into account the amount of influence someone has in the social media world.
As such, certain crypto social media celebrities end up getting paid a large amount to promote ICOs and thus paid social media shoutouts are nothing new to the crypto industry. Well known industry voice John McAfee, has been able to charge $105,000 per tweet at times. While shoutouts on social media have played their part, endorsements are beginning to play a growing role in ICO marketing as Internet giants including Google, Facebook, and Twitter banned cryptocurrency advertisements entirely this year.
However, bounty campaigns are not overt advertisements; they are posts from individuals on their social media. More to the point, these bounty campaigns are not going anywhere and have been the driving force for so many ICOS.
ICOs are still raising money at a record pace, despite the ad bans and this year’s 57 percent tumble in bitcoin’s value. On the one hand, many try to defend the use of bounty campaigns as they have proven to be a very inexpensive way to build a brand rapidly worldwide. On the other, some tend to scrutinize these bounty campaigns and see them as a breeding ground for hype and misinformation.
The Securities and Exchange Commission (SEC) sounded the alarm and told the world back in November 2017 that celebrity endorsers of ICOs often lack the expertise needed to ensure that the investments were indeed adequately vetted. SEC Chairman Jay Clayton has warned the public that the only reason ICOs have been so successful is that they are improperly skipping around registration requirements, and therefore, the resulting market is probably full of fraudulent companies.
The Commodity Futures Trading Commission (CFTC), another U.S. markets regulator, has given customers the same warning as the SEC. That warning being, it is best to avoid buying tokens based on tips which have been shared on social media. Neither the SEC, CFTC, Google, or Reddit responded to requests for comments on these social media celebrities. Twitter quickly deflected any questions by referring to its policy on banning ICO ads. However, Facebook loosened its current cryptocurrency ad ban on June 26, 2018. Facebook stated that some content would be allowed on the social network after passing the established vetting process. Despite loosening its grip on some crypto ads, Facebook will continue to prohibit ads for ICOs.
While these social media celebrities and cryptocurrency advocates have been able to make some money from these bounty programs, experts are warning these cryptocurrency promoters that they may actually be committing another sort crime.
Based on the principles of the offering, an ICO may be considered a security by the SEC. According to Richard Levin, Chair of Fintech and Regulation Practice at law firm Polsinelli PC, anyone who promotes such an offering in exchange for any compensation tied to the sale may be breaking the law if they do not register with the regulator first.
Lex Sokolin, Global Director of Fintech Strategy at Autonomous Research in London, said it best:
“Once it becomes clear that financial outcomes can be manipulated not just by trading, but creating perceptions through social media, regulators will take a very hard stance.”
Some crypto promoters have already begun to feel the heat from the SEC. On June 18, 2018, McAfee, tweeted to his over 820,000 followers that he would no longer be working with ICOs or making further recommendations because he received several unspecified “threats” from the SEC.
Due to SEC threats, I am no longer working with ICOs nor am I recommending them, and those doing ICOs can all look forward to arrest. It is unjust but it is reality. I am writing an article on an equivalent alternative to ICOs which the SEC cannot touch. Please have Patience.
— John McAfee (@officialmcafee) June 19, 2018
Even with the ongoing legal and physical threats that McAfee has received, the legal risks of promoting ICOs has done little to slow bounty campaigns or the ICO explosion that is currently happening. In 2018 alone, blockchain-related startups raised over $11.6 billion through ICOs.
According to CoinSchedule, that is around triple that amount of last year’s record. Currently, about 18 percent of cryptocurrency-related posts on Reddit, Twitter, and Bitcointalk.org now originate from bounty campaigns, according to Solume (a company that currently monitors social-media posts on cryptocurrencies). That amount has also tripled since January 2018, when it was only about six percent.
What are these “Bounty Hunters” Really Making?
These promoters have earned the name “Bounty Hunters” as they are hunting for the rewards from these bounty campaigns. It is true that the initial coins earned from these bounty campaigns are often worth little. However, the hope is that the coins will gain value significantly if the ICO is successful. Indeed a nice pitch and driving force behind these bounty campaigns. The idea is similar to that of a stock option and promoters can stake their rewards on the issuer’s success.
One startup that is currently running a bounty program is 4New. 4New is a company that wants to generate electricity from waste. It recently restarted its bounty campaign in April after the ad bans brought an abrupt halt to its marketing momentum. President of 4New, Saransh Sharma said, “It’s really a very cost-effective mechanism for developing a brand. Before you know it, there’s a snowball effect.” While 4New has raised about $43 million, most of this money has come from accredited investors.
What remains to be a big problem in bounty programs is the lack of quality advertisements that the bounty campaigns tend to create. Most Bounty Hunters do nothing more than retweet the ICO’s tweets and often merely rephrase material from the ICO’s website. Bots, fake followers, and stolen identities are commonplace within the crypto community.
While there are crypto celebrities such as McAfee, many others crypto advocates are making their way up the totem pole. Paul Angus is a forty-three-year-old who works as an engineer by day, but by night, he’s Cryptonomatron: a producer of YouTube videos on the latest ICOs. He currently has more than 8,000 subscribers on YouTube. While his online alter-ego has been described as a labor of love, it sometimes comes with an additional perk: payment in cryptocurrency.
Angus, or Cryptonomatron, comes across as an analytical expert by the standards of the crypto world. In his videos, he takes the time to evaluate the pros and cons of each ICO he promotes to his viewers. While Cryptonomatron claims that he has received between four and five thousand dollars from bounty campaigns, he still holds to his word that the money does not change his views of the ICO.
Just like most crypto celebrities, Cryptonomatron also encourages his viewers to do their own thorough research before investing in ICOs. Cryptonomatron has warned, “There might be people that go in solely based on watching my video — I hope that’s not the case. You shouldn’t listen to YouTubers.”
While big Internet companies are working hard to ban cryptocurrency advertisements, bounty campaigns continue to run. Although these campaigns have proven to be inexpensive ways to promote products, Autonomous Research estimates that only about one to two percent of the money raised by ICOs comes from bounty campaigns. Most of the money raised for an offering comes from accredited investors, but so much product awareness and community support is spread and built through these bounty campaigns. As internet giants continue to make it difficult for cryptocurrencies to advertise, it is likely we will see more and more forms of bounty campaigns across different social media channels.