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A fun scheme allowing members of Ethereum-oriented subreddit r/ethtrader to “tokenize” Karma has already, apparently, produced a corrupt “pay-to-play plutocracy,” and will be shut down.
Since October, r/ethtrader's 204,000 subscribers have received a weekly share of two million “donuts” that are automatically allocated “in proportion to...karma [upvotes] earned each week.” So far, 102.8 million have been distributed. Users with a higher proportion of donuts have more clout on so-called “weighted polls”—Reddit polls, used for community decision making, that lend more influence to high-quality contributors. (The point of a “weighted poll” is to forestall so-called “Sybil” attacks, in which users create multiple fake accounts to mass-vote an option in line with their own agenda.)
But on May 15, when ethtrader user shouldbedan introduced a system that would let members trade these tokens as non-fungible assets on various crypto-exchanges, all hell broke loose—influence was now for sale. Subsequently, following a Wednesday poll in which ethtrader members overwhelmingly voted for the option to halt trading, shouldbedan announced the end of the experiment, with the remaining donuts redistributed and any unclaimed donuts “left in the wild.”
Within nine days, the dream was dead.
Donut try this at home
So what happened? The original conceit was that users would be able to trade their donuts for cash—making a buck off their witty Reddit posts—or donate donuts to others, for kudos. A TrustNodes reporter made $10 doing this. A user on forum ethtrader reported selling theirs for 0.1 ETH.
To do this, users would first send their donuts to user ProofOfDonut, a non-active “bridge” account. This would transform the donuts into transferrable Ethereum-based (ERC20) tokens, which could be withdrawn from a site called donut.dance. ERC20 donuts could then be traded on several low-key crypto exchanges, like Switcheo.
Tokenization seemed to make sense within the context of Reddit's "Karma" system. The whole purpose of reddit Karma, of course, is that it enforces good behaviour. Redditors with high Karma, acquired through upvotes, gain administrative privileges—they can post and comment in more places, and more visibly. So the idea of "tokenizing" this asset intuitively makes sense, adding as it does an extra layer of incentives—money.
As such, it was a grand experiment. “This shit is the future,” declared one sage commenter, aptly named cryptofuck. Uniswap, another commenter, envisioned a donut-fuelled utopia. “Goals: going to a restaurant, paying in Fortnite points, the waiter receives their tip in WoW gold, and the restaurant receives DAI.”
A world of free-flowing donuts, an endless stream of love-for-money, was within reach.
But it wasn’t long before commentators started to point out the obvious—by making Karma sellable, it had also become buyable. “$DONUT lost its charm since it's tradable. buying karma is not how it's supposed to work, y'all,” wrote Ethereum dev Afri Schoeden on Twitter. Ryan Sean Adams, the founder of crypto investment firm Mythos Capital, agreed: “Opps! We tokenized karma on our subreddit & accidentally turned it into a pay-to-play plutocracy”
The very point of a Sybil-attack-resistant weighted poll, it seemed, would be undermined if "weight" could be bought. And with the price skyrocketing, there were other fears: users could create multiple fake accounts to mass-upvote their own posts, accruing unearned donuts—tradeable for cash—to themselves.
And indeed, savvy investors were already scheming to pump the price. One user bragged—or joked?—”Sold mine, then bought them back on the dip, then sold them again on the uptick. So far I'm a better Donut trader than any other crypto.” Another, apparently earnestly, wrote: “I just purchased donuts bc I think it's an awesome experiment. I've never contributed to r/ethtrader before, but this experiment made me want to buy some donuts and check it out.”
The donut speculative mania had begun.
So it was on Wednesday this week that user hodldwon posted a poll, titled “Stop Donut Sales to Preserve Sybil Resistant Polls.” The poll offered three options: “Stop Donut Trading (both sales and regrettably donations),” “allow / Continue Donut Trading (both sales and donations),” and “abstain (neutral or no preference).” Despite fierce debate, “Stop Donut Trading” won 48.6 percent of the vote. Shouldbedan, the apparent architect of the doomed project, subsequently wrote that all donut trades would soon be halted, giving traders just enough time to cash out their winnings.
But, in all this chaos, was there ever any actual vote-rigging in the end? It’s unclear. After Wednesday’s conclusive poll, Redditor ckd001 harrumphed that “unfounded fear” had triumphed over truth. “Name one manipulated poll please,” he beseeched his countrymen. “I'm astonished that so many people want to "fix" an imaginary problem,” he added in a separate post.
So far, there is really only conjecture or vague anecdotal evidence. “We're already seeing a lot of the issues inherent with governance tokens that are also traded on secondary markets. Plutocracies, Sybil attacks, bad moderator incentives, content quality traded off for high yield shitposts, etc,” wrote Enigma735, obscurely, following Wednesday’s poll.
And of course, there’s that final irony—the conclusive poll, the poll that killed (or suspended) the donut dream, was weighted. If the donut-laden vote-riggers were out there, they played themselves.
[We have reached out to the community, and will update if we get a response.]