Kraken co-founder Jesse Powell responded to Reddit’s decision to discontinue its Community Points blockchain rewards program, arguing the company shouldn’t erode token value without compensation.
On Wednesday, Reddit announced it would be sunsetting the initiative that issues crypto tokens like MOON and BRICK to users by November 8th. The cited reasons were scalability limitations and an unfavorable regulatory environment.
Following the news, related tokens plunged nearly 90%. Kraken had listed MOON and BRICK in August, causing prices to spike.
Also read: Basel Committee Proposes New Crypto Disclosure Rules for Banks
Powell suggests offering redemptions to soften the blow
Powell acknowledged Reddit’s concerns but said the company should offer redemptions to soften the blow, like enabling purchases of avatars or badges with the points. In his view, Reddit is destroying significant user holdings without providing anything in return.
Launched in 2020, Community Points aimed to increase engagement by rewarding activities like posting popular content. The abrupt winddown after three years has dealt a blow to early adopters.
Also read: Shiba Inu Team Warns of Fake Telegram Channel Promoting Scam
Despite regulatory uncertainty given the challenges presented, Powell believes Reddit could have transitioned the program through an alternative utility rather than abruptly sunsetting it.
The dramatic token selloffs spotlight the risks of relying on platforms to persist with incentives. However, Powell’s critique raises debate about appropriate transition plans when discontinuing once-core features with monetary implications.