Lessons from a Crypto Entrepreneur: Nader Al-Naji of BitClout

A Crypto Entrepreneur's Journey: Nader Al-Naji and DeSo

Nader Al-Naji, currently based in Los Angeles, has experienced a dynamic period in his career as a crypto entrepreneur, a fact he readily acknowledges.

In 2018, approximately sixteen months after securing $140 million in investment for a cryptocurrency venture focused on a stablecoin, Al-Naji and his colleagues from Princeton University returned $130 million. They encountered difficulties in realizing their vision. The technological roadmap of Basis, as it was known, proved incompatible with existing U.S. securities regulations.

The Rise of DeSo and BitClout

Undeterred, Al-Naji initiated work on DeSo two years later. He characterizes DeSo as a blockchain specifically designed to support social applications. Its most prominent application is BitClout, a platform enabling users to invest in the perceived popularity of influencers and celebrities through tokens tied to their profiles.

BitClout gained traction last spring, in part by scraping profile data from tens of thousands of Twitter users. Creator coins were then distributed to these profiles to populate the application. However, this approach sparked criticism from users who were surprised to find their names associated with the project. At a StrictlyVC event in San Francisco, Al-Naji expressed regret over the initial rollout to interviewer Erin Griffith of the New York Times.

The primary source of his regret wasn't the controversy itself, but the fact that the platform was “launched pretty much as a prototype.” He believes this may have discouraged developers within the DeSo ecosystem from pursuing similar projects. He stated that, in retrospect, it would have been preferable to avoid launching any application on DeSo initially.

Beyond BitClout: A Growing Ecosystem

Al-Naji emphasized that over 100 other applications are now functioning on the DeSo blockchain. He contends that these applications surpass BitClout in functionality, comparing BitClout to a basic platform like Craigslist.

• Diamondapp allows users to purchase virtual diamonds to reward creators.
• CloutFeed is a mobile application designed for BitClout.
• Polygram.cc serves as an NFT marketplace.

A key feature of DeSo is that content and users generated by one application are accessible to all others, a deliberate design choice.

Al-Naji’s vision centers on a single, highly engaging application attracting users to the platform. This, in turn, would increase the value of DeSo’s coins. He suggests this model mirrors Meta (Facebook), but with a decentralized structure and without the advertising prevalent on Facebook and Instagram.

DeSo vs. Meta: A Potential Disruption

Griffith questioned whether Al-Naji believes DeSo can genuinely compete with Meta, given the tech giant’s own blockchain initiatives and DeSo’s status as a “pirate-ship startup.”

Al-Naji explained why he believes platforms like DeSo pose a threat to Meta. He highlighted that applications on DeSo typically levy fees on financial transactions, potentially generating substantial revenue. This contrasts with Meta’s reliance on a traditional financial system burdened by “red tape” and chargebacks.

Al-Naji argued that a sustainable “fee model” can be “much more efficient than the ads-driven business model” currently employed by Facebook. Furthermore, an ad-free environment allows for a focus on transaction generation, regardless of user activity.

In essence, DeSo represents a fundamentally different approach than Meta’s current operations. Meta’s potential shift towards a more “crypto-oriented” future could be a complex and prolonged undertaking.

Navigating Regulatory Challenges

Griffith inquired about the regulatory risks facing both DeSo and Meta as they navigate evolving regulations in Washington D.C. Al-Naji acknowledged that “you can’t be in crypto and not be subject to some amount of regulatory risk.”

However, he believes his experience with Basis has prepared him for these challenges. He noted that the $10 million not returned to investors was entirely allocated to legal counsel, focused on understanding the complexities of securities regulations and FinCEN’s perspective on synthetic dollars. He expressed confidence that they have taken the correct approach this time.

DeSo has secured $40 million in funding from investors, including Sequoia Capital, and an additional $230 million through the sale of DeSo tokens. Al-Naji confirmed that there are currently no requests for a return of these funds.