Reddit is discontinuing its blockchain-based reward system known as Community Points, a move that has led to a significant drop in the value of associated tokens like MOON, BRICK, and DONUT. This decision comes after the program faced scalability challenges, regulatory concerns, and a shift in focus towards more accessible and widely adoptable reward programs.

The Rise and Fall of Community Points

Community Points, introduced in May 2020, aimed to reward Redditors for positive engagement in specific subreddits, fostering better content and conversations. These points were Ethereum-based tokens stored in Reddit's Vault, offering users the ability to spend them on perks like emojis and badges. However, the program faced hurdles due to Ethereum's high transaction fees, leading to a migration to the Arbitrum blockchain in 2022.

The downfall began on November 8, when these points would no longer appear in users' Vaults, and those available to subreddits would be burned by the end of the year. The decision triggered a sharp decline in token values, with MOON dropping over 85% and others experiencing similar losses.

Why is Reddit Choosing to Discontinue Community Points?

Reddit explained that the discontinuation resulted from scalability issues, regulatory concerns, and the pursuit of more user-friendly alternatives. Tim Rathschmidt, Reddit's director of consumer and product communications, stated, "Part of why we're moving past this product is that we've already launched, or are actively investing in, several products that accomplish what the Community Points program was trying to accomplish while being easier to adopt and understand."

The newer Contributor Program, offering monetary rewards for gold and karma, is one such alternative. Reddit emphasised its commitment to learning from the Community Points experience and applying insights to other communities.

Challenges Associated With Community Points

Despite foreseeing future opportunities for Community Points, Reddit faced challenges in scaling it broadly across the platform. The initial use of Ethereum presented problems with transaction fees and scalability, leading to a move to Arbitrum Nova in 2022. However, even this Layer 2 solution proved insufficient in addressing the issues at hand.

The announcement surprised some moderators, particularly those of r/CryptoCurrency, who expressed disappointment, stating they were unaware of the decision until an hour before the public announcement. The moderators clarified that existing MOON tokens held by community members would remain intact, emphasising that Reddit was removing its control over the smart contract but not shutting off transfer functionality.

Regulatory Landscape and Future Directions

Reddit cited the evolving regulatory environment, marked by uncertainties and complexities, as a contributing factor to ending Community Points. The lack of a clear path to scale the program broadly led Reddit to redirect resources toward more feasible and accessible reward programs.