Once we read that Reddit is proposing giving back 10 percent of a $50 million round's equity to its users, we tried to figure out what that number would be. Would it be $5 million? A million? It turns out that the number is more mysterious than that, but Reddit will likely be giving back the money in the form of cryptocurrency (think Bitcoin).
The $50 million Series B investment is led by Sam Altman, the chief executive of Y Combinator, along with others such as Andreesen Horowitz and Sequoia Capital, according to TechCrunch. Reddit receives 5 billion monthly page views each month and the cryptocurrency will go "toward staff expansion for product development, community management, and better tools around moderation and community." Reddit's community is a self-governed one that relies on user-generated material and moderation.
We are thinking about creating a cryptocurrency and making it exchangeable (backed) by those shares of Reddit, and then distributing the currency to the community. The investors have explicitly agreed to this in their investment terms. . . . Nothing like this has ever been done before. Basically we have to nail down how to do each step correctly (it is technically, legally, and financially complex), though in our brief consultation with an ex-SEC lawyer, he stated he could find nothing illegal about this plan.