No, the expansive licensing Discord demands here is not required to operate the service.

    By uploading any User Content you hereby grant and will grant Y Combinator and its affiliated companies a nonexclusive, worldwide, royalty free, fully paid up, transferable, sublicensable, perpetual, irrevocable license to copy, display, upload, perform, distribute, store, modify and otherwise use your User Content for any Y Combinator-related purpose in any form, medium or technology now known or later developed. 

Discord tricks the user into using it as a private messaging platform. Its main draw, as I understand it, is the IRC channel clones ("Servers"), which can be public or private/invite-only. It's also got no privacy or security options for the direct person-to-person messages, which people use essentially as an SMS/iMessage/WhatsApp replacement. Encrypted chat at scale is hard, but this is a relatively new product and was built in an era where privacy concerns were well known. The benefits of encryption/privacy/security etc (and drawbacks from the lack of it) are clear.

I understand they need to be able to transmit the data, but they also clearly state that the developers of the product can look at your messages in cleartext. That's absolutely not required. How do you think Signal operates?

What does that have to do with needing to acquire rights to redistribute your content?

>Discord tricks the user into using it as a private messaging platform.

Discord doesn't advertise security at all (they do mention keeping your IP secure in some support articles but that isn't advertising)

Beyond that, Discord exists to create big open public spaces. Why would you need encryption in a big open public space.

But when a company lets a lawyer write their TOS, they're gonna end up with a "better safe than sorry" version.

In order to host your (automatically copyrighted) content on their server and display it to other people in your chats they need your permission, so you have to give it to them if you want to use Discord. Without it they would be infringing on your copyright by hosting your content on the service.

I'm not sure how else you expect it to work.

Yes, they could use your images in their advertising, or publish a book of your images, or make a movie out of all your messages and videos, or anything else they wanted to do with, as they call it, "Your Content". That's what a perpetual, transferable, worldwide, royalty-free, sublicensable license to create derivative works is.

And no, all those rights are not required to operate Discord.

So what you're saying is that when you grant someone the right to use your content for a specific purpose, you're actually granting them the right to do whatever the hell they want with it?

Again, not a lawyer, but "in connection with operating and providing the Service" reads like a legally important part of that sentence to me.

"Service" in this context is defined earlier in the document:

>the Discord application (the “App”) or the website located at https://discordapp.com (the "Site"), which are collectively referred to as the “Service,”

IMO you're reading this very creatively if you think that grants them a right to publish a book of your private messages. Rights to use your content are granted specifically "in connection with operating and providing the Service." A book of your messages is not in connection with operating/providing the Discord app or website.