Crypto and Black Economic Empowerment

Disclaimer: The views expressed here are my own and not those of my employer. The views in this post should not be construed as investment advice.

While COVID-19 continues to impact people across the world, it’s clear that it is disproportionately hurting Black communities. The effects of the virus have both exposed longstanding racial wealth disparities (a typical white family has 8x the wealth of a typical Black family), and become a driving force for further racial economic inequality.

As COVID-19 has delivered a crushing blow to many small brick and mortar businesses, it has accelerated the growth of the digital economy creating opportunities for new technologies, platforms, and applications.

Cryptocurrencies have been one such beneficiary of this growth, representing a fundamental innovation in the creation of new types of digital money, and global public networks that can underpin and power applications serving the digital economy.

While most people have heard about Bitcoin in the context of price speculation, it’s important to zoom out and understand “crypto” through a wider lens to illuminate the economic impact that it could have in the coming years.

Crypto is uniquely powerful because it simultaneously exists as a technology, an industry, and a new asset class. Therefore, it’s important to break it down into these three dimensions to explore the opportunities that it presents to contribute to Black economic empowerment.

Crypto as a technology

Crypto is built upon computer science innovations in the fields of advanced cryptography and distributed systems. Building applications on crypto networks requires knowledge of new and emerging programming languages and technical foundations.

Crypto networks and protocols are built in public through a vibrant open source community of software contributors. These open source ecosystems lead to a rapid pace of innovation while enabling new forms of apprenticeship and education through open access to participate in these communities online.

Over the past decade, there has been broad recognition of the importance of increasing Black representation of degrees within STEM (science, technology, engineering and mathematics) fields that can provide both high paying careers as well as opportunities to participate in technology innovation.

However, it’s important to consider the specific technologies that are seeing growing demand and provide significant economic upside once learned as well as the barriers to entry to obtain the necessary resources and mentorship needed to learn them.

The technologies and programming languages required to develop crypto applications are both in significant demand and participation in open source communities online provide new opportunities to learn these skills without requiring formalized degrees.

While there is a need to continue to improve Black representation of formal STEM degrees and patents as a proxy for ownership of innovation, there is also the need to encourage and increase Black participation within large open source software communities like crypto.

Crypto as an industry

Over the past 5 years, crypto has evolved from a handful of startups to a professional industry with high growth fintech firms and large technology companies ramping up hiring for crypto focused jobs across both engineering and non-technical roles like business development, sales, and customer support.

Many crypto companies had established remote friendly workplaces pre-COVID that have given them a head start and enabled them to accelerate remote first hiring and onboarding over the past year. Location of jobs can be a significant factor for diversity and inclusion hiring where remote roles expand the hiring pool to Black talent living in diverse communities across the country.

Most importantly, crypto lowers the barrier to entry to Black entrepreneurship by providing new open platforms and protocols. When platforms emerge that provide new capabilities and distribution channels, new companies are created on top of them.

Building technology products used to entail building new software from the ground up requiring significant capital, resources, and time to market. Building products on open platforms leveraging open source software has made it easier for small teams to test ideas, create value, and scale without needing to raise significant venture capital.

Entrepreneurship doesn’t lead to binary outcomes of success or failure. Encouraging Black communities to build products and leverage open platforms that enable them to easily do so drives significant returns. Even if a company doesn’t succeed, the skills, knowledge, and network obtained through building in public leads to new career opportunities.

Crypto as an asset class

Crypto represents a new asset class and new model for digital community and property ownership. Cryptocurrencies like Bitcoin are social financial networks where instead of a single company operating the network, tens of thousands of individuals and entities run the software that operates it and tens of millions of people use it to store and transfer value.

Rather than ownership of shares in a social media company, ownership of Bitcoin represents a scarce asset that exists on this network and increases in value as the adoption and demand for the network grows. Therefore, the people that use and operate the network directly benefit from the growth and adoption of it.

Black teenagers and young adults have been early adopters and among the most active users of the current generation of social media platforms like Instagram and Snapchat. Black communities create global internet culture through content and memes that drive growth and revenue for these platforms. However, they haven’t had the opportunity to capture the value that they create through ownership of the networks themselves.

As the digital economy grows and new crypto based networks, platforms, and applications emerge, Black consumers of these platforms benefit from the opportunity to participate in the direct ownership of them.

Crypto enables the upside of venture capital-like returns that can generate life-changing wealth that are accessible to Black consumers without requiring accredited investor status, or access to venture capital networks that have been traditionally dominated by white men in Silicon Valley. These assets are able to be passively bought or earned without minimum investments where they are liquid on 24/7 markets.

Traditionally, the path to ownership of a digital network required starting a company or having the opportunity to join a startup on the ground floor. Freelancer and gig economy jobs were limited to hourly wages without an upside in the network for which they are helping to build.

Crypto enables consumers to join or build online communities and contribute to them while owning an asset that benefits from the growth of that community. This creates the potential for generational wealth transfer to young, tech savvy, online communities who are able to identify and capitalize on new trends.

While Black ownership of physical property and real estate has been inhibited for decades by a legacy of redlining and discriminatory practices, ownership of digital property and assets operate on a more level playing field.

Similar to the early days of the internet, many crypto networks and applications will fail. However, there is a direct relationship between the risk of early stage, high growth technology projects and the potential upside and wealth generated from the networks that succeed. Therefore, it’s important to encourage education and responsible allocations to this new asset class for Black communities.

Conclusion

One of my favorite things about crypto is that it is the ultimate growth hack for financial literacy. The existence of new forms of money forces people to ponder the question of what money is in the first place and how technology can create new ways to express and communicate value.

Crypto is not a panacea that will end racism nor is it impervious to it. However, it’s critical for crypto to be in the conversation of what the future digital economy could look like and who is positioned to benefit from it as it continues to grow. Because crypto is still in its infancy, it’s even more important to consider it now as a potential vehicle for Black empowerment.

Each dimension that I highlighted requires significant research, exploration, and action to grow Black participation. It’s critical for the industry, academia, and policymakers to work together to educate each other and ensure that Black communities can contribute to and benefit from this innovation.

If you are passionate about this topic please feel free to reach out to me on Twitter @cuysheffield.