Two Diverging Groups — Institutions and Enthusiasts
Once again digging into my 2018 thesis in digestible posts!
Through extensive involvement throughout the blockchain community and the multiple methodological research design, two distinct groups emerged in the research, with divergent reasons for involvement within the community and with the technology. The simplest way to summarize each group is institutions and business on one side, and the crypto enthusiasts and blockchain startups on the other. It can certainly be argued that there are many sub-groups that exist and operate within each main group, but for initial group description, the two largest groups are helpful to describe. Later sub-group description may in fact find that certain sub groups actively avoid specific characteristics of the larger main group, but still fit the majority of the characteristics of the larger group as a whole. Given the infancy of the blockchain space and the discussed concept that as additional groups and projects join the space, it alters the possibilities of the space as a whole, these groups could eventually splinter and create additional major groups with unique approaches to the space.
The two groups will be described in terms of some of the general group characteristics, followed by a general description of some of the observations made throughout my research that supports each categorization.
Institutions and Business
Locations of study: IPO Consultation, Conference Board of Canada Round Table, Ethnography.
- Tend to be more risk averse — in some cases passing risk to customer/user
- Tend to be less concerned with preserving decentralization
- Tend to focus on value translation to fiat as opposed to value in the system/token (ex. daily spot trading, not “hodling”)
- Regard a lot of the conversation and blockchain popularity to be “hype”
- Often trying to come to grips with the technology so they can implement into their current practices
- Little demonstrated interest in fostering wider adoption, simply interested in personal/corporate/institutional utilization
- Not interested in failing, want long term security, success and efficiency
The Institutions and Business group is mostly composed of groups, organizations or business that are coming into the blockchain space while remaining embedded in existing organizational structures. For this reason, they are likely to be studying or attempting to translate specific aspects of their general operations into a blockchain platform, and exploring the possibility of efficiency or cost-savings. This is to be expected even if we consider the theoretical basis we are operating with in this thesis — capitalist firms and states will adopt technology if it allows them to find efficiencies, particularly if they can extract more labour with less overhead cost involved.
The tendency of members of this group to prefer trading cryptocurrencies for fiat instead of “hodling” cryptocurrency (an intentional misspelling of holding that is common in the cryptocurrency space that essentially became a blockchain meme) was demonstrated in several locations throughout my research, but was most evident in the IPO meeting. It was clear that all parties involved viewed immediate spot trading at current prices of the day superior to retaining ownership of any mined tokens, though it was mentioned that it could potentially be an option if particular investors wanted it. Again, this is likely an effect of existing business logic moving into the blockchain space while still operating mainly outside of it. It also highlights the difference between an IPO and an ICO, as investors in a blockchain based IPO are wanting a return on investment that can only be clearly achieved with a cash out back to fiat. With an ICO, which is essentially a blockchain based form of crowdfunding using cryptocurrencies, investors may choose to retain ownership of tokens either for a speculative increase in value, to utilize within the system if there is a use for the token within the platform, or may also trade back to another cryptocurrency. These tokens can also eventually be traded back to fiat, though it takes much more effort, particularly if the token from the ICO is new, as it may not be listed on exchanges, and may not have immediate liquidity. Because of this, the two systems end up functioning in quite different ways, even though they are both intended as investment vehicles. This difference is at least partially a result of ties to operations within or outside of the blockchain space and required value translation for evaluation of success. It is also worth noting that the ICO concept was mentioned several times around members that would fit within this institutional group, and each time the concept was dismissed as fringe or unimportant, while the mechanism was actively being used to launch many different projects across the blockchain space.
The earlier point regarding sub-groups is likely best exemplified by describing an interaction I had with a business that is explicitly cryptocurrency based, selling hardware wallets and other cryptocurrency related goods. I had been looking to purchase a hardware wallet, and sent an inquiry to see if the store accepted payments for items in cryptocurrency. I didn’t think this to be a strange question given the central focus of the store was for cryptocurrency related items. I received a response back stating that yes, they did accept payment in bitcoin, and a link to a website that they consider as the current valuation of bitcoin. However, they also noted that if paying in bitcoin, the customer would have to pay an additional 10% of the total cost of the items, due to the volatility associated with bitcoin. I was surprised to hear that this business that is focused on cryptocurrency would impose an additional cost onto their customers because of the volatility of bitcoin, essentially passing all risk associated with making a payment in bitcoin to the customer. This is an example of a business that would at first glance be associated with the crypto enthusiast and blockchain startup group, but actually fits better within the institution and business group due to their practices.
Decentralization is not often seen as an integral part of blockchain systems with members that fit into this group. This aspect was demonstrated at the blockchain round table at the Conference Board of Canada. When asked about whether decentralization would cause discomfort given their current data practices, it was mentioned that with cloud computing, some data is already moved and stored in multiple locations, though not necessarily decentralized in the same way. The option of having permissioned and private blockchains was of interest, and it was expressed that for some of their purposes the permissioned aspect is integral, and so decentralized or distributed systems were either not necessary or not attractive, depending on the use case. This would be evaluated starting from the specific data set being moved onto or recorded on the blockchain, as some of the data sets contain more sensitive data, and would not be moved onto public systems even with encryption. There was also talk about using a consortium of companies to leverage benefits of blockchain systems for all involved, though this was understood to represent some centralization of the platform, system, or network build.
These were the most illustrative examples taken from my ethnography to demonstrate why particular characteristics were chosen for this group description. The examples given should not be considered exhaustive of the examples that appeared through my research, as these characteristics were certainly supported by multiple interactions and observations throughout the data collection phase.
Crypto Enthusiasts and Blockchain Startups
Locations of Study: Forums, QBIC involvement and events, Hackathon, Ethnography.
- Tend to be involved in at least one project in the space that they will talk to you about
- Typically regard the space as having social, philosophical, and ideological aspects involved
- Decentralization and/or privacy is often a key concern
- Attitude of build, iterate, fail fast, learn and move onto the next iteration or project
- Often have some frame of reference to the technology, though most openly admit when they are learning about a specific blockchain concept that they are not familiar with yet
- Tend to explore concepts with an interdisciplinary perspective — wide variety of educational backgrounds exist in this group
The crypto enthusiast and blockchain startup group is composed of many different people and groups, which makes it difficult to generalize specific characteristics to the group in its entirety. Once again, it is important to note that some individuals and groups may only subscribe to some of the above characteristics, though still may best fit into this group. The additional consideration of sub-groups for later research is also most exemplified within this group.
The blockchain startups inclusion here is also worthy of some discussion, as some may dispute their inclusion here, where they may also be characterized as a business and operating under a pursuit of profit. At the same time, I believe they fit best with the crypto enthusiasts because many of those involved with blockchain startups are crypto enthusiasts themselves, and some of the thoughts and behaviours are then projected onto and into the operations of the startup. I also include them here because they are most often operating directly within the blockchain space, whether using cryptocurrencies, bootstrapping development using an ICO, or looking to expand capabilities within the space and foster adoption. I would also caution against simply slotting all blockchain startups into this group as a default, as some startups may actually meet more of the criteria of the institution and business group and would be more accurately categorized there, though I believe blockchain startups that fit more neatly into the previous group would be in the minority.
The crypto enthusiasts and blockchain startups group is characterized in some ways along the same lines and for the same reasons as have been discussed in terms of ideology and involvement with the technology. This concept is best demonstrated by describing a speaker session at a hackathon where Toufi Saliba of TODA (a blockchain protocol) spoke about some of the things they are doing with the company and their continuing pursuits globally. These were primarily described as rooted in altruism and influencing and creating positive social change. This same thread seemed to be prevalent throughout the conference as evidenced by the different hacker project presentations. Many were focused on ways to take control of, secure, and monetize your own data, facilitate peer to peer rental or purchasing transactions, amongst other uses. In any case, the hackathon simply reinforced many of the characteristics associated with the startup and hacker involvement with blockchain projects — excitement, design-build-iterate mentality, as well as a commitment to community building.
Individuals that fit within this group tend to be informed and excited about the characteristics of many blockchain projects that stand to make substantial shifts in the ways society functions. The concepts of decentralization and privacy or personal liberty both feature heavily in many discussions within this group, and are regularly considered to be integral to the progression of the technology in a socially beneficial way. There are often discussions about how the technology could be leveraged to create social programs or ways of democratizing and horizontally distributing power throughout society in ways that were never feasible or even technically possible in the past. Some examples that emerged in the research included forms of basic income projects, connecting impoverished individuals to educational, medical and economic resources to close gaps in their needs, and establishment of forms of direct democracy. These changes would force substantial shifts in the ways we function as a society, as well as the function and purpose of both the state and the market.
The crypto enthusiast and blockchain startup group also regularly recognizes the importance of and is concerned with fostering adoption and utilization of cryptocurrencies and blockchain technology. One of the ways in which this was made obvious was through the creation process of my Steemit account. Because there is a requirement of Steemit’s STEEM cryptocurrency to create an account on the platform (though it is possible to have this cost covered by Steemit for a single account in exchange for some personal information and a wait time) there are additional services that offer account creation in exchange for other cryptocurrencies instead of information. One site that I found was AnonSteem, a site that states that its “service is designed to protect people who would otherwise be vulnerable if they signed up on Steemit with their social media account” (AnonSteem n.d.). AnonSteem accepts Bitcoin, Litecoin, and STEEM, but they offer a discount for using Litecoin and highlight this using a text box tooltip that reads “Did you know it’s cheaper to pay via LTC? Litecoin is much faster, and has lower transaction fees, thus we reduce the price for LTC payments” (AnonSteem n.d.). This is in stark contrast to the previously discussed shop that instead passed a 10% fee for using bitcoin as a payment method, instead offering a discount for using the blockchain platform that the designer of the website or service supports. This is a clear way of fostering adoption and utilization of blockchains or cryptocurrencies without passing additional risk to the user or customer, and provides both a rationale for the discount as well as information about why the user might want to consider further use of the cryptocurrency.
There was also a question regarding adoption within the semi-structured interviews. The responses to this question provided a clear view that individuals within the space tend to see adoption as one of the keys to the continued success of the technology. A selection of edited quotes from respondents follow:
“Yes, adoption of any technology is required for that tech to have an impact. The people are more important than the tech. The community and culture behind the tech and products are what make them successful or not. The larger the community and the more participants the larger the valuation of any network. This applies to social networks, blockchain networks or telephone networks.”
“Adoption is key and currently the biggest hurdle that blockchain technology faces. Overcoming the hype is a challenge. The abuse from greedy parties is causing some negative reputation to the technology which slows down legitimate use and invites crushing regulation.”
“Adoption is the most important thing, more people need to start using it for demand to increase and also for it to test the unknown, see how big it can scale, watch it break, then fix it. That’s how this technology will advance. A series of breaking, fixing, improving and learning.”
“Adoption is crucial for network effect. And the network effect is a necessary ingredient for a blockchain system because the more people running the protocol, the more decentralized and distributed network validation can occur. Also the more people use a blockchain, the more value it holds.”
“The industrial revolution meant nothing until it became adopted across demographics. The electric revolution was built upon that revolution, then the internet and blockchain follow suit. These revolutions, or technological concepts, meant nothing until adoption began to snowball into all of our society.”
“Adoption will fulfill the promises made by the technology. There are a lot of people in the space working to create a better world using the tech. When we see businesses, individuals, and governments benefiting from Blockchain instead of speculation Blockchain will have succeeded.”
Comparing aspects of the two groups using illustrative examples collected through the research project, it should be evident that there are some very clear differences in the approaches to the blockchain space between the groups. Further research may continue to break down these categorizations into more specifically descriptive sub-groups. For the purposes of this initial exploratory study on the blockchain space however, remaining with two large main groups is still descriptive and clearly illustrative of the engagement of individuals or organizations with the space, their approach toward utilization of the tech, and important characteristics of implementation. It is important to note that the situatedness of the organization or individual’s operations or requirements to operate either internally or externally to the blockchain space also has significant impact on involvement. It is precisely because of the existence of these two groups with distinct practices within the space as well as the aspects of prefigurative political space and decentralization within the blockchain space that early research in the social sciences is sorely needed, as the space changes with each new involvement and project, which then alters the possible futures for the space and the technology. Without research examining these changes as they occur, we may lose some clarity in understanding early development and proliferation of the technology.
References from this section:
AnonSteem. n.d. “AnonSteem”. Retrieved March 27th 2018. (https://anon.steem.network)
Kachulis, Eleni. 2018. Roundtable Summary: Blockchain and Security. The Conference Board of Canada: Custom Report. Ottawa, ON. Innovation, Science and Economic Development Canada. Retrieved May 7th 2018.
