FOCUS: Crowdfunding, Cryptocurrencies and Financial Inclusion – Precarious Innovation

FOCUS: Crowdfunding, Cryptocurrencies and Financial Inclusion – Precarious Innovation

Alexia Maddox

Precariousness drives innovation. For research innovation, the state of precariousness in the higher education environment opens both possibilities for innovation alongside risks and roadblocks for researchers and the research itself. This article is a discussion of the highlights and low lights of running a crowdfunding campaign to support an ethnographic study of cryptocurrency use.

At the time of the crowdfunding campaign, earlier this year in January 2017, I was operating from the academic precariat as a research consultant at RMIT and seeking ways to pump the lifeblood of money into the study. My collaborators in the project, all familiar with innovations in financial technologies, were open to the idea when the invite came through to build a crowdfunding campaign for our Bitcoin use study.

Our team is drawn together through our diverse interests in financial inclusion and socio-technical innovation. Professor Supriya Singh contributes insight into money and financial inclusion. Professor Heather Horst contributes a cross-cultural perspective of mobile money. Dr Greg Adamson contributes 25 years working in digital risk experience and financial technologies. My contribution sits in the area of digital communities, digital frontiers and online activism.

Research ethics for the study had been approved and covered the online-offline approach of participant engagement at cryptocurrency related events, depth interviews and online monitoring and engagement. A story unto itself, the research ethics process for this mixed methods study (deploying digital and place based methods) took six educative months to shepherd through the system. At the end of this process the startup funds for the research had run out and the project was languishing in an unfunded state. An option was to pursue the decentralised funding model of crowdfunding, still a new approach in many universities, including RMIT where the study was being run from.

Through this study, we aim to understand why people use cryptocurrencies such as Bitcoin and what the benefits and risks have been for doing so. We also aim to investigate the mechanisms for trust, security and privacy that are deployed and developed within the community of users. In serendipitous synergy to the research directions the crowdfunding campaign also raised these and other questions.

In taking this pathway, we anticipated that practice of raising the research profile and gaining support from the cryptocurrency movement would contribute towards the research ethos of identifying socially generated solutions for current financial inequalities within both local and global contexts. Simultaneously, we believed that a study of cryptocurrency use was a timely way to consider the rise of decentralised and digital alternative payment systems which tend to gain more appeal during periods of economic instability.

The resulting waves of political backlash from disaffected groups is already evident in countries such as the US, UK and India. Think “Trump”, “Brexit” and economic and political processes such as demonetisation in India. The lead investigator, Professor Supriya Singh, observes that for socially marginalised groups, unstable economic and political conditions create a climate where governments are no longer trusted to keep value in the currency and people turn to alternative monetary forms not only for trade, but as a store of value and investment return. In an uncanny way, the research focus of money and financial inclusion replicated the tensions between the centralised practices of institutions such as universities and banks and the decentralised systems of crowdfunding and cryptocurrencies that are digitally native.

Before I take the deep dive into the crowdfunding campaign I’ll discuss what cryptocurrencies are for the curious. Cryptocurrencies, such as Bitcoin, are a recent socio-technical innovation designed by their developers to disrupt the existing monetary system. These newly emergent digital currencies rely upon a decentralised and open source cryptographic protocol to regulate the manner in which currency can be created and exchanged. They can be described as an electronic cash system that harnesses decentralised networking technologies to enable irreversible payments. Unlike fiat currencies, cryptocurrencies are not the only instance of its kind, given that it is algorithmically generated.

The creation of Bitcoin is attributed to an anonymous group of developers (Nakamoto 2008). Bitcoin is commonly positioned as circumventing the centralised control of the current fiat system and the mediation of the banking system through its nature as a distributed verification system (the blockchain). This distributed verification system is designed to facilitate real-time transfer and transparency through its public access ledger, referred to as the Blockchain.

Over a very short period of time, Bitcoin had gone from a proof-of-concept to being actively traded. Whilst it is characterised by price volatility has recently reached its highest value breaking its previous all-time high of US$1,155 (bitcoin.com). Whilst there are technical limitations to the expansion of cryptocurrencies, it is informative to observe how it performs in comparison to fiat currencies. The following excerpt from the New York Times illustrates the reactionary or opportunistic nature of Bitcoin in response to world economic and political events.

“The price of Bitcoin has been buoyed by increased interest from places like Venezuela, where the local currency has lost much of its value, and India, where the government recently removed the largest cash notes from circulation. More broadly, a tilt toward isolationism that has emerged in American and European politics — highlighted by Donald J. Trump’s election victory — has given a new sheen to a currency that can move between countries with little oversight.” New York Times, Jan 3, 2017

However, governments are not generally a fan of the unregulated movement of money and Bitcoin is working against its reputation stigma as an anonymous currency used by criminals. For example Bitcoin use has been vilified in Indian media as a shady black market operation (India Today, December 2016) and Bitcoin mining operations are reported to be the target of arrests in Venezuela (Redman, February 2017), possibly in response to the exponential adoption rates and growing visibility and draw of the cryptocurrency.

Whilst the above activity has pushed Bitcoin to the forefront, even by November of 2016 I was feeling the pace of time (several months since the ethics had been approved) and the relevance of the cryptocurrency study to current public discussion. I made several moves to bring the study back to life, including moving from a full-time position and back into the academic precariat so that I could make time to do the data collection.

The initiation of the crowdfunding campaign was marked by a series of serendipitous connections through digital exposure. The invitation to develop a crowdfunding campaign came at the same time that I had decided to relaunch the project regardless of its funding status. I was approached by the US based scholarly crowdfunding platform, experiment.com, to join their themed challenge for research into network security related projects. They had found me through a previous publication on research into the social impacts of cryptomarkets.

Because the Bitcoin use study is about a decentralised peer-to-peer payment system, I felt that this worked with the logic of a crowdfunding campaign and could engage the community to support the project as an additional angle. The aim of a crowdfunding campaign being to build relationships with a core group of people and take them with you as you conduct the research.

The subsequent crowdfunding campaign was launched on January the 4th (US time) however it experienced a few initial setbacks and readjustments upon launch. Due to the limited number of network security related research projects that had got themselves off the ground this themed group did not happen and the project ended up being aligned with a poverty and development challenge platform theme. It seems unlikely that people interested in these topics would wander excitedly into the cryptocurrency proposal and make a pledge.

The success possibility of a crowdfunding campaign to support an abstract social concept with a limited run-up time was not likely to be strong, but I thought the process would be a valuable learning experience regardless. True to form, from its early start in the year in January, before the academy awakes, the campaign inexorably stalled its way through institutional resistance and dribbled to a halt with the slow waking of attention within a digital community.

In the development of the campaign proposal, the first set of questions that I had to respond to were about the amount of money reasonably sought and the research activities that could be funded through a crowdfunding campaign. In discussion with the crowdfunding strategist at RMIT, Jonathan O’Donnell, aka one half of the Research Whisperer, the viable sum of donations that are within the probability odds of a successful crowdfunding campaign is around $4000 (AUD).

He enlightened me that this was the estimated viable sum that can be raised by an individual researcher through first and second level personal networks (i.e. close friends and acquaintances). When thinking about how this (daunting) task applied to me, I immediately began wondering how this could work across my networks and within the study context of cryptocurrencies. It was (and remains) unclear if this amount is universal across currencies (AUD, USD, GBP or BTC equivalents) and how this would work when using a US centric platform.

This pondering also raised the question as to whether the crowdfunding platform would support Bitcoin donations. This would be an important community engagement aspect that would be well worth the PR to sort out I thought. In a quick, smart and responsive process, the people behind experiment.com set up a bitcoin wallet where donation pledges could be held. The key issues we had to work through were that Bitcoin transactions are not reversible and that the value of a Bitcoin pledge was likely to change between the time of donation and the time they checked the Bitcoin wallet (once a week).

The second question that came quick smart after defining the viable sum was what activities this sum could fund for an ethnographic project. Whilst social research can be done on the smell of an oily rag, the true cost of the research practice is hidden in the passionate analytical labour of the researcher(s) rather than in the material costs of laboratory equipment. I settled on attempting to quantify the cost of data collection, which is probably the most mundane and uninspiring aspect of research to fund (no baby animals and no awesome webpage providing public health information). I also think that this lack of wow factor and distinct funding product (you give us $, you get this awesome resource/product/experience) hampered the success of the campaign.

In an obvious follow on from this, third question that took me much longer to conceptualise and respond to. What was it that donors would receive for contributing suggested dollar amounts? Whilst I’ve got the enterprising drive, I am still building the entrepreneurial skill set needed to do this effectively. In consultation with community members and other research stakeholders, I decided on providing early releases of research findings in the forms of tailored reports and workshops. The underlying logic for this was best summed by Jonathan in his tweet sharing the link to the project consultation packages and observing the virtuous circle this created between research participants, donors and the research topic

“This is clever. Stakeholders = funders = participants = recipients. Fund @alexiamadd. #CrowdfundResearch” (@researchwhisper, 24th January 2017)

One of the stakeholders in the crowdfunding campaign was the university itself, which had no currently active crowdfunding campaigns under its banner. Being the wave breaker at the university was enlightening, with many keen to see this form of funding approach gain traction, but no university processes in place to facilitate this. Questions this campaign raised for the university included a risk to reputation evaluation and how this evaluation affected the role of the media team in promoting the campaign. Another more basic concern was how and which area would accept and distribute the funding and whether it classified as research funding.

The uncomfortable (for me) decision for who would handle the money should the crowdfunding campaign be successful was that it would be classified as philanthropic funding. This led to the troubling requirement that the university would then require the names and contacts of all donors, in line with their existing business model. I baulked at that, knowing that a) this was a “crowd” were talking about and b) no one had given consent for their details to be passed on to the community. With a privacy conscious group such as those in the cryptographic movement, I didn’t feel that that would be an enticing feature. Because of this, I was happy to see the campaign dribble out into a non-event.

I believe that the campaign failed, in part, due time constraints and institutional factors. These included RMIT working out how it fit in their funding models and timing, both in terms of the academy coming online (with January being a sparse period of the year for engagement of any kind in academia) and the realistic need for a three-month funding raising period in order to more effectively engage and mobilise the research stakeholders.

I believe that the campaign succeeded however in its other goal of establishing a core network of people who were invested in the project and whom I can engage throughout the research practice and conduct. Essentially this campaign did act as a “Trojan horse” where I was able to use it as an alternative way to approach the community and engage their interest in the project. Through this, I could also gently raise the provocation of financial inclusion and turn the combined attention of the community on the possibilities of cryptocurrencies to achieve this.

In an unintended consequence of running this campaign, one of my key learnings was insight into the function and fears of the academy. Upon presenting this crowdfunding experience to a group of researchers at the University of Melbourne, I found the strangest thing. The academic precariat is a substantial proportion of researchers and they fear that crowdfunding signals the changing nature of research funding. Did this make us look desperate to the general public they wondered in response to my presentation? Would centralised funding models be further reduced in response to the utility and application of crowdfunding?

Not one to be driven by fear, I argued that crowdfunding represented a small-scale entrepreneurial act and incentivised the development of relevant skills such as social media engagement and presenting public facing research discussion through short videos. I also provided my well-trotted out example that research needs to reach out and be present in spaces where people go to get everyday information. I use a milk analogy. There are many brands of milk at the supermarket and people choose amongst them. If we do not have our product (scholarly knowledge) on this shelf, people will not engage with or value our contribution of critical and evidence-based dialogue and research insight into social problems.

 

Alexia Maddox is a digital sociologist and Lecturer in Communications at Deakin University in Melbourne, Australia. Her research interests are in digital frontiers and mixed-methods research and her background in sociology has provided a scholarly foundation from which to study the social implications of digital networked technologies, connected communities and social media. Her recent book, ‘Research Methods and Global Online Communities: a case study’ with Routledge presents her approach to mixed-methods research and forms the basis of her study of emerging communities forming through the internet. Alexia’s blog presents project information and research ideas as they unfold.