Cryptocurrencies and their potential for large-crowd, cost-effective transactions in peer production
First Monday

Cryptocurrencies and their potential for large-crowd, cost-effective transactions in peer production by Yong Ming Kow



Abstract
Cryptocurrencies — being digitally transmitted and embodied within peer-to-peer infrastructures — may mediate new forms of peer-driven interactions and collaborations among Internet users. In this paper, I performed in-depth interviews of cryptocurrencies’ emerging uses with 16 participants between September 2013 and March 2015. My analysis of how these users have used cryptocurrencies revealed a new feature, large-crowd, cost-effective transactions (trades involving massive numbers of participants), that can drive trades involving massive numbers of participants. Cryptocurrencies, having a peer-driven logical infrastructure, are already known to offer a freer alternate medium for users to customize or automate monetary processes. But the newly identified feature makes it possible for peer producers to organize work payment options involving a large crowd of contributors. This capacity suggests the emergence of many-to-many financial flows in small individual amounts. Taken together, I identify a cluster of temporal and spatial ways that cryptocurrencies remix and automate payment mechanisms and pathways.

Contents

Introduction
Background and related work
Method
Findings
Discussion
Conclusion

 


 

Introduction

The ways in which the Internet could foster money-mediated social relations have long been of interest among researchers (May, 2001; Szabo, 1997). Some of these early ideas are now embodied as forms of cryptocurrencies, sometimes known as digital currencies, as a set of alternative monies that are only transmitted over the Internet, powered by software tools, and rely on peer-to-peer networks of personal computing devices to record and transmit their global transactions (Nakamoto, 2008). Cryptocurrencies are novel because, in comparison with other forms of digital money, they are embodied as digital commodities having properties of information (Bergstra and Weijland, 2014). The peculiar characteristics of cryptocurrencies (as informational commodities running on peer-to-peer networks) may contain potentials for new uses (Nardi, 2015; Penzenstadler, et al., 2015). Yet, there have been few empirical studies examining cryptocurrencies in concrete uses. The literature has largely examined generic features of cryptocurrencies’ technicalities, questionable libertarian origins, misfits with legal and economic frameworks, and security concerns (e.g., money laundering, illicit trades, and online scams) (De Filippi, 2014; Guadamuz and Marsden, 2015; Maurer, et al., 2013; Moore, 2013; Krombholz, et al., 2016). In a previous study, Krombholz, et al. (2016) conducted a survey and categorized Bitcoin uses into generic categories (e.g., donation or online shopping), but we still lack contextual information related to these uses, and particularly how cryptocurrencies may mediate social relations and collaboration among users.

In this study, I performed in-depth interviews of cryptocurrencies’ emerging uses with 16 participants. I adopted the conceptual frame of cryptocurrencies as adaptive and malleable alternatives maintained by peer-to-peer networks of computers in comparison to other forms of money (Maurer, et al., 2013). Through my interviews, I found that these informants are using cryptocurrencies in novel ways to facilitate new forms of online work arrangements. I argue that a key innovation in cryptocurrencies lies in ways peer producers could alter monetary processes to mediate online exchanges which may benefit their communities. I discuss the implications of these findings in the context of peer production.

 

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Background and related work

Cryptocurrencies are a unique form of money. There remain difficulties among different research fields in defining cryptocurrencies uniformly. In this section, I describe what the technology embodies — from a design perspective — by paying close to features that may mediate real world uses. I also discuss its differences with other forms of digital monies, such as the virtual currencies. Finally, I describe peer production as the main form of collaborative work among online communities, and emerging views of how money may mediate this work environment.

Cryptocurrencies as governed by software code

The phrase, “code is law,” was coined by Lessig (2006). The phrase also extends to cryptocurrencies, and captures the way their transactions operate strictly according to rules embedded within software algorithms. The first cryptocurrency system, Bitcoin, was published in 2009 by its pseudonymous founder, Satoshi Nakamoto, to operate on peer-to-peer networks which primarily adhere to coded protocols determined by transnational bodies of open source developers (Nakamoto, 2008). Cryptocurrencies’ transactions are therefore transmitted and broadcast across these peer-to-peer computer networks (Nakamoto, 2008). No institutional intermediaries may be involved in this process, even though a growing number of cryptocurrencies today are being controlled by profit and non-profit organizations (e.g., Wong and Kar, 2016). The ledger that contains all historical transactions (e.g., who owns how many bitcoins and when) is recorded publicly in an open database. Once the cryptocurrency software tool is adopted by a network, the underlying code is all that determines which transactions are permissible and which are not. While it is difficult to overwrite these transactions, it is not impossible, as organizations controlling cryptocurrency networks (often in collaboration with open source developers and network providers) had successful reverse transactions which had major repercussions to cryptocurrency owners (Wong and Kar, 2016). But due to the relative rarity of cryptocurrency developers and network providers altering transactions, cryptocurrencies can largely be understood as being governed by software code (Maurer, et al., 2013; Lustig and Nardi, 2015).

Like other forms of software tools, a cryptocurrency platform, like Bitcoin, does not scrutinize its users. Any transaction that adheres to algorithmic rules, as of now refers mainly to paying transaction fees, is admissible through the network, regardless of background and purposes of the actors (Nakamoto, 2008). For example, cryptocurrencies are sometimes discussed as if they are the same as virtual currencies (e.g., World of Warcraft gold coin and Second Life Linden Dollars), even though there are differences. The most salient difference is that the infrastructure handling virtual currency transactions is connected to a trusted financial institution or company to verify each transaction. But cryptocurrency platforms verify transactions by utilizing a peer-to-peer network of computers, thus eliminating certain needs for trusted third parties (Nakamoto, 2008; Krombholz, et al., 2016). Due to the common lack of involvement of financial institutions in operating these tools, the open source developers had tended to design them more for technical elegance and functionality than to adhere to local monetary policies.

Cryptocurrencies’ transaction fees have so far been kept very low. The Bitcoin system currently charges only about seven cents for every transaction. Fees for a cryptocurrency like Dogecoin can even go as low as one-hundredth of a cent, or virtually negligible. In comparison, PayPal, the currently most popular payment method for interpersonal transactions on the Internet, charges a US$0.30 flat fee plus a 3.9 percent commission for international transactions below US$3,000. As of November 2016, Bitcoin has a global capitalization of US$11.5 billion, while Dogecoin is worth US$24 million in total, and there are about 76 other cryptocurrencies that has more than US$1 million capitalization each. While researchers have questioned the ability for Bitcoin to sustain such low fees for the long term (Guadamuz and Marsden, 2015), there is no shortage of technical solutions among alternate cryptocurrencies (or even using modified implementations of Bitcoin itself) to keep fees low for users (e.g., Poon and Dryja, 2016).

Maurer, et al. [1] rightly note that motivations of many early libertarian supporters of Bitcoin were all “about eliminating the need to trust governments and corporations and about learning to trust the Bitcoin algorithm instead.” A monetary system that is governed by software code has daily use implications, even when its anti-government rhetoric has raised concerns among regulatory bodies (Boehm and Pesch, 2014; De Filippi, 2014). For example, while credit card users typically need to submit detailed personal information to financial institutions before they can own an account, cryptocurrency users only need to download a client software tool before they can use it. Like other peer-to-peer technologies such as the BitTorrent protocol, the software itself only contains logical mechanics that apply the same rules to all users [2]. Thus, cryptocurrencies can operate quite seamlessly and predictably across national boundaries.

Cryptocurrencies as informational commodities

Cryptocurrencies are a form of information. When a user is said to own bitcoins, he simply possesses a unique alphanumeric key, roughly 64 characters long, which can be used to cryptographically prove that she is the owner of certain bitcoins, as publicly verifiable through the public ledger. As such, cryptocurrencies have no physical form; what she owns are, in essence, digital representations. Therefore, when one user transfers cryptocurrencies to another user, only information has been transferred between them.

However, cryptocurrencies have one distinct difference from the usual type of information. Particularly in the field of economics, information has been discussed as a non-rivalry type of goods; that is, having one user consuming a piece of information does not make the original disappear (Benkler, 2006). We know that by forwarding an e-mail message to someone else, it does not make our current copy disappear. This property was featured in the axiom, “Information wants to be free,” which refers to the low cost of copying and transmitting information but also emphasizes how its low replication costs do not belittle the importance of information (Doctorow, 2014). However, cryptocurrencies cannot be replicated like most other information. Within the same peer-to-peer network, a user will lose any cryptocurrency that is sent to another user. As such, its quantity is limited, which makes it a type of rivalry or non-replicable goods. In specific terms, this rivalry characteristic of a cryptocurrency (i.e., no duplication of a transaction) is maintained by the way peer-to-peer computers verify and synchronize transactions on the shared public ledger.

Due to cryptocurrencies embodying characteristics of both information and commodities, Bergstra and Weijland (2014) call them a money-like informational commodity. To Bergstra and Weijland (2014), cryptocurrencies are first and foremost informational commodity, or “private information which is owned by an individual” [3]. While confidential information of individuals and companies are also forms of informational commodity, cryptocurrencies can be exchanged in marketplaces, thus giving them money-like characteristics (Bergstra and Weijland, 2014).

Peer production, online communities, and monies

Cryptocurrencies are not just information (as in data structure) but a commodified data structure that exists only on the Internet. Such forms of money can be transmitted across distance quickly, with few barriers as well as at low cost, with no precedence in the history of money. Therefore, could it be used to motivate modes of exchanges on the Internet, so as to monetize contributions of peer producers such as open source developers, digital artisans, and other content contributors?

Peer production is a worker-driven collaborative work structure among online community participants to produce digital artifacts that are non-proprietary (Benkler, 2006). The most fundamental aspects of peer production is how resources (or commons) within these communities are often freely shared among members. Communities do not own properties (Benkler, 2006). This open-sharing aspect of peer production contrasts with companies, in which properties are held by one or a few legal entities and are to be traded when economic conditions are fulfilled. The term peer production refers to a mode of producing goods and services in which production goals are determined by workers themselves, instead of being mandated by institutional management (Benkler, 2006). An example of institutional mandate is the way corporate employees are given specific job scope, and often have to come into the office at specific work days and times.

If peer production tends to keep information non-proprietary, would online communities still benefit from adopting forms of money as work mediators? The production community literature discusses money use within these communities, but only generally and within limited cases, such as in crowdsourcing and crowdfunding (Kraut and Resnick, 2012). In other studies, peer production had largely been described as free labor (Benkler, 2006; Preece, 2002; Rheingold, 2000). There are also commercially supported production communities (e.g., Amazon and eBay), even though most of their profits are channeled to the corporate owners than to the peer producers. More recent works have begun to provide situated and grounded arguments how peer producers should obtain more benefits from better designed money-mediated work models which help to defray the workers’ living and operating expenses (Doctorow, 2014; Kamp, 2014; Lanier, 2014). For example, these researchers contend that one reason why we have not seen such money-mediated peer production may be that there was no effective way on the Internet to make small payments to large number of global contributors (May, 2001). Today, although virtual currencies have been offering low-cost and convenient payment options within national and institutional boundaries, these options are still locally bounded and restrictive (i.e., most other digital monies can only be used freely within a country). “You can’t eat cyberspace,” remarked Tim May [4], a cryptographer and cypherpunk, who commented on how leading thinkers and writers on the Internet were unable to derive consistent remuneration for their work.

To challenge the “free information” assumption, Cory Doctorow (2014) argues that creative works have always been supported by “donations,” “tips,” or “pay what you want” models, which are incompatible with payment models being offered by today’s marketplaces (e.g., Amazon, Apple Store). Similarly, Lanier (2014) argues that peer producers suffer in the current creative ecosystems by largely giving out their contents for free. An example he cites is YouTube, in which only a very small number of the most accomplished contributors are paid (Lanier, 2014). More generally, he questions the way that the monetization of peer-produced content on the Internet is centralized within only a handful of companies:

An amazing number of people offer an amazing amount of value over networks. But the lion’s share of wealth now flows to those who aggregate and route those offerings, rather than those who provide the “raw materials.”

Benkler (2006) rightly describes peer production as a commons-based activity. Communities, by law, do not and could not own properties (Benkler, 2006). But on the other hand, peer producers themselves could, and may, benefit from having a compatible monetary system that supports their valuable contributions (Doctorow, 2014; Lanier, 2014; May, 2001). Peer producers who can receive regular sustenance may be able to invest more time and effort in media production to further benefit their communities. Thus, a relevant question is how can this system be operationalized? What roles may cryptocurrencies play for these peer producers?

 

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Method

I performed in-depth interviews with 16 cryptocurrency participants between September 2013 and March 2015. These interviews were conducted as part of a participant observation study. In this study, I engaged the cryptocurrency communities that were publicized on social media platforms, that is, Meetup.com and Facebook in Hong Kong, Singapore, and Baltimore in the U.S. It is perhaps important to note that cryptocurrency communities have developed significantly since Bitcoin’s publication in 2009. The earliest participants (mostly libertarians) gathered at the Bitcoin Forum (bitcoin.org). On the other hand, the communities at Meetup.com and Facebook represent a newer generation of community participants (Hong Kong’s Meetup group was founded in July 2012), which consisted of only a few libertarians and a majority of startup companies and investors.

I engaged the community by participating in casual meetings at bars, seminars, and a conference. At these events, I participated in informal discussions with attendees and developed personal contacts with these informants. As a consequence of a regular direct and personal engagement, I was able to add a number of these core participants into my personal Facebook contacts as well as on instant messaging platforms like Skype. Eventually, 16 of my interviewees were recruited through these social events, while two were personal referrals by my informants (i.e., snowball sampling). As a result of this sampling method, our informants comprised mostly entrepreneurs, bankers, incubators, and technology hobbyists. Fifteen of these informants are male with only one being female. Seven of these interviewees were residents of Hong Kong, five of Singapore, and four of the U.S. These interviewees started using one or more kinds of cryptocurrencies between 2011 and 2013.

Each interview lasted about an hour, and was conducted in an open-ended format. Eight interviews took place in-person at a pre-agreed public space (e.g., at a café or during Meetup meetings), while six took place on Skype. In these interviews, I asked key questions such as: How did you come across cryptocurrencies? Have you used any cryptocurrencies? If so, for what purpose? What are you working on that is related to cryptocurrencies? In the interviews, I allowed interviewees room to express their own opinions, even those I did not ask for. This has the benefit of detecting native themes within the interviewees’ narratives. These interviews were audio-recorded and transcribed. After each interview, the transcripts are analyzed through memoing and coding to analyze emerging themes. At the end of the interviews, I performed axial coding to identify major contexts and interactions involving cryptocurrency use that are presented in this paper. All interviewees’ names in this paper are anonymized.

 

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Findings

In this section, I detail how cryptocurrencies allow unforeseen exchange relationships, freely amplifying remote, distributed, and intersecting communities to collaborate in modes that defy the contemporary hub logic of traditional monetary systems.

A peer producer offering services on the Internet

Cryptocurrency users perform digital services for their communities. They often volunteer initially, but were subsequently reimbursed through voluntary donations by other participants, or by the site owners.

Gerald, a 20-year-old hacker from Canada and co-founder of a renowned bitcoin news and information site, encountered Bitcoin in early 2011 while he was a college student at the University of Waterloo. Gerald’s entry into bitcoin use also came through providing services for Web sites, even though he had gone further by offering personal services to a Bitcoin online forum community:

I started looking for basically bitcoin jobs on the forums, and the first thing I found was a guy who was running a Bitcoin blog called Bitcoin News, and he was paying people five BTCs per article and I started writing for him. I was earning about US$1.30 an hour [laughter] and I did that. Eventually the blog ran out of money. So I invented this business model where I would write two articles a week, and I would publish the first paragraph of each one on a forum and put a bitcoin address, and it would say, “I am keeping the rest of the articles for myself for now. If you can send five bitcoins to the address, or if the community sends five bitcoins to the address, I will release the rest of the articles ... .” Then after that, [a community member] contacted me about starting a magazine and then [the news site] started from there.

Gerald made an alteration to the simple working-for-a-business-owner model by offering the same services but for an online community. With his original “employer” gone, he continued to write articles for the community. But he altered the payment process slightly so that he would withhold the content until community members could put together a token sum of money. Since bitcoins are payable in very small amounts, dozens of community members contributed to his work. Gerald, as a computer science student, wrote several popular articles including thoughtful user interface critique of Bitcoin payment systems.

Tyler was a 16-year-old high school student in Hong Kong. He had been learning about the Bitcoin system for more than two years. In addition, he had learned HTML, PHP, Javascript, and CSS programming for a few years. First, he learned basic programming through Scratch, a programming language for young learners developed by MIT, and then through self-directed practice on the Internet. When I asked Tyler about his participation in Bitcoin-related communities, he said that he had rarely participated actively. However, he had been developing relationships with some Web site owners by applying his programming skills to improve these sites that he had visited:

I met those guys in ... a Chinese gambling site ... The site was crappy. I made some codes, like some modifying codes, or some charting codes. I had the experience. People appreciated my work, and they know my ability, and there goes the relationships. The last project I’m working for a site called BTC123.com ... he handed me what he would like me to do, and I start coding on it. He gave me [a few bitcoins].

I asked Tyler further about his thoughts on literally working for Web sites — which was his sense of “participation” on the Internet. Tyler replied that being a developer, even as young as he was, the ability to make money is an important motivation to program:

Since I’m a Web developer, I’ve been thinking for some ways to get myself some profits for my Web site, because if I code and ... no one pays for it, why should I code?

Tyler was unwilling to contribute for free as reported by the dominant peer production rhetoric; instead, he was looking for a return for his time spent coding — even for something he did out of free will. The liberal design of cryptocurrency protocols has allowed young users, like Tyler, to conduct trades without being immediately subjected to social rules and regulations. This design permits these transnational actors — common in production communities — to conduct contentious, but nonetheless legitimate trades on the Internet.

A community working for another community

Some communities have also raised large quantities of small donations from their global participants to support collaboration with other communities.

When we think of marketing, corporations are nearly always the primary actors. However, some cryptocurrency communities have been able to mobilize members to pay external companies and associations for marketing services. The Bitcoin StarCraft Challenge, held on 21 December 2013, was a one-time electronic sporting event that featured professional gamers from the online game StarCraft II. The Bitcoin community put together about US$10,000 worth of bitcoins to support that event.

Due to the success of the Bitcoin StarCraft Challenge event, the Bitcoin community subsequently decided to award long-term sponsorship to Team Axiom so that the Bitcoin community’s logo would be showcased on the team’s Web site for a longer period of time. I interviewed Team Axiom’s content manager, Jennifer:

When we initially announced our sponsorship with the Bitcoin community, there were a lot of, eh ... “What?!,” like kind of surprising and confusion like “how can you be sponsored by a community” and things like that. The Bitcoin community, apart from being interested in StarCraft, they are also interested in DOTA 2 ... their sponsorship of StarCraft is like testing the water to see ... what kind of a reach they could get with our team.

The case of an online community (of Bitcoin) sponsoring another (of StarCraft) was unprecedented to the StarCraft players. The relationship between Team Axiom and the Bitcoin community rests on both communities benefitting through collaborative relationships mediated not by shared practices, but by a cryptocurrency.

With the use of cryptocurrencies, formal organizations may also approach online communities for help in terms of funding needs. An emerging practice but currently isolated to cryptocurrency companies is the raising of corporate startup funds by appealing to cryptocurrency owners. Usually, bootstrapped technology companies take the route of finding incubators and venture capitalists to fund their businesses. But among our informants, Tyler, the 16-year-old Web developer, learned that he could invest his newly earned bitcoins in bitcoin-related companies:

Most of my [bitcoin] is put into some investments, like Just-Dice [an online gambling site]. I trust their [security] approaches ... and they can generate some profits over time.

The “stocks” of these technology companies are commonly sold in many of the emerging sites such as Havelock Investments (havelockinvestments.com) and Crypto::Stocks (cryptostocks.com, no longer online). Some of these projects pay dividends (in cryptocurrency) like regular stocks. While the reliability of such investment platforms remains a valid questioned, these uses highlighted cryptocurrency features in supporting community to community monetary relations.

Exchanging resources in a seamless and more flexible transnational environment

In some cases, cryptocurrency had allowed participants to pay each other without concern about uneven monetary regulations across different regions.

My informant, Tyler, has also been using Bitcoin to make online purchases:

I don’t have a credit card, [and] my fiat money is held by my mom and dad in bank account. [With a credit card] you have to verify your identity before you spend the money to some merchants, so Bitcoin is the only way for me to buy stuff online.

Tyler found that it is easier spending bitcoins since PayPal and credit cards have imposed age constraints on their uses. His bank accounts, which contained years of accumulated allowances given by family members and relatives, were primarily controlled by his parents. But interestingly, though his parents had regulated the use of his fiat currency savings, Tyler is allowed to freely manage his own bitcoins. Tyler explained that his father, an ex-engineer from Motorola, had encouraged his technical interests. “Try anything, but don’t mess up with your academic life,” Tyler told informed me of his father’s opinion.

Peter, an American entrepreneur and business owner from Ohio, operated a company which he described as a “software bug marketplace.” Peter’s clients are mostly from developed countries like the U.S., Canada, Western Europe, and Australia. These clients would agree on a price for every bug Peter could find. In turn, Peter would crowdsource these bug-finding tasks to thousands of testers distributed internationally. Each tester would receive their monthly payment depending on the number of bugs that they identified.

In Peter’s attempt to develop a transnational crowdsourcing platform, he made use of PayPal as the main medium of paying testers. However, he encountered issues paying some of his testers:

We generally use PayPal, and that’s turned out to be a problem in many countries. For example, mainland China doesn’t allow foreign currency transactions via PayPal. Then other countries blocked a developer [for] a few months, usually it’s tax-related [issue]. If you have someone in a place that has done work for you, I feel like they deserve to be paid whether or not their government says they should get paid. They work for me, so we owe them money. [So] we started offering a bitcoin payout option, I think it was a little over a year ago ... [our testers] can choose either PayPal or they can choose Bitcoin [system] for the payment.

The Bitcoin payment option that Peter has offered to his testers is new. Peter shared with us that its take-up rate is still low. Peter rationalized that this is probably due to PayPal’s dominance in the payment market. Most of his current participants are already located in affluent countries where setting up PayPal is easy. But he wanted all his testers to be treated fairly. “We would love to see more people take it ... It’s good to have competition in different payment methods,” Peter told us in the interview.

Another case that exists in the transnational environment is that of donation, which consists most of the reported use case in a previous survey (Krombholz, et al., 2016). Francis, a 31-year-old French entrepreneur, is developing a transnational gateway that allows non-profits to seek donations from global donors:

The goal of [charity site] is to list the charities and to allow small charities in different countries to receive small donations from abroad. For instance, if you’re a small charity in Vietnam, it will be very difficult to receive donations from the U.S., for instance. Because if someone sent a donation to you from the U.S., he is going to pay 15 or 20 USD of banking fees. So unless you’re giving like a hundred or a thousand USD to this charity, your donation will be not worth it. So I think in this field Bitcoin has a real interest, because anyone in the world can send a few cents or a few USD to any charity across the globe.

While sending bitcoins is not free, its fees are making it possible for donors to donate smaller amounts than they would with other payment media. Developers like Francis saw this as an opportunity for non-profit organizations to expand their pools of donors.

More recently, many new cryptocurrency projects are developing automated software systems that run on cryptocurrency networks (see Szabo, 1997). One such project, known as Ethereum, has raised US$18 million in development funds from cryptocurrency users in 2014 (see blog.ethereum.org). In Ethereum, its lead developer, Vitalik Buterin, and his team of 30 hackers are developing a cryptocurrency platform that was designed so that software developers could manipulate and extend the flexibility of how money is being transmitted among its users. For example, Etheruem could host automated programs that allow users to pay a fee (i.e., in a cryptocurrency) to store data in its network cloud. The fee would be automatically redistributed in small fractions to pay dozens of network contributors for providing the bandwidth and storage spaces. While tools like these are still at an early stage of development, their emergence is of interest to us primarily as software improvisations for altering the monetary pathways and thus enabling new forms of money-mediated large-crowd collaborations to take place cost-effectively on the Internet.

 

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Discussion

From these findings, cryptocurrencies, as informational commodities running on peer-to-peer networks, may contain some potential implications for social practices of cryptocurrency users and online communities. First, I will discuss the generalized features of cryptocurrencies in use, and then their possible relevance to peer production.

Feature one: Peer-driven logical infrastructure

A well-known feature of cryptocurrencies is their peer-driven logical infrastructures, which refer to their ability to transact payments across countries and localities without immediate need to adhere to specific local regulatory requirements. Peter, who crowdsourced his clients’ needs to a community of global workers, appreciated the Bitcoin system for the ability it provides to promptly pay anyone anywhere.

Here, the term peer-driven does not just imply the ease of sending cryptocurrencies across national borders, but also how its uses in these contexts could align monetary processes with users’ intents and desires — even when they deviate from standards of institutions and cultural norms. But a major concern for cryptocurrency use is that these users also harbor intents of illicit trading (De Filippi, 2014). Such concerns may forestall cryptocurrencies’ development due to users’ fear of legal complications. This is a complex problem concerning financial regulations across countries that require further research studies to resolve (De Filippi, 2014; Moore, 2013).

On the positive side, cryptocurrency users are able to make use of a relatively liberal software tool to initiate trade with a presumed innocence of their intents. A liberal interpretation of logic of a monetary system may be useful for users who have identified gaps in online trades and services, but found that regular forms of payments cannot meet their needs. In the case of Tyler, he could use bitcoins to make Internet purchases even though he was not old enough to use a credit card. Tyler was right in this regard, as his parents had no objection to his Bitcoin activities. Likewise, despite his age, Tyler could offer programming services to anyone on the Internet, thus developing business relationships based on proven competency and expertise instead of on social identity. Thus, a cryptocurrency can mediate the inversion of the conventional dynamics of social currency (i.e., free sharing), and suggests to its participants a monetary exchange model in which a producer’s competency increases in importance.

Feature two: Large-crowd, cost-effective transactions

These informants often mentioned that current media like PayPal are not viable for transaction amounts less than a dollar. The very low transaction fees of cryptocurrencies prompted participants to collect payments for work from a large number of participants. In real-world neighborhoods, artisanship has often been sustained through voluntary donations and tipping from a community audience; but this practice could not be cost-effectively performed on the Internet. The Bitcoin community could support the Bitcoin Starcraft Challenge by collecting bitcoins online from large number of global contributors.

According to Benkler (2006), transaction costs consist of not just dollars and cents; they also need to account for the human efforts needed to predetermine prices. An advantage of cryptocurrencies being open source and non-restrictive, is that end users could quite cheaply and pervasively personalize these transaction rules (see Kallinikos, 2006). For example, a user could designate a good as “pay what you want,” thus aligning closely with existing models within the creative industry (Doctorow, 2014). These opportunities are being materialized by projects, such as Ethereum, to automate part of online monetary transactions, or even drastically expand traditionally perceived functions of money (see Szabo, 1997). At present, cryptocurrency-based systems are already available to distribute nanopayments to users who contribute computing power to process their peer-to-peer transactions (see ghash.io).

Emerging potentials for peer production

These two cryptocurrency features, when put together, may mediate new forms of online relationships between peer producers, online communities, and companies. Cryptocurrency communities in need of resources they cannot produce have bought them from other companies or from their participants. These communities had also paid for services of their participants. While Gerald started out working for a company as a writer, he subsequently worked directly for the Bitcoin community through the use of a cryptocurrency. These exchanges are currently straightforward in nature; but as community members gain experience with such exchanges, more complex forms of collaboration may emerge.

Whether it is trading between a community and a company, or between a community and its users, the idea of paid labor in a production community context appears to violate the voluntary climate and sense of non-monetary exchange commonly reported in the literature (Preece, 2002; Rheingold, 2000). In a voluntary and peer-driven community, participants are said to be driven by common interests, rewarded through reputation, and legitimated through peripheral participation (Preece, 2002; Rheingold, 2000). But in my cases, products that were bought by a community (e.g., a StarCraft team helping to publicize Bitcoin) were still added to the community’s commons — an important underpinning of the peer production structure. These cases also reaffirm online communities’ non-jurisdictional nature, which is that these organizations cannot own properties (Kallinikos, 2006). The fundamental feature of production communities as social groups with shared commons, and not legally-assigned properties, is not violated. Also in these cases, none of the examples violated the peer-driven principle in which participants are masters of their own production goals. Gerald had written his online articles before he would share them with the community. The paid labor which Peter sought was crowdsourced, rather than hierarchically assigned, to his workers.

The use of cryptocurrencies by online communities does not alter their fundamental structure. Examples such as those of Gerald seeking community sponsorship of his articles, and eventually a software development work, also fall in line with Doctorow’s suggestions that creative works based on non-proprietary information would benefit from modified payment models that include community members providing unconditional and post hoc monetary contributions (i.e., donation, tipping, and grants) (Doctorow, 2014). When peer producers get paid sufficiently, their agency to engage in self-directed production work may become more sustainable over the long term (Lanier, 2014).

 

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Conclusion

The main contribution of this paper is to describe two features of cryptocurrencies — peer-driven logical infrastructure and large-crowd cost-effective transactions — and how they may mediate new forms of work practices among peer producers. This finding extends earlier works arguing that software tools are malleable informational artifacts that, in the hands of end users, could potentially disrupt social relations and work practices previously centered around institutions (Kallinikos, 2006; Nardi and Kallinikos, 2007). Similar conclusions extend into cryptocurrency uses. Developers of cryptocurrencies may remix different monetary pathways and automated processes to introduce new forms of payments; not to mention enhancing users’ agency — making personal decisions to pay to-whom, to-where, and how much (or how little) — to self-determine contributions to worthy peer producers. These monetary pathways and possibilities reorder and redistribute payment ecosystems to fit the users’ and communities’ own needs [5]. End of article

 

About the author

Yong Ming Kow is a social computing scientist in the field of human-computer interaction. His research focuses on studies of community cultures around media design and development as informed by ethnography. In particular, he is investigating collaborative work and practices within research areas including computer games, peer collaboration, digital youth, and novel uses of media artifacts. An example of his contributions includes a First Monday special issue discussing user creativity and governance on the Internet (at http://firstmonday.org/ojs/index.php/fm/issue/view/312). Yong Ming is currently an Assistant Professor at the School of Creative Media, City University of Hong Kong.
E-mail: yongmkow [at] cityu [dot] edu [dot] hk

 

Acknowledgements

I thank all the informants for their time sharing with me their valuable knowledge and experiences. I also thank the reviewers for identifying issues in earlier versions of this paper. Special thanks to David Jhave Johnston for proposing the term “large-crowd cost effective transaction” in this paper. The work described in this paper was partially supported by a grant from the Research Grants Council of the Hong Kong Special Administrative Region, China (Project No. CityU 11608515).

 

Notes

1. Maurer, et al., 2013, p. 14.

2. See Benkler, 2006, p. 412.

3. Bergstra and Weijland, 2014, p. 16.

4. May, 2001, p. 73.

5. With the caveat that as these modes of exchanges arise without intermediaries or deflections through conventional monetary apparatuses, these structures constitute an evolving sociotechnical reconfiguration of exchange models. Thus, the implications of this development remain nascent, emergent, and unpredictable.

 

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Editorial history

Received 24 February 2016; revised 10 November 2016; accepted 14 July 2017.


Creative Commons License
This paper is licensed under a Creative Commons Attribution 4.0 International License.

Cryptocurrencies and their potential for large-crowd, cost-effective transactions in peer production
by Yong Ming Kow.
First Monday, Volume 22, Number 8 - 7 August 2017
http://firstmonday.org/ojs/index.php/fm/article/view/6617/6512
doi: http://dx.doi.org/10.5210/fm.v22i18.6617





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