How blockchain can build communities completely free of hierarchy

This post was co-written by Jordan Odinsky and Mohit Mamoria .

In the past few months, blockchain technology has blown up. While a year ago blockchain was an unknown side note synonymous with Bitcoin, today there are dozens of applications making their way into mainstream media.

To many, blockchain is a foreign concept reserved for computer science junkies and is irrelevant to the average mom and pop, but what many don’t realize is that blockchain is similar to familiar pillar in everyone’s lives: community.

Sometimes, it’s hard to wrap our heads around the statement that ‘blockchain is a new technology’. In a sense it is, for it allows us to build useful applications on top of it, but truly, it is just a group of individuals who follow a certain set of rules that allow them to trust each other. Anyone can play the game if they follow the rules, just like in a community.

Similarly, blockchain is a community of participants across the globe that rally around a similar cause: to provide transparency, trust, and decentralization to the world. As communities and blockchains grow, there are more participants devoting time, resources, and capital to the network, making it more valuable with every user that joins.

In other words, blockchain is like a tribe. Everyone in the tribe knows everything about everyone else. This simple fact allowed members to trust anyone in the tribe. But you may ask, “Tribes eat, sleep, live and hunt together. It is easier to trust members of your own tribe. How can I trust random people I don’t know on the blockchain?”

In blockchain we trust

This is a brilliant question. How can a community of strangers offer us trust? Sounds like a paradox, doesn’t it? The short answer is ‘math.’

Trust is a concept that whole books can be written about. As a species, whom do we trust? Why do we trust family, friends, or business partners? If zeroed down, you’d find that we trust people who have proved their honesty through their actions more than once, and have not betrayed us. As soon as someone backstabs, their thousand honest acts of the past stop counting.

In the simplest form, the only rule of the blockchain community is — ‘whenever you do something important, shout and let everyone know.’ If blockchain was used to power a currency (like Bitcoin), the important action worth announcement would be the act of sending money to another person. As soon as you make an announcement, everyone else record it, thus never allowing you to go back on your statement.

The very act of getting something recorded by thousands of strangers provides the trust. The statements are locked using math in such a manner that no one can ever modify it. The math that is used to lock those statements has proven its honesty for uncountable times in the past and haven’t failed us yet. And due to the way a blockchain functions, even if an individual tries to be dishonest, the math doesn’t allow him/her to be.

In brands we trust

The truth is that for most of us, we do not only trust our communities of friends, family, and business contacts — we also trust our brands. We trust Google with our data, Facebook with our thoughts, JPMorgan Chase with our money, and ultimately the keys to our lives. For decades, corporations have been leveraging our data to power trusted decentralized communities that fuel their customer acquisition and branding strategies. The key to these brand communities is that it’s for the community, by the community. While the corporation isn’t officially tied to these decentralized communities, the central theme remains that the corporation brings together likeminded individuals who are aligned towards common goals.

BMW has built a strong brand synonymous with the word luxury. BMW vehicle owners view themselves as part of a global tribe and exude pride and status as they drive down the freeway. To them, if you aren’t driving a BMW, you’re not driving at all. These drivers rally around the common unwritten doctrine that they are truly different from all other car owners.

BMW’s decentralized community is called the BMW International Riders Association. With over 35,000 members, the community is run totally independant from the corporation and is based on the idea of sharing experiences, ideas, and concepts. The IBMWR is run by elected officials nominated by the general community.

Most companies enjoy some benefits of decentralized communities. By doing a quick search on the popular community platform Meetup, you’ll find that there are nearly 100,000 participants in the Apple Meetup community. While Apple doesn’t manage, oversee, or even play a role in these events, they surely benefit greatly from these for the community, by the community activities that boost their bottom line.

Shifting communities to blockchain

Blockchain shows early but promising signs of powering an entirely new kind of organizations called Decentralized Autonomous Organization. As the name suggests, the organizations will be decentralized (that is, not controlled by a few people) and autonomous (that is, self sufficient in itself). What does that mean in practice?

It means the organization without hierarchy, not even implied, will be possible. And these organizations will allow brands and corporations to officially support (not run) the global communities around their brands. The enterprise will only be responsible to define the constitution of the community and put it in the code. Beyond the constitution, the brand has no role to play; the members powers the community entirely.

The important decisions in the community is not taken by the top of the pyramid (remember, there’s no pyramid like hierarchy) but by everyone. Every proposal gets submitted in the form of a Smart Contract on which everyone can vote. If the threshold defined in the constitution is met, the proposal gets activated for the community. Such contracts can help a community organize meetups, events and get togethers.

Even the contracts to unanimously assign certain responsibilities to an individual is possible. The members vote in to assign a role to an individual but if the person doesn’t fulfill his/her job well (or behave like a total jerk), the votes can be withdrawn, making the role taken away.

Blockchain allows brands to support a community without the efforts that it takes to support one in current times. These decentralized autonomous communities will help organizations do the things that don’t scale at scale.

Predictions for the future

The leverage of trust is the biggest leverage a business can have. It’s only trust that allows us to put our family photos on Facebook, put our money at the hands of PayPal and argue with our friends why we don’t need a headphone jack in our phones anymore. Trust has been a cornerstone on which billion dollar businesses are built.

Businesses of future will not be only about providing value through products or services; they will also be about providing value through the community. Biggest businesses of next decade will also have a powerful tribe evangelising it. Products will be sold not only because of the value they offer but because of the tribe they will provide access to once bought. Along with their products and services, communities powered by blockchain will be the new norm for businesses of the next decade.

That could end up taking shape in a few different ways. Instead of JPMorgan Chase validating wire transfers manually using a limited staff, they’ll be able to verify transactions through the community, saving time and money. Zillow will become a powerhouse in doing real estate transactions over the blockchain weeding out agents, lawyers, banks, and other intermediaries.

Reddit, Facebook, Twitter and other social networks will become the destination where fake news cannot live long because the community hunts down each such news using a public blockchain. SolarCity will have a community of localities, where each such locality has divided itself into the roles of producers and consumers, and trade the solar energy generated using a blockchain.

To sum up, the future of community and blockchain is very bright and we’re excited to see how it unfolds.

If you’re interested in blockchain, and Ethereum in particular, check out our upcoming AMA-like session with Ethereum’s creator Vitalik Buterin: Post your questions here !

SEC sets up a fake ICO to warn naive investors against cryptocurrency scams

The US Securities and Exchange Commission (SEC) has come up with a creative way to educate naive investors against fake initial coin offerings (ICOs) .

On May 16, the government agency announced a brand new cryptocurrency, HoweyCoin, which promises to revolutionize the luxury travel industry. But here is the catch: the project was intentionally depicted as a blatant scam.

The HoweyCoin website is filled with all the signs of a rushed-up ICO that has been devised specially for an exit scam . This includes a white paper that is high on claims and low on product description, a team that cannot be traced on Google or other social media, and unverified testimonials from celebrity supporters.

The ICO website offers exciting discounts as part of the pre-sale as is usual for ICOs, but the moment you try to buy the tokens, you are redirected to investor.gov , and all the fun ends.

The redirected website (which also belongs to the SEC) educates the users about spotting red flags in fraudulent ICOs like HoweyCoin such as celebrity endorsements , claims of high guaranteed returns and regulatory compliance with the SEC , suggesting pump and dump schemes, and asking for investments with credit cards.

SEC Chairman Jay Clayton said in an official press release that the widespread promotion of ICOs as a lucrative investment opportunity has provided fertile ground for bad actors to take advantage of unsuspecting investors:

The concerns over identifying fake ICOs have been rising; after all, launching an ICO is as easy as setting up a website with some high rising claims.

The SEC says that it took them very little time to launch the website with all the content (including the white paper), even though they prepared the whole undertaking in-house.

Indeed, Hollywood insiders (and some less marketing savvy entrepreneurs ) recently resorted to the same tactic for publicity purposes.

Popular HBO series Silicon Valley launched its own fake ICO – and went on to promote it in the real world. Among other things, the marketing initiative included its own website, a listing on Etherscan and Coingecko , as well as an announcement thread on Bitcointalkrg.

Given the ease with which these parody websites can be disguised as legitimate ICOs, it is no wonder that scammers don’t find it much difficult either .

The US government agencies are getting more active in their fight against such cryptocurrency scams. The SEC previously charged the founders of Mayweather and DJ Khaled backed cryptocurrency startup, Centra Tech, with fraud. The three founders were recently indicted in the case by a New York court on May 14.

The US Federal Trade Commission (FTC) will also be hosting a workshop to spread awareness against cryptocurrency scams.

eToro is expanding its cryptocurrency trading operation to the US

Fresh off its $100 million venture round , social trading platform eToro has announced it will be expanding its cryptocurrency operation to the US later this year.

In addition to its foray into the US market, the company revealed it will also be launching its own cryptocurrency exchange desk and a dedicated mobile wallet to store your crypto-assets.

eToro is opening up the onboarding process with a waiting list for anyone interested in its upcoming US-based offerings. This will give users the option to verify their registration prior to the official launch as well as a chance to test out a live demo of the platform.

“Consumers all over the world should have access to the tools they need to participate in cryptocurrency markets, regardless of their expertise. We’re excited to make our platform available to US users,” said eToro CEO and co-founder Yoni Assia. “Within the platform, our US users will find rich knowledge and insights into how to effectively trade and invest in cryptocurrencies.”

Following the addition of EOS to its platform earlier this year, eToro boasts a total of 10 cryptocurrencies on its platform. The list includes: Bitcoin (BTC), Ethereum (ETH), Bitcoin Cash (BCH), Ripple (XRP), Dash (DASH), Litecoin (LTC), Ethereum Classic (ETC), Stellar Lumens (XLM), and NEO (NEO). Once the platform kicks off, all of these will be available for trading to US users.

eToro further notes that it will likely add several more coins to its catalog by the end of the year.

As expected, the company will support its full range of investment tools. For the record, eToro lets users make investments manually (by doing their own research), but it also makes it possible to automatically copy the trading activity of more successful traders or simply invest in a Crypto CopyFund, which spreads your investment across several different cryptocurrencies.

“eToro will continue to focus on simplicity and user-friendliness so that more diverse groups will feel welcomed into the global crypto community,” Assia added. “US crypto holders have a strong appetite for diversified portfolios and we’re committed to offering the best tools and assets to help them manage their investments all in one place.”

The expansion into the US market is an important step for eToro, which already boasts over 10 million users in more than 140 countries, including the UK, Germany, Australia, Switzerland, and Spain.

It remains unclear when eToro will officially make its debut on US soil, but Assia notes that currently the focus is on making sure that the operation is fully compliant with local regulations.