This time last year bitcoin, the world’s leading cryptocurrency, was chugging along nicely, valued at just below $6,000. Fast forward twelve months and the coin, criticised for its volatility and erratic price, sits at… $6,500. Good growth but nothing spectacular. It has increased in value less than the share prices of Paypal, Costco or Microsoft. But looking at year-to-date price changes hides the real story.
On the 12th of November 2017 you could buy one bitcoin for $6,136. From there it climbed. And climbed. And climbed. It broke $10,000 on the 28th of November. One week into December it was valued at $15,000. Ten days later it reached its peak price of $19,783. If you bought a bitcoin just over a month beforehand and sold at the top value, you would have walked away with a profit of over $13,000. For each bitcoin.
But what goes up, must come down. And bitcoin fell with the same speed as it had risen. On Christmas Day 2017, just eight days since its historic high, over $5,000 had been lost. At the beginning of February, it dipped below $10,000. Once the fall stopped, on the 6th of February, one BTC was worth $6,300 – a price nearly identical to the 12th of November when it had started its rocket-like rise.
The crypto-coaster was in full swing. Many people and companies saw the money being made and wanted a piece of the pie. But if bitcoin was too risky to invest in why not sell their own tokens? The Initial Coin Offering (ICO) was seen as faster, cheaper and more disruptive than the Initial Public Offerings it was named after. 2017 was good for ICOs. In January that year, only $19m was raised with the process. But once people caught the crypto-bug the money raised became eye-watering. In December over one and a half billion dollars was raised through token offerings.
ICOs, or token offerings, allow people to buy tokens (often called coins as well), obviously. These tokens can be used to interact with a service or product made by the team behind the ICO. It is a bit like a fairground. You buy 5 tokens at the gate then you can go on 5 rides. Teams used the money raised to deliver their projects. These ranged from a way to rent computing power to a way to pay for escorts that can’t be tracked. Believers spread the good news – token economics was going to change everything.
Civil is one attempt to use token economics to better the world. It set its focus on fixing journalism and news. It promises to build a home for trustworthy, sustainable journalism. Civil launched its own token sale on the 18th of September and it hoped to raise between $8m and $24m. 28 days later, when the sale closed, it had raised only $1.4m. Most of that came from its main investor Consensys, which had also put $5m into the start-up.
The token sale failed for several reasons. Civil is a complex organisation both in how it is structured and what it does. There are two main parts to Civil. The first is Civil Media, the for-profit arm of the company, which will develop tools for newsrooms to use. The second is the Civil Foundation. It is a non-profit and is intended to help newsrooms get set up by giving them grants and support. It will also work with the community to define and enforce ethics standards for newsrooms in the network. Anyone can submit a newsroom for consideration to the community. People can also submit a complaint about unethical behaviour. Both issues will be voted on by the community.
But you only get to do this if you hold CVL, the token Civil was selling. The more tokens you hold the larger your vote is. To submit a complaint or application for a new newsroom would cost $1,000. The winning side of a vote will take this deposit and spread it among those who voted ‘correctly’. However, community decisions can be overruled by the Civil Council, a board set up to oversee the community. In turn, the Council’s decisions can be overturned by the community, though only with a 66.67% vote in favour of doing so. It all gets a bit complicated which led to a poor understanding of what the coin was and what it did. The complexity did not stop there. If you did want to buy into the project you had to jump through a lot of hoops.
There were, by Nieman Lab journalist John Keefe’s count, 44 hoops to jump through. Besides the money you wanted to put into the project, you would need three different online accounts, some browser plugins, identification and patience. A lot of patience. You’d also have to pass a test to demonstrate that you knew what you were doing. Even founders of newsrooms already in the Civil network failed the test. This byzantine process undoubtedly put people off. But Civil put it in place so that it would not attract the regulatory attention of the Securities and Exchange Commission.
The SEC has been cracking down on the wild west world of ICOs after some notable frauds. Many token sales are angering the SEC because they are, essentially, selling securities. Sales of securities must be registered with the regulatory body before being approved. Civil positioned itself as selling a utility token, something that could be used rather than an investment in a company that could increase in value. Trying to avoid becoming a security, the Civil team put off crypto speculators looking to make a return from their investment with rules only allowing future selling of a person’s token only to Civil approved individuals. This dampened interest in the sale.
Crypto-fatigue was in full effect. The market was oversaturated with promises of how the blockchain could fix everything. Civil launched their sale in a bear market which did not help their cause. The big reason, however, why Civil’s token sale failed is that many believe it cannot.
Civil takes the money it has raised, and had hoped to raise with the token sale, and helps set up newsrooms around the world. That is great, but it doesn’t address the fundamental problems facing journalism. Having already ethical journalists abide by a constitution does not provide a solution. Readers will still have to jump around many different sites to get all the news from the Civil Network. Each has a particular focus. If you want to read investigative reporting you have to go one site, coverage of the cannabis industry is siloed somewhere else and you’ll have to visit a third niche newsroom to get reporting on how global affairs is having a local impact. It is a chore to have to read so many different websites to stay up to date.
After the first grant newsrooms have to be self-sustaining. Civil does not give an answer to the question of how journalism will support itself. Subscriptions for niche newsrooms would not be worthwhile in many people’s eyes, especially in a world where you can listen to all the music you want for less than £10 a month. Tipping is a novel idea, but the infrastructure or desire on the consumer side is not there.
News is fragmented. News is expensive. News is not trusted anymore.
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