Evaluating Ethics in Blockchain and Cryptocurrency Investments

This post was originally published by Leanne Luce on Medium.

  Image by The Fashion Robot

Image by The Fashion Robot

As new and exciting technologies and business prospects arise in the blue ocean blockchain space, young and experienced investors alike are jumping in for a chance to capitalize on potentially life changing gains. Amidst this frenzy is a blurred vision for the alignment of values and ethics. In an economic system that equates money and power, how can you ensure your investments aren’t supporting human trafficking, warfare, increasing the impacts of global warming, and other activities with explicitly (or even vaguely) dark impacts?

“It’s Gonna Pump”

It seems that we (the community) have too often lost sight of any sense of values in our discussions and evaluations of blockchain-based companies to invest in. Despite educational merit and technical prowess, the most common collective basis for investing in a project that I’ve heard amongst peers is “it’s gonna pump.” Devoid of responsibility or conscience, this single phrase has a high potential for economic and social damage not only in the blockchain system but the industries that are intertwined in its branches.

There’s no inherent problem with investing in a project that is anticipated to see financial gains. There is a problem with a complete failure to understand the potential impact of that proposed project should it succeed.

Your Vote Has an Impact

One of the incredible opportunities in blockchain and cryptocurrency-based projects is the ability to vote. We, as individual contributors, institutional investors, new investors, and retail investors each get to vote with whatever amount of money we can afford for the future we want to see. In this case, we have the ability to vote for projects whose impacts will lay along a spectrum of collateral damage.

Marketing is not Empowerment

If there’s a project that you wouldn’t normally invest in, but they’re pitching it as innovative and empowering just because the blockchain is involved, take a hard second look. Solving a payments processing problem is not equal to creating economic opportunities. Reading a company’s Medium posts about how empowering their platform is does not provide any assurance that they are in fact empowering anyone.

17 Goals for Sustainable Development

Defining ethics might mean something very different to everyone. What I’m referring to with ethics in this context is taking environmental, religious, labor, and social issues into account when making business and investment decisions. The United Nations did a great job identifying goals aligned with this ethical responsibility for communities across the globe. For developing and developed countries alike, they came to an accord of 17 goals for the world we want to live in by 2030. The “17 goals for sustainable development” [1] are the following:

  1. No Poverty
  2. Zero Hunger
  3. Good Health and Well-being
  4. Quality Education
  5. Gender Equality
  6. Clean Water and Sanitation
  7. Affordable and Clean Energy
  8. Decent work and economic growth
  9. Industry, innovation, and infrastructure
  10. Reduce inequalities
  11. Sustainable cities and communities
  12. Responsible consumption and production
  13. Climate action
  14. Life below water
  15. Life on land
  16. Peace, justice, and strong institutions
  17. Partnerships for the goals

I’m not suggesting that we stop investing all together. I’m not suggesting we paralyze ourselves in fear of the wrong decision. What I am suggesting is that we use the goals outlined as a jumping off point to check ourselves. Projects in direct conflict with these goals are probably not projects that we want to invest our money, our vote, and our future in.

The Business Case for Ethics

Ethical investments are increasingly popular in institutional funds. The reason is not just because it makes investors feel better about themselves. In fact, social responsible and sustainable investments yield higher returns and decreases liabilities, according to a paper by Oppenheimer Funds released in 2016. [2]

Businesses have to make decisions based on all kinds of external factors. In an HBR case study on businesses and sustainability, “72% said that climate change presents risks that could significantly impact their operations, revenue, or expenditures.” [3] Concerns around sustainability impact value for every stakeholder in a business from investors to employees.

Communities at Risk

There are so many groups of people who are at risk for being in the sweeps of damage caused by this new wave of investments. Women are especially marginalized in almost every conversation I’ve been a part of involving blockchain and cryptocurrency. I could speak endlessly about the encounters I’ve personally had, but the blockchain community has a diversity problem that isn’t just about women. Large groups of people who are not white, heteronormative men, are being excluded from this industry. [4]

If you do want to know more about some of the incredible women working in blockchain, follow Meltem Demirors’ “Women in Blockchain” posts. [5]

The impact of the projects I’m talking about aren’t just damaging due to a lack of inclusion in their teams. Even well-intentioned projects can be missing critical infrastructure for dealing with bad actors.

Diversity in Discourse

Forums and chats are commonly a source of a valuable knowledge exchange among investors, with a range of people weighing in on a massive influx of projects. Participants in these conversations range from people running hedge funds to casual friends trading information. Taking measures to ensure that the platforms for discourse embody a welcoming tone can also play a critical role. These spaces where people come together for conversation are the breeding grounds for projects, funds, and companies. Leaving people feeling alienated, objectified, or marginalized in these conversations is counter productive. Yet they often do.

Thriving Future Businesses

This is particularly problematic when those being objectified or marginalized make up minority voices. Being sensitive to this can benefit everyone in the conversation. Those minority voices will find refuge in groups that do a better job at hearing them; ultimately those will be the communities that flourish the most long term.

In this innovative and thriving new industry, it might be surprising to find how many of those community conversations evolve into projects, investment funds, and companies. Considering how these casual conversations can evolve successfully into inclusive companies might help provide a framework for improving engagement. Highlighting the importance of building vibrant diverse corporate structures, a study by McKinsey last year reported “Companies in the top quartile for racial and ethnic diversity are 35% more likely to have financial returns above their respective national industry medians.” [6] “Additionally, a 2015 study from Bersin by Deloitte showed that diverse companies had 2.3 times higher cash flow per employee over a three-year period than non-diverse companies did.” [7] These success stories start in the chats and forums you may already be a part of.

A Call for Guidelines

A guideline to help evaluate the ethical practices and potential impacts of a company is in high demand for blockchain projects right now. For those interested in helping to create an accord or guidelines for ethical investing in this space, please comment below or email me at: ethics@shopomura.com

References

[1] http://www.un.org/sustainabledevelopment/sustainable-development-goals/

[2] https://money.usnews.com/investing/articles/2017-01-27/ethical-investing-continues-to-grow

[3] https://hbr.org/2016/10/the-comprehensive-business-case-for-sustainability

[4] https://hackernoon.com/blockchains-diversity-problem-why-women-aren-t-the-only-ones-missing-d6b2f42f126e

[5] https://insights.dcg.co/@Melt_Dem

[6] http://www.mckinsey.com/business-functions/organization/our-insights/why-diversity-matters

[7] http://fortune.com/2017/01/18/leadership-diversity-bottom-line-career-advice/