This has become one of my most popular posts — if you found it useful and informative, please check out the news blog, buy my book — it got good reviews! — or sponsor the site! You can also sign up at the “Get blog posts by email” box at your right!

You may have seen this text pasted repeatedly on your Facebook or Instagram:

Initiative Q is building a new payment network. To get people to adopt it, they’re giving away significant sums of their future currency to early users. They require only name, email, and an invite from an existing user.

Initiative Q is a proposal for a new payment network using a private currency, which they aim to leverage into the “one global currency”.

It’s not a cryptocurrency — but a few people asked me about it, because it has the same smells to it, and they keep comparing themselves to cryptocurrencies. It also shares a lot of bad ideas with cryptos.

There’s no such thing as a get-rich-quick scheme that works — particularly one that badgers you to get in early. And the marketing is entirely pyramid-shaped.

But as far as I can tell, they’re completely sincere! It’s just their ideas that are bad — or don’t actually exist yet.

The people

Initiative Q was founded by Saar Wilf, who has past experience in the payments world — amongst other companies, he founded Fraud Sciences, which he sold to PayPal when it was part of eBay.

The other key participant is Lawrence H. White — an economist at George Mason University, who is heavily into Austrian economics, though he’s not a complete gold bug. White worked out the economics of the Q private currency.

The Q token

The Q token is a centralised private currency issued by Initiative Q. It’s presently worthless, and not exchangeable even on Initiative Q’s own servers — but they aspire to it being used in their nonexistent future payment network. At that point, they intend it to be freely exchangeable with dollars.

Get your pyramids early!

Initiative Q needs many committed users to ensure a meaningful network of buyers and sellers. If a critical mass is not reached, the project may not go forward. Because the rewards are only valuable once the system is functional, it is in everyone’s interest to get others to join.

The marketing is a straight-up pyramid scheme — you need an invitation to join, and then you and the person inviting you get some Q tokens, and you get five invitations in turn.

You are required to complete (unspecified) tasks to get your full Q token reward. They also stress the importance of getting in early — “joining at the very early stages requires real vision and foresight.”

So far it’s just signing up to get their made-up Q tokens — they haven’t asked for actual money, or anything else that’s exchangeable.

The signup process

I click on a friend’s affiliate link, and I get:

Initiative Q is building a social payment system. Join now for free and secure an estimated future value of $142,239

Huge if true! My recruiter verifies my link, and I get mail:

Congratulations! [——] verified your Initiative Q registration. This means you have secured 10% of your potential Q grant! Now for the important part: to reserve an additional 40%, log in to your account and invite the people you care about to reserve their own Qs. You have 96 hours to verify up to 5 friends. Initiative Q will only succeed if many users join. The more people invite their friends, the greater the likelihood of reaching the goal of each Q being worth around one US dollar. Welcome to the future of payments!

The site tells me:

You have 96 hours to invite up to 5 friends and secure an additional Q56,901 Current balance: Q14,225 Out of your possible Q142,252

HURRY HURRY HURRY! I’m told that after recruiting five more users, the next task is to recruit ten more. I think this is enough magic beans for me, thanks.

Worst-case scenarios for your personal data

Initiative Q’s privacy policy is good and respectful — but if they go bust and get sold off for parts to pay the bills, then it will no longer apply.

The signup list collates the following information:

people who think get-rich-quick schemes can work;

people who will get their friends to sign up for a get-rich-quick scheme;

a full network graph of said people.

Any number of disreputable people and companies would throw their hats in the air at getting hold of a database like this. Affinity fraud loves this sort of list of pre-screened suckers.

(This is an example of why a large pile of Personally Identifiable Information is such a dangerous thing.)

Advertising trackers on the Initiative Q site include Facebook and Google Tag Manager — so these ad networks will also have categorised you as someone susceptible to this sort of pitch.

So if you signed up — you’re marked as a prime target for more pitches of this sort in the future.

(And I’d hope they’re storing password hashes, and not the actual plain-text passwords.)

An undertaking of great advantage, but nobody — including us — to know what it is

The Initiative Q payment network concept is hard to critique — because not only does it not exist, they don’t have anything as yet, except the notion of “build a payment network and it’ll be awesome”:

The legacy payment systems we use today are hopelessly obsolete and creaky;

anyone with modern technology could come along and make a better payment system — if only they could get a user base;

the existing providers are just too bogged down and inefficient to keep up with a new upstart along these lines.

So they’re recruiting people with Q tokens as future lottery tickets, so they can get merchants — and, presumably, venture capitalists — on board by saying, “we have this huge number of users.”

But first, they need to get past the problem that none of this exists yet — everything in their pitch is completely imaginary — and they literally don’t have a plan yet.

The other problem is that nobody signed up to use Q as a payment processor — they signed up to get free money. Q still need to build their superior payment network before those people will use it.

Once Q build the payment network, and Q tokens are worth a dollar … they’re in the hole for the millions of Q tokens they’ve handed out — 14,000 Q to anyone with an email address. But I’m sure Q won’t suddenly declare the early tokens aren’t quite worth a dollar, or anything like that.

How could real-world payment networks possibly compete?

The centralised touch-to-pay cash card network was launched in the UK in 2007. It’s so ridiculously convenient that by 2017, it was more popular than actual cash. Most people would call that a success.

That network was launched by the obsolete and ancient banks and credit card providers — it turns out that, in reality, they put quite a lot of effort into keeping up with technology.

The Individual Pubs case study in chapter 7 of Attack of the 50 Foot Blockchain reveals how the payment networks can rapidly add a new protocol — they rent the terminals to the merchants, so they can upgrade them as needed. That’s how they put chip-and-PIN into place in 2006 so quickly.

The claims in Q’s payment pitch are very crypto-like, in that they claim obsolescence of a system they don’t appear to know already does what they’re offering:

“”For example, open your wallet and count how many different cards you have, and how much cash you have to carry around. The technology already exists to replace your wallet with a fast and secure digital payment method.” — if I open my wallet, it’s got a debit card, a credit card and my driver’s licence. I use the debit card as a touch-card for the Tube. If I wanted, I could put the debit card on my phone instead. Many weeks I don’t spend actual cash at all.

“There are many advanced payment technologies and innovations waiting to be deployed. Here are just a few examples: NFC on smartphones instead of a plastic card to authenticate account holders; MFA methods to make payments more secure; AI to reduce fraud; one global currency to eliminate currency exchange fees; digital transactions to make transactions faster, safer, and cheaper.” — all of these are in place right now, if you want them — except the “one global currency”, which is the thing Initiative Q are really trying to launch.

New payment networks do happen — Apple Pay launched in the UK in 2015, and Google Pay in 2016. These use a lot of what’s in the Q pitch — and have succeeded by providing convenient access to established financial institutions with experience in handling payments.

It’s utterly unclear what unsolved problem Q is meant to address. The incumbents have demonstrated their ability to adopt new technologies as absolutely fast as there’s a profitable edge in them — how do you beat that from first principles?

Ideas are cheap. Execution is everything.

The economic pitch: Initiative Q as private central bank

There’s no intrinsic reason for a new and better payment network to have its own private currency. But Q does.

In this regard, it’s comparable to cryptocurrencies — even before the mid-2015 transaction clog, Bitcoin’s merchant use case was negligible. Per chapter 7 of the book, merchants would typically adopt Bitcoin, see no use, and drop it.

As with Bitcoin, the point of evangelising the payment network is to make the currency more valuable — and make “number go up.” The Q-based payment network won’t work unless consumers and merchants accept Q tokens as the dollar-substitutes they aspire to being.

In their economic vision, Initiative Q seriously proposes that their two trillion Q tokens will eventually have $2 trillion of value — bootstrapped by the payment network.

Bitcoin bootstrapped itself up from nothing to thousands of dollars per bitcoin, with its only real market use case being drugs on the darknet. So stranger things have happened.

And, as it turns out, the crypto trading market doesn’t care about decentralisation — Bitcoin-style cryptocurrencies, ICO tokens and centrally-controlled cryptocurrencies like XRP trade in the same markets to the same people. A private currency that’s in a database rather than a blockchain may be just a step further.

There’s no mention of an exchange mechanism for Q tokens, though presumably they’ll be exchangeable for dollars at some point if merchants are ever going to take them.

You’d think a private currency with an M0 narrow-money cash supply of two trillion dollars would need some serious governance — for comparison, M0 for the United Kingdom was estimated at £481 billion as of February 2017. We usually have reserve banks for that sort of thing, with the best economists they can find, and close monitoring and questioning by governments, the press and the public, in the usual democratic manner.

What does a private company offer in this regard?

However, it is extremely important that the money supply only grows in proportion to the growth in the demand to hold Qs, and not for other reasons. For example, governments that printed money with abandon to fund their budgets (and in doing so transferred wealth from the citizens to government accounts by devaluing the citizens’ currency) created hyperinflation, and eventually made their currency worthless.

That is — their pitch to run this stupendously huge private currency is literally the pitch of paranoid Bitcoin conspiracy theorists — with governments as the big threat, and private enterprise as our saviour.

Good thing no private company ever just took everyone’s money and vanished with it. Particularly in the world of virtual digital currencies.

Fortunately, “Initiative Q’s monetary policy will eventually be overseen by a monetary committee that is directly accountable to all Q holders, and independent of the Initiative Q corporate entity.” So that’s nice.

I wonder if your Q token balance will have FDIC-style deposit insurance, like banks do.

Well, just a tiny bit of crypto

I did notice some Ethereum ERC-20 tokens — if you search on “Initiative Q” “Ethereum”, you’ll find, owned by this address:

Initiative Q founder Saar Wilf says: “We did not yet decide what will the backend settlement platform. So in the meantime we registered the ethereum tokens” — so they’re not part of the Q proposal as such, and there’s no ICO or anything.

Summary

Initiative Q appear to be quite sincere, and not crooks.

Their payment network isn’t even a plan yet.

Their economic plan is to do what a central bank does — as a private company, informed by conspiracy theory paranoia rather than experience.

The pyramid-scheme marketing is bad, and creates a toxic dump of personal data.

If you want to sign up for some private company magic beans, hey, why not — but tread carefully.

I wouldn’t invest in this company in a pink fit. Someone probably will, though — the founder has a track record of founding and selling companies.

The idea that there are inefficiencies just lying around to be optimised away is not so plausible when the incumbents already use all the ideas that Initiative Q put forward as future hypotheticals. This goes double when they have nothing for a pitch, except the concept of inefficiencies to optimise.

It’s not impossible they’ll get something up … but pure ideas are near-worthless. The hard part is always execution.

Update, 24 October 2018: Me on BBC Radio about Initiative Q, and Q’s economist on Bitcoin.

Update, 31 October 2018: A response from Initiative Q founder Saar Wilf to this post.