Can Blockchain and Open Innovation change the way we interact on the web? We met with Prague-based digital startup Crowdholding to discuss

Crowdholding public event at Prague Blockchain Hub, February 2018

Internet is a Babel. As in the Biblical myth, plenty of people from all around the globe contribute to the erection of an unprecedented monument to human civilization. And as in the Biblical myth, they all end up speaking in different, mutually incomprehensible tongues. Here lies the paradox of the web, where everyone has the right and means to express him/herself but few incentives to do it in a cooperative, constructive way. A critical rethinking of how contents are created and circulate on the web has become particularly relevant in the last years, when disinformation, polarization of opinions and cyberbullying have started to regularly occupy the front pages of news outlets. How then can we create a web environment which is clean, proactive and constructive?

You might have heard of crowdfunding, but maybe not of crowdsourcing. They are both built around the same core principle, that a bottom-up approach to problem-solving yields quicker, more innovative and overall better results. While crowdfunding solves problems of financing and access to microcredit, crowdsourcing tries to solve business or innovation problems by getting common people onboard and using their collective resources to provide information, feedbacks and proposals. If you think experts have better skills than the man on the street to create new products, think better, because many crowdsourced projects turned out pretty well. The most famous crowdsourced enterprise is probably the website you and I frequently turn to when being in doubt: Wikipedia.

Internet is a Babel and, as in the Biblical myth, people who thought they could understand each other end up speaking in different, mutually incomprehensible tongues

Crowdsourcing is reshaping the media landscape too. Several mainstream newspapers used crowdsourcing to involve citizens and local sources in finding the information their journalists needed and keeping them updated. This strategy proved to be particularly effective for investigative journalism, with successful stories from Sweden, Finland and the United Kingdom. Letting people participate in the process of the creation of a journalistic investigation, however, posed all but negligible questions about data verification, liability and professional ethic. Particularly telling is the Sunil Tripathi case, where Reddit users started their own investigation to identify the culprits of the Boston marathon bombing. The crowd wrongfully accused Tripathi, an American student gone missing one month before the bombing, as the perpetrator of the attack. They then tried to contact his family and posted threats on his social media accounts. When Tripathi’s body was eventually found, the real culprits had already been apprehended. Yet, in the meantime several news outlets had relied on the information generated by the Reddit crowd to build their stories. What the Tripathi case teaches us is that crowdsourcing can become dysfunctional if the collective creation of contents is too hasty and users don’t face any serious repercussions if the contents they generate prove themselves unreliable, detrimental or misguided.

A possible solution to the problem could be a system of sanctions and rewards, not just moral and reputational, but monetary as well. Here is where Blockchain and the digital currencies come in. The word count prevents me from explaining the mechanism of how cryptocurrencies and blockchain work, so I’ll just assume you’ve familiar at least with the basics of last years’ buzzwords. For our purpose, it’s enough to say that these new technologies allow potentially any crowd on the web to code its own cryptocurrency or token, link it to an existing blockchain to make it valuable and secure, and use it as a currency. The cryptocurrency can then be used to reward users for the quality of the contents they create. Tokens have even more possible applications, since they can be used not only as stores of value, but also as company’s stocks (equity tokens) or access to a service (utility tokens).

Cryptocurrencies and Blockchain technology allow web users to build a community whose contents can be rated and rewarded, giving the incentive to build a cooperative and constuctive environment

By putting together the guiding principles of crowdsourcing and adding to them the blockchain technology to create a reliable system of rewards for the members of your crowd, you’re actually few steps away from creating a web community which not only encourages users to get together in a bottom-up creative process, but also ensures everyone has a strong incentive to be nice to their peers and propose innovative ideas. Someone in Prague realized the potential of this system and tried to apply it to the business world. Founded in July 2016, Crowdholding is a startup where companies can put forward tasks and questions and users can try to provide answers in an open and peer-reviewed way, getting rewarded in tokens for the quality of their feedbacks.

The idea behind Crowdholding came to Ethan Clime (CEO) and Aleks Bozhinov (CMO) after they turned to Reddit to solve a business problem and tried to motivate users by offering a reward for the best answer. “What is innovative about our business model — Clime explains — is that two processes that used to happen in different moments, the gathering of ideas and the selection of the best ones, are now simultaneous. In the screening of contents, both the firm which proposed the task and every user rate everyone’s contribution”. In this way, transparency and reciprocal validation let users build a skill-based reputation which is certified by the rewarding system. Moreover, it is in the users’ interest to keep the community functional and constructive, so as to attract new companies and increase the value of the tokens used to reward their work. In other words, users become stakeholders with an interest in the proper functioning of the platform. “The system seems to work — Bozhinov says — with around 16,500 signed-in users and a rate of active participation around 10%, much higher than that of other platforms such as Reddit”.

Crowdholding is still in the beta phase, “and we plan to stay like that for another 6 months — says Malte Christensen (CSO) — at least until our platform is thoroughly developed.” What will happen when Crowdholding will leave the beta phase, thus, remains an unknown variable: “Crowdholding is trying to bring some humanity and cooperation in a world of cryptocurrencies populated by many speculators (Crowdholding’s utility token, YUP, is pegged to the value of Ethereum, one of the most widely used cryptocurrencies) and we hope we can succeed” Rosario Colletti (CTO) explains.

Transparency and reciprocal validation let users build a skill-based reputation, turning them into stakeholders with an interest in the functioning of the web platforms they belong to

Regardless of what the future of Crowdholding holds, the system it created is based upon principles that look like a promising starting point to ty to experiment new ways of interacting on the internet. “I am confident that crowdsourcing and the process of open innovation we use in our work will eventually spill over into other fields of application — Clime says — and will give unprecedented incentives to information sharing and transparency.” In fact, another startup platform, Steemit.com, is trying to embed a similar mechanism into a social news community; founded in 2016, Steemit has now more than 800,000 users who can post contents, get votes from their peers and gain cryptocurrencies. As Crowdholding, Steemit is in its beta phase, but its experiment is going to be telling of how the future of social network will look like. Both startups feature “a tool that can be integrated in any website — Bozhinov explains — also without the presence of a cryptocurrency: crowdsourcing with a parallel rewarding mechanism of any kind could be easily used, for example, by governments or city administrations to gather proposals on how to improve local communities and the everyday life of their citizens.”

In conclusion, although the cryptocurrency world might look fishy and unclear to you and the startup environment often oozes with an aura of overconfidence about its disruptiveness, they have the undeniable merit of setting the bar of innovation higher and higher. Experimenting with technology that increasingly dominates our lives -blurring the line between the on- and offline activities we perform- is necessary to reveal the risks we need to tackle as well as the opportunities we can seize. You can believe that the for-profit side of the crowdsourcing platforms I’ve written about is a recipe that could and should be extended to other fields of our web interactions, or you can be skeptical about it. However, it remains undeniable that any system which can give us the incentive to be cooperative and keep the internet clean is more than welcome today and tomorrow.

Fabio Parola, Roundtable editor-in-chief, Go Think Initiative