Breaking out of bank with Bitcoin
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Presentation of our paper at SNEE Conference in Mölle, Sweden May 2013, Full paper here: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2263707
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Breaking out of bank with Bitcoin
- 1. Breaking Out of the Bank: Exploring Collective Emergent Institutional Entrepreneurship through Bitcoin Research-in-Progress Robin Teigland, Ph.D. robin.teigland@hhs.se Stockholm School of Economics Tomas Larsson Tomas.larsson@kairosfuture.com Kairos Future Zeynep Yetis zeynep.yetis@hhs.se Stockholm School of Economics Presented at SNEE: The Swedish Network for European Studies in Economics and Business May 2013
- 8. Research Methodology – Multi-method Case Study Social network analysis & Semantic network analysis • Bitcoin Forum (English) • 1.15 mln posts by 21,903 people • 85% all posts / 89% all people • Secondary data • SNS, blogs, websites, etc.
- 9. Formal Organization Bitcoin Foundation • Registered as 501c of US Internal Revenue Code • Bylaws effective July 23, 2012 • Governed by board with five seats – Two seats by Individual member class – Two seats by Corporate member class – One seat by Founding member class • Board member criteria – Individual member in good standing – Any business is conducted openly using real identity – Pass background check for felony conviction “Bitcoin Foundation standardizes, protects and promotes the use of Bitcoin cryptographic money for the benefit of users worldwide.”
- 10. Informal organization 10 Most Active in Forum 5 Bitcoin entrepreneurs 5 anonymous Forum Topics over Time Technical Exchanges Legal
- 13. •Institutional Entrepreneurship literature –Initial insight into how OS communities can act as emergent collective institutional entrepreneurs •OSS literature –Further support for Open Entrepreneurship in OSS, i.e., entrepreneurs are driving force in these communities despite commons-based production (Teigland, Di Gangi, Yetis, 2012) •Social Network literature –Exploration and development of semantic network analysis of large datasets –Multilevel network analysis to come Contribution
- 14. Questions? Thank you for your criticisms and comments! Acknowledgements: A big thanks to Paul Di Gangi for his help in the layout of this PPT: http://www.linkedin.com/in/pmdigangi, and to Claire Ingram of SSE for her help on the legal issues. Full paper can be downloaded here: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2263707
- 15. Robin Teigland robin.teigland@hhs.se www.knowledgenetworking.org www.slideshare.net/eteigland RobinTeigland Photo: Lindholm, Metro Photo: Nordenskiöld Photo: Lindqvist If you love knowledge, set it free…
Editor's Notes
- Photo credit:arstechnica.com/tech-policy/2011/12/bitcoins-comeback-should-western-union-be-afraid/ Full paper here: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2263707 Acknowledgements: A big thanks to Paul Di Gangi for his help in the layout of this PPT: http://www.linkedin.com/in/pmdigangi, and to Claire Ingram of SSE for her help on the legal issues.
- *No central clearing house nor are any financial or other institutions involved in the transactions.*There is a limit to Bitcoin supply (21 million bitcoins) to be reached in 2140. According to Bitcoin supporters, this implies in theory that the system will avoid inflation as well as business cycles stemming from excessive money creation.
- Some actors drive institutional change through their conscious actions; however, the collective efforts of others, while unaware of their contributions, may be just as much of a driving force.
- Jon Matonis, Forbes, Rhetorically, I posed the question: “In fifty years, would you rather own 100 euros, 100 Amazon Coins, or 100 bitcoins?” http://www.forbes.com/sites/jonmatonis/2013/05/20/bitcoin-comes-to-swift/
- November 2009 is the month when the first message to the forum was posted. Therefore, we have the complete forum between day 1 and beginning of Jan 2013.
- The Bitcoin Foundation was founded by seven of the community’s most instrumental individuals, such as Gavin Andresen – a core Bitcoin developer (table 1). The Bitcoin Foundation has been registered under section 501c of the US Internal Revenue Code in Washington, D.C., and its bylaws were effective as of July 23, 2012. The Foundation is governed by a board with five seats split by membership class. Two seats elected by the Individual member class (annual membership costs .23 BTC), two seats by the Corporate member class (five different levels from 9.4 BTC for companies younger than two years and with less than 25 employees to 935.4 BTC for Platinum companies), and one seat by the Founding member class. The Individual member class currently has 426 members (of which 68 are anonymous) while the Corporate member class comprises two platinum and eight silver members (table 2). The Board has established the following requirements for its board members: 1) an Individual member in good standing, 2) any business is conducted openly using their real identity, and 3) they pass a background check for felony conviction.https://github.com/pmlaw/The-Bitcoin-Foundation-Legal-Repo/blob/master/Bylaws/Bylaws_of_The_Bitcoin_Foundation.mdhttps://bitcoinfoundation.org/about/governance
- For this we used the bottom-up approach of semantic analysis whereby the relationship between each Bitcoin forum user's posts and the proper nouns they contain are analyzed. This enables the identification of the topics that people from different parts of the world have discussed within the Bitcoin community during its first four years. The Stanford Log-linear Part-of-Speech Tagger (Toutanovaet al., 2003) was used to automatically assign parts of speech, such as noun, proper noun and verb, to each word in the posts. We then extracted a word list of all the proper nouns posted on the Bitcoin forum.The next step was to conduct a network analysis to map the relations between the proper nouns, which enabled us to determine the social distance between words. To explain, two words have a short social distance if they are often used in posts written by the same individuals, and a long social distance if they are mainly used in posts written by different individuals. In this manner, we were able to determine the distribution of topics across the community or, in other words, the social structure of the discussion in the community (appendix 1).We also conducted a factor analysis to analyze the variation over time among our observed variables, namely the word frequencies of proper nouns. All proper nouns with a frequency of 40 mentions or more in the entire database, totaling 3,296, were used in the analysis. Factor analysis is a statistical method for analyzing interrelationships among observed variables in order to reduce them to a smaller set of underlying variables. In our case, the variation over time of the 3,296 proper nouns hides a lower number of underlying variations. For example, the words "Zhou Tong", "AurumXChange", "Bitcoinica" and several other words related to an investigation into the hackings of Bitcoin trading platforms rose in tandem in July and August 2012, a discussion that is captured by one of the factors. In other words, each factor can be interpreted as a topic discussed by the community and which distribution over time can be examined.We analyzed the 50 factors that explained most of the variance, both in terms of the words that loaded strongly on them and their time profiles to provide an overview of the most important topics discussed on the Bitcoin forum over time. In other words, each date is assigned a value for each factor based on how active the factor is on that date. A high value on a certain date results when there is a high frequency of use on that date of the words that load strongly onto that factor. The distribution for each factor over time sums to zero, meaning that the number on the vertical axes in figures x and y are relative values. Hence the values can be compared across dates within a factor but not between factors. An initial investigation of these 50 factors revealed that 42 (82%) were topics that had a limited degree of activity during a very short time, i.e., led to a sharp spike in activity (e.g., figure 4). However, eight of the 50 (18%) factors were active topics for longer than three months (e.g., figure 5).
- Number 3 - case of exchanges and companies like Coinbase, a Bitcoin transaction platform. It has around 40,000 users performing 30,000 transactions per month (Ludwig, 2013). Coinsetter, a BitcoinForex trading platform, provides traders with leveraged trading and the possibility to short the digital currency (Finberg, 2013).Number 4 - give the examples of Bitcoinica and Mt.Gox lawsuits. Zhou Tong, supposedly a 17-year-old entrepreneur from Singapore, created a Bitcoin trading platform called Bitcoinica, which within six months amassed trading assets of more than USD 1 million in bitcoins. In March 2012, it was hacked and 43,554 Bitcoins or around USD 220,000 were stolen. This happened twice again. Talk about the uproar it caused. Four users of Bitcoinica filed a complaint in San Francisco against Bitcoinica LP. Number 5 - talk about the blacklists of scammer that the community circulate on the forums and how they are actively involved in the forums to keep each other updated. When the community is challenged and still absorbs the shock, the community appears to be strengthened rather than damaged. Therefore, we propose that these instances of fraud, by bonding the community and by flourishing safe businesses around Bitcoin, actually increase Bitcoin’s institutional entrepreneurship potential.