In 2013, the digital anthropologist Lui Smyth conducted a survey of the most common uses of bitcoin.
He found bitcoin was used to buy web services, software, hardware, gambling services, and (in the heyday of the Silk Road) narcotics. Topping the list though, when measured in terms of the number of transactions, was tipping and donations.
The public block chain provides much anecdotal evidence for this. All one needs to do is search the tipping addresses of people or groups who openly advertise that they take bitcoin tips.
Here, for example, are tipping accounts for Adam B Levine and Stephanie Murphy of the popular Let's Talk Bitcoin show. Libertarian activist Adam Kokesh has received a significant number of donations via his Youtube channel. And here is Wikileaks, the open-source software producer VideoLAN, and the anarchist magazine Strike!.
I have even received one bitcoin tip and a few dogecoin tips for my own blog (indeed, the dogecoin community appears to have a particularly generous heart when it comes to supporting underdogs like the Jamaican Bobsleigh team). This donation culture has also taken off in forums like reddit, where tools like BitcoinTip allow redditors to send each other tokens of appreciation for thoughtful comments.
This use of cryptocurrency for small acts of generosity may seem unusual to those who associate bitcoin with self-interested profit-seeking speculation, but it points to the emergence of a promising cryptocurrency gift economy.
What is a gift economy?
The best way to illustrate a gift economy transaction is to think about a street busker who sets up on the sidewalk and proceeds to give something to society.
“The air-conditioned Silicon Valley conferences seem a million miles away from the gritty reality of the rest of the world.”
The busker does not expect anything back from any particular person who walks past, but the fact that they leave a hat out for tips shows that they hope that in general some people will be inspired to give back to them.
In 2001 I experienced this first hand when I busked on the New York subway. It differs from normal economic exchange, where a service is offered only to a particular person who completes the transaction with a particular payment.
It also differs from a pure gift, where we hand something over to a particular person without expecting anything back. In busking, a service is freely given to many but voluntarily paid for by only some.
At its heart then, such exchange relies on a different notion of the economic individual, not one who acts in their narrow self-interest, but one who is motivated to act even when they do not have to. It has much in common with the Buddhist notion of Karma – I give something and have faith that it will come back.
Why cryptocurrencies suit online gift economies
So why might cryptocurrencies be ideal for online donations and tipping?
Firstly, they are easy to use. Bloggers engage in the Internet version of busking when they request donations for pieces they write. If I enjoy a blog post though, I do not want to have to enter into a complicated process to donate to the writer. I need the digital equivalent of flipping someone a coin as I walk past them, and cryptocurrency is ideal for that.
There is also something very personal about choosing to give money to an online busker when you are not contractually obliged to do so, and this type of transaction does not lend itself to formal third-party payment providers. Bloggers frequently do set up Paypal donate buttons on their sites, but the third-party adds a layer of formality to something that is intrinsically informal.
Cryptocurrencies, on the other hand, have a naturally informal feel to them, a bit like loose change in your pocket. Their anonymous nature adds to this. When you send a Paypal donation, your identity becomes known to the person receiving it. As the transaction becomes formally recorded, the act can become more contrived, like when a wealthy person donates to a public building to get their name plastered on it.
Hiding identity can be associated with a lack of trust, but equally it can stand for the removal of ego from a transaction. When I tip a street busker it is very fleeting, and the busker will seldom know who I am.
In a sense, I stand for a general person in society who appreciates them. Anonymous cryptocurrency donations are similar. They do not aggrandize the tipper, and can be used to express a pure appreciation for the services provided.
Preserving the soul of bitcoin
This emergent gift economy should be actively encouraged by all those interested in the future of cryptocurrency, and here is why.
Bitcoin initially had the feel of a true underdog currency, an unlikely adventure undertaken by outsider enthusiasts. I often work with NGOs and humanitarian groups, and when bitcoin initially came out there was real curiosity about whether the technology had the potential for helping vulnerable people.
As bitcoin's fame has risen though, and with it the triumphalist stories of bitcoin millionaires, the tone has shifted. Far from being perceived as a currency of empowerment, it risks becoming seen as just another technology for elites to get rich off, especially as the costs of mining skyrocket. The air-conditioned Silicon Valley conferences seem a million miles away from the gritty reality of much of the rest of the world.
Recently Andreas Antonopolous urged bitcoin enthusiasts to tone down the rhetoric of speculation and to focus on bitcoin's potential role in facilitating charity. And as Andrea Castillo writes, new approaches to welfare that go beyond the traditional left vs right battles are needed.
Participating in, and encouraging a thriving informal gift economy could be a chance for crypto enthusiasts to showcase how an economy based on decentralised voluntary association could also support those who are on the fringes of society.
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