Blockchain and the 'Pink Economy' - a social enterprise model

Although no one is entirely sure, the global 'Pink Economy' is estimated to be worth a huge $4.6 trillion.

This means that if the income, output and expenditure, of the lesbian, gay, bisexual and transgender (LGBT) community were the GDP of a country, it would rank as the fourth biggest economy in the world behind the US, China and Japan.

As a result, it is not surprising that attempts are now being made at “surfacing the community’s economic power”, in the words of Christof Wittig, co-founder of Hornet Networks, a social network for gay men that has more than 25 million members worldwide.

To this end, Hornet joined with a number of other investors in January to launch the LGBT Foundation, a not-for-profit organisation based in Hong Kong, which has one of most conducive regulatory environments for cryptocurrencies on the planet – the other two are Switzerland and Singapore.

The Foundation intends to use blockchain technology in the shape of an “LGBT Token” to support members of the wider community, which it is believed account for between 4-6% of the global population. Wittig explains:

Hornet’s focus is on social interaction between gay men, but the LGBT Token is a much more complete platform for the community to achieve three main goals - or utilities in blockchain-speak.

The first is about enabling people to be members of a community without exposing themselves to danger. So it’s about giving them a way to control and manage what they choose to reveal in identity terms. This is important in some countries such as Egypt, for example, where there are law enforcement issues.

The second goal is to enable members to spend the cryptocurrency on a wide range of products and services. Merchants such as queer digital streaming service Revry have already signed up to the initiative, while businesses such as Out of Office, which offers tailor-made LGBT holidays, and the Time Bar in Hong Kong have also agreed to take the Token as payment.

Working the LGBT Token

To further boost take-up, the LGBT Foundation, which employs half a dozen staff and another 40 or so consultants, has set up a Network Accelerator Program to make it easier for participants to adopt the technology and migrate their existing reward schemes over to it.

It is also developing a platform to enable partners to store and manage tokens efficiently. As Wittig says:

The problem at the moment is we don’t really know the size of the pink economy. But at the micro level, that’s where the Token comes in as it will help brands understand the preferences of the community more effectively, enabling them to interact with it better.

The third aim, meanwhile, is to fund charitable causes that are meaningful to the Foundation’s members. As Wittig points out:

Every year, 1% of the entire token supply will be minted as additional coins, which will go towards charitable causes. So whether it’s about helping to start an organisation, supporting immigrants in integrating into their new home or helping gay men to find safety, these causes bring the first and second utility together. The community votes on the allocation of all funds and supervises them to ensure they’re used properly.

The LGBT Token will be built on top of Ethereum’s blockchain platform due to its focus on privacy, although the Foundation is also evaluating whether to add technology from the Raiden Network to enhance micro-payment capabilities. It is currently in the process of defining and designing how the Token’s economic model will work, before the implementation phase can begin.

Once this phase is complete and the Token and its infrastructure are ready to use, the Foundation plans to release the cryptocurrency into circulation and for sale via third party exchanges and token platforms that undertake compliance activity such as ensuring money laundering regulations are adhered to. In other words, once the tokens have been “legally cleared as a utility”, they will be provided to participating users and merchants for immediate use. The entire process is expected to take about six months.

But consumers will not only be able to buy Tokens, they will also be able to earn them for contributions to the wider LGBT community. Wittig explains:

Hornet has a lot of community activity, for example, which means that members can become City or Health Ambassadors or undertake beta testing. So these are awards you can earn, but in future they’ll be issued as tokens. It’s a programme we can scale out.

To ICO or not to ICO

Once the tokens are in circulation, the Foundation will undertake an Initial Coin Offering (ICO) in order to raise funds to market the platform and repay its investors. Although the decision to go for an ICO ahead of launching the platform is a break with convention, Wittig considers it a necessary move brought about by regulatory uncertainty, especially in the US. He says:

The Securities and Exchange Commission (SEC) is taking a pretty aggressive stance on some ICOs, which is creating uncertainty on how to go to market. So in response, we’ve changed our timeline, which we’re pushing out and we’re separating the project funding from our public token sale. There have been some major changes over the last three months and so we’ve done it on advice as the situation with the SEC is unclear.

As to why the Foundation decided to go with blockchain as its infrastructure of choice, Wittig says the choice centred on the technology’s decentralised ledger-based approach:

Blockchain enables a decentralised group of people to come together and, like a public spreadsheet, allows them all to have the same view of what’s going on. So they can see and take part in projects, vote, give money, report embezzlement – it’s all visible to everybody and that creates huge transparency.

In fact, he would go so far as to say that:

Without blockchain, it would be impossible to achieve our goals unless you believe in a centralised approach, which is contingent on trust in a central authority, whether it’s government or corporates. But we suspect that neither organisation always operates in the best interest of our members – they can go wrong, but they can also be hacked. Instead we believe that each individual should be empowered to take their destiny into their own hands. Only they, and no one else, have the right to disclose their identity to others.

To date, some 16,000 power users from the Hornet community are already earning LGBT Tokens as City Ambassadors and the Foundation has garnered 10,000 members on social media. But Wittig is keen to get even more people involved. He concludes:

We’d like everyone to participate and chime in on the design. We’ve published a white paper and are asking people to follow us on Twitter as we want it to become a community-driven project. We see our role as being instigators, but we believe that ultimately the Foundation belongs to the community and should be governed by the community.

My take

This kind of thoughtful use of technology, which not only caters to the needs of its community but includes philanthropy from the ground up, undoubtedly offers a positive role model for other forms of social enterprise to build on.