May 22 '19

Talking Blockchain and Payment Systems

Learn more about the convening technology potential of the blockchain.

Holly Fearing

Hello everyone and welcome to the Filene Fill-In. I'm Holly Fearing with Filene. The Filene Fill-In is the podcast where we fill you in on what's been going on here at Filene's home base and out and about in the financial services world. At CUNA's governmental affairs conference this year, Dr. Lana Swartz, Assistant Professor in the Department of Media Studies at the University of Virginia spoke during our Filene breakfast about industries that are using the blockchain and why credit unions might want to consider its use too. Lana studies money as a communications technology focusing in particular on the history of payments and new financial technologies. She's been featured in the Atlantic and reached the status of Bitcoin famous when she appeared in a Netflix documentary on cryptocurrencies. After the GAC talk, I sat down with Lana to get a better understanding of blockchain technology in ordinary terms, through the example of how it has been used, or at least attempted to be used by the music industry, answering my questions about how this tech solution came to be and what the driving force behind it really is. Lana explains how blockchain is a convening technology that makes people that don't typically work together, come together and pool their resources too. That it's an idea concrete enough to think through, but big enough to put all our dreams into it, kind of beautiful, but unfortunately, blockchain hasn't been the solution that the music industry had hoped it would be. Mostly because that industry couldn't trust each other enough to build the technology it needed to enhance their trust in each other. Kind of sad. Speaking of trust, Lana is our keynote speaker at Filene's upcoming Future of Trust event in Seattle on May 29th and 30th. In this interview, she previews some of the ideas she'll be covering there and she leaves us with her thoughts, a on a question worth pondering. What happens when things like everyday payment systems are managed by Silicon Valley, think Facebook think Venmo, do we really want them writing our terms of service? Okay, I'm here with Dr. Lana Swartz. You just presented at the Filene breakfast. Can you tell us a little bit about what you talked to about?

Lana Swartz

(02:24): Yeah, so I gave a talk about some of the research that I've been conducting in the use of the blockchain in the music industry and sort of how this industry, that was a total mess because of long standing issues, over distribution, rights, contracts, getting paid, et cetera, came to the blockchain with these really utopian dreams and like big beliefs that, you know, the blockchain was gonna revolutionize everything. It was going to change everything and nothing was ever gonna be the same and how it didn't quite work out how they planned. But ultimately they came together with new partnerships, new points of view and new technologies that they wouldn't have come to otherwise, even though those technologies might not ultimately be blockchain based.

Holly Fearing

(03:09): Right, and so obviously we were talking here today to a room full of credit union people. So how do you see, what is the financial industry doing with the blockchain? Are they doing anything at all?

Lana Swartz

(03:23): Yeah, I mean there's a lot of white papers and there's a lot of initiatives and there's a lot of buzz around blockchain. I don't know really what's coming out of that in the financial industry, more broadly. I'm relatively new to credit unions. Although, as I mentioned, I have been a member for quite some time, so I can't really speak to what exactly is going on in credit unions. But I do think that it's important to think about the different kinds of blockchains. So there's this idea of the kind of open peer to peer blockchain that anyone who's willing to contribute their computing power to is able to be a part of. And then there's these ideas of these private blockchains that a group of banks or a hospital group or any kind of industry group can decide to make themselves. So whenever I hear people talk about like on the blockchain, my question is always like, which blockchain? Where? Whose blockchain? How does it work? So I think that there's a range of things going on. Sometimes it's hard to get to whether or not things are actually happening or whether it's a case of, you know, really trying to marshal resources, make sure that banks don't lose talent to Silicon Valley. There's always that fear today that some of the top talent isn't interested in going into finance anymore, the way that they used to. So if you can attract young, techy, smart people with something like a blockchain, it can make a big difference, but that's not to say that all of those initiatives are pointless. I think they're really interesting things that can and will come out of it. For example, you know, we think about something like Dee Hock, the founder of Visa in the seventies was thinking about things like, you know, Visa was going to make it such that we're gonna have a cashless society and money was gonna be nothing more than bits of information, alpha numeric frequencies. And that governments and banks were suddenly going to be obviated by technology. And that didn't exactly happen, but we did get the Visa Network out of it, which is incredibly powerful and has been, you know, has changed everything, but not necessarily in the way that was originally imagined.

Holly Fearing

(05:32): Right, and you said something in your talk that I thought was really enlightening, that blackchain is perhaps a technical solution to a social problem. And when you think about it in that lens, it kind of changes the game when you say, okay, well maybe we need to rethink what we're actually trying to do with creating a blockchain ledger type system. Can you explain a little bit more about what is the social problem then?

Lana Swartz

(06:01): Yeah, well, I think all industries face social problems. In the music industry, which is what my case study was about, a lot of these problems have to do with contracts and making sure that those contracts are actually executed. So it might be the case that I am, I play the drums on your record and my contract says that I'm supposed to get paid X amount every time that song is streamed or every time that song is played, or if it's used in a commercial. But how do I actually know all the times that that song has been played and how do I actually get paid? And in many cases, the, you know, at least according to the people I interviewed, you know, the industry is kind of built on that lack of transparency and that obfuscation, and there are people who make a lot of money off of that status quo. And so the dream is that adding in a blockchain would suddenly automate those contracts. And every single time that song has played, I will automatically get a cryptocurrency token that is equal to the amount of money that I am owed, but you have to get the contracts right and you have to get the reporting right in order for it to be translated into a technical system, because otherwise you're just a automating something that sort of intentionally doesn't work. So you have to get the social problems fixed and you have to get people on the same page and be willing to adopt the same standards in order to just get to the baseline of new technology adoption.

Holly Fearing

(07:34): So it's almost like putting the cart before the horse in that are jumping to here's the way we can solve it, rather than looking at, well, maybe there's another solution to the problem that doesn't involve this technology.

Lana Swartz

(07:47): Right. Right. Although what I hope I, you know, tried to argue is that other solutions, like if they said, you know what, we need to fix our social problems, we need to fix our policy problems, we need to get everyone together and adopt up some standards, no one would show up. But if you say, we're going to use a blockchain and we're going to solve all of these various problems with it, then all of a sudden, a lot more people are interested and people are willing to show up, willing to put in the work. And it marshals a lot of attention, like press. It marshals money. It marshals attention from institutions like MIT and Harvard, who might previously be like, who really cares about the music industry, you know, we're doing more lofty things. You know, I call the blockchain a convening technology, and that convening part is that bringing people together, getting them actually willing to work, actually willing to talk to people that they normally don't like talking to, and then marshaling all those resources. And then the technology part is the fact that it is a technology. It is a concrete, specific thing that demands talk of implementation. So if we say, we're going to use a blockchain to do it, that means we have to sit down and really think about like, what that might look like, what that might mean. And as we do that, as we work through it concretely, we start to think, oh, I never noticed that this is how this was working, or I discover this new aspect of this process. And so as we talk through it, as we imagine it and try to implement it concretely, suddenly we can see all the things that were unseen, all the labor, all the infrastructure, all the maintenance, but then at the same time, because it's like, woo blockchain brand new barely implemented anywhere, it's still open enough to kind of dream with. So it's concrete enough for us to like really think through, but big enough for us to like project all our dreams onto. So as a result, you wind up with a real inventory of need and a set of potential solutions that may or may not involve something that may or may not look like a blockchain.

Holly Fearing

(09:49): Yeah, it kind of takes something that's maybe a solution in theory, and it gives it a way to at least attempt to execute it all. That's really interesting. Do you think that blockchain by the nature of its structure lends itself more to a cooperative nature? So something like credit unions, an industry like credit unions might be more ideal for it. Organizations that put people before profit and then blockchain seems like the type of technology that might be right for this industry.

Lana Swartz

(10:25): Yeah, so the issue of trust and cooperation as it relates to the blockchain is really, really, really interesting. So originally for Bitcoiners, they thought that technology like blockchain makes trust obsolete. So it like obviates the need for trust because you don't have to trust each other, you just have to trust the infrastructure. And so you could all, each individual person or individual organization can have a node in the network and the network is cooperative in the sense that it's cooperating to produce this shared ledger, but the cooperators don't have to trust each other because the cryptography allows the network to function without trust allegedly. But what we've actually seen in most cases is that it's lack of trust, that winds up being a sticking point for actual implementation of the blockchain. So with the music industry, as I noted in my talk, you know, I had a quote from one of my interlocutors who said, nobody in the music industry trusts each other at all. And the biggest problem facing the music industry is just lack of trust and you know, you can all kind of imagine like the shady industry executive being like sign right here on the dotted line and we'll, you know, make you a star. And that kind of seems to be, you know, the way it happens. And so if you can create a system where people are cooperating to create an infrastructure that then obviates the need for trust, that works well for the imagination of the, say the music industry. But while there have been some interesting developments, they haven't really adopted this kind of like large scale blockchain solution and the reason for that seems to be that not enough parties were willing to trust each other to sign on to like the one big network. So while it did create new networks of trust and new cooperation and ideally technology should obviate the need for trust it was the lack of trust on a large scale that didn't.

Holly Fearing

(12:23): Like almost getting it started is the sticking point. If you could fast forward to 10 years from now and everyone's already in it, it would probably be working great. But it's that, that getting the ball rolling start.

Lana Swartz

(12:38): Yeah and because it requires this kind of adoption of shared standards, one of the big conversations that's really important that came out of this was like, oh, actually we need to trust each other. So we are building this technology that obviates the need for trust, but in order to build it, we need to trust each other. And so what that would look like for an ecosystem like the credit union ecosystem, where there is trust, you know, there's trust among credit unions it seems, and there's trust between credit unions and members and where trust is kind of built in and cooperation is built in, it would be really interesting to see where technology like the blockchain can go.

Holly Fearing

(13:15): Yeah and you're gonna be speaking at Filene's event in May in Seattle, that's all about how trust and technology have like influenced each other or one leads to the other.

Lana Swartz

(13:29): Yeah, I'm very excited about that. That's a totally different facet of my research. So as I mentioned, my talk part of my research is about the context of innovation and part of my research is about user adoption of those innovations and how it actually impacts people's lives, and so I'm an interesting case in that I'm a media study scholar. So everybody at my conference, everyone in my department studies things like Facebook and like Twitter and how those things influence our lives and influence economy, influence elections, that sort of thing. And I'm the one saying, you know what, FinTech, the Venmos, the PayPals, the Google Wallet, Apple Pay, et cetera, those are also communication technologies. Those are also coming out of the same Silicon Valley business imaginary and they're being managed by the same kinds of Silicon valley MOs. So like things like terms of service, using automation to automatically detect fraud and then do account freezes. Like those are all things that are like practices that are native to Silicon Valley. So what happens when something like payment, something like money that you're trying to use in everyday life is being managed according to the logics of Silicon Valley, where trust is really lacking. Like if you have a problem, if something happens on Facebook, someone's harassing you or someone hacks into your account, what do you do? Like, is there a customer service number you can call? Is there a branch you can show up at and complain? There's nothing you can do.

Holly Fearing

(15:03): You have to wait like three weeks before anyone will get back to you. Facebook is the worst about that.

Lana Swartz

And that's, I mean, three weeks is pretty good. So what happens when they try to think about offering something that looks like financial services, but really there's no fiduciary relationship at all.

Holly Fearing

That's scary.

Lana Swartz

(15:23): Yeah, I think so. And so what I have is some very concrete examples of where that's gone wrong. And I do try to show that, you know, this isn't simply malice or like an attempt to, you know, do a bad job at taking over increasingly large amounts of our lives, but that there are aspects to the way, that kind of working model of the way business is done, that are an ill fit. Another interesting thing, so we have like, you know, governed by terms of service, which are blanket and like how many times have you ever read a terms of service to know exactly like what's prohibited?

Holly Fearing

(16:00): We sign everything without looking at it. At any of it.

Lana Swartz

(16:02): Exactly, but then another issue is issue of scale. So one thing that most people don't realize is that most start ups don't have to make money. And in fact, they're discouraged by their funders from making money. And the goal is really to scale up and try to get as many users as possible. And then like the theory of success is sort of winner takes all. So like you become the Facebook and you have no competitors or acquisition by one of those winner takes all, so you get acquired by Facebook and then your product either goes away or becomes integrated into Facebook. And so when you're not really worried about making money and your goal is to just get as many people on ramped as possible, then problems arise. In terms of these things.

Holly Fearing

(16:49): Oh yeah. There's so many unintended consequences or maybe even intended consequences related to that.

Lana Swartz

(16:55): I mean I do think it's mostly unintended consequences. It's sort of like if you have one way of doing things and then you try to take on healthcare or you try to take on, something as mundane as like scooters that are, you know, getting put around everywhere or as I study, you know, financial services and you're governed by term service, your one way you can imagine ever making money eventually is data, is used collection data, and you don't have to make money for like a good long while and that's, that's normal. That's how you do things, but then the consequences on the ground can be pretty dire.

Holly Fearing

(17:34): There's so much information that you need to know and keep up with and learn about, especially if you are a professional in the financial services industry. Do you have any recommendations for people of like how they even just stay in the loop of blockchain and other emerging technologies and everything that's changing so fast, how do you stay? Like, you know, you get to do it for a living, you get to study it. I mean, that's part of the reason why Filene is putting on this event in May is to have people come together and just kinda learn like some of it, you can't learn all of it, but do you have any other advice for like, how do people stay in the know?

Lana Swartz

(18:11): Well, I think that there are lots of ways, but one way is, increasingly scholars, at least in my field are really trying to write books that are accessible to all audiences. And if I may, I'd be happy to shout out a few of my friends, and scholars that I really respect who have done work in this area.

Holly Fearing

(18:27): Absolutely. We'll start a book club.

Lana Swartz

(18:29): Yes, start a book club. You know, like if you wanna keep abreast to some of these things, start a book club and I can give you a few places to start. So, Tarleton Gillespie at Microsoft Research wrote a fascinating book about how platforms are moderated. So all the work that goes into moderating Facebook, and we think it's all automation and some of its automation, some of it is actual people having to watch videos and decide that they're too violent to be seen on Facebook. And just what happens when you make these blanket rules and how they kind of rule out individual cases. So that is all about the way that platforms are governed and that is called Custodians of the Internet from Yale University Press. Nancy Baym, also at Microsoft Research wrote a fantastic book from New York University Press called Playing to the Crowd that is about the music industry and technology. Lisa Servon.

Holly Fearing

(19:21): Yeah, we've spoken with her for Filene before.

Lana Swartz

(19:23): She's fantastic. She has a great book, that was called, I don't remember what her book was called, but it's great. You should read it.

Holly Fearing

(19:34): I know it. I'll find it out and I'll put it in the notes.

Lana Swartz

(19:37): Okay, great. Siva Vaidhyanathan, my colleague at University of Virginia just had a book that came out from Oxford University Press, that's all about Facebook and just sort of the history of Facebook and how Facebook came to dominate so many aspects of our lives and how it's turned into this thing that we all are members of, but we aren't quite sure what to do with. But I mean, I'd be happy to keep giving you guys a reading list and...

Holly Fearing

(20:05): That would be awesome. We would love to do that. We'll pilot it at Filene. Taylor's been talking about, let's get a book club started, but I recommend any credit union listeners out there, if they're looking for book recommendations, we can totally pass 'em on and you guys will know what Filene is reading. That would be really great.

Lana Swartz

(20:23): I mean, articles are good and kind of keeping up with the news is good, but there are some studies that have shown that oftentimes people looking at Facebook or on Twitter, just look at the headlines and they so rarely actually click on the link. And there are studies that show that people who just read the headlines are far less informed than they think they are. So I would recommend, you know, actually read the articles, but then also sometimes go beyond the articles and do those book length, deep dives. And we on the academic side are trying really hard to write books that are interesting and write them in ways that are interesting and it would be great if folks read them.

Holly Fearing

(21:05): I would love to, I'd love to. I feel the same way you do, as a marketing person, more focused on content marketing, I'm like, it's all about the content. It's not about just the shiny rapper. Like when I hear things that say, people don't read anymore, it just breaks my heart. So anything I can do to help people go deeper into our research, into these books, I think that's the way you learn. You don't learn from a headline.

Lana Swartz

(21:29): If you think about it, we actually read more than any humans ever have in history, because we're constantly looking at screens that have words on them. So we read thousands and thousands and thousands and thousands of words a day. The question is which words do we read a day? So how can we kind of find that balanced information diet where we're not just reading kind of like junk words, but we're getting some depth.

Holly Fearing

(21:55): Yeah, I don't think Twitter is helping with that, but I love it still. I have a love-hate relationship. I can't wait until all of the tweets that are happening now are gonna be like studied by future anthropologists.

Lana Swartz

(22:10): I can point you to scholars who are studying tweets right now. In fact, I'm actually doing a little research project. I have this fantastic undergraduate research assistant. There's this great program at UVA where we can work with undergrads who show promise, who are interested in research. So over the course of 26 months, we collected a lot of tweets that use the word Venmo. And it was close to 2 million tweets, our like big data set and we were able to narrow that down and take a sample in a few different ways. But basically we're interested in, you know, there are all these headlines about how Venmo is like the newest social network. It's the place where all the real gossip happens, and so we were trying to understand what kind of jokes are people making on Twitter about Venmo and how do those jokes reveal something about the way we feel about relationships and money?

Holly Fearing

(23:01): Interesting. That's kind of meta like the jokes about Venmo, but on Twitter, right?

Lana Swartz

(23:07): Yeah, and I mean, it's not just joke. So we found some interesting things, so it's sort of both their practices, so people using Venmo on Twitter. So people sharing their Venmo name or someone else's Venmo name for a variety of purposes. So some of them are fundraising, and fundraising for themselves or fundraising on behalf of someone else or for an organization. All of which I think are gray areas in terms of the, again, the terms of service of Venmo or using it to sell things on Twitter. So like they advertise that they have something for sale, goods or services, and then they put their Venmo information, which also is against the term of service. But, so it's interesting cause it creates an economy and it creates a payment where there's no payment native so it's like a cross platform transaction. So there's the practices and then there's a commentary. So the commentary is mostly jokes and, we've seen some interesting things in our data set. As you know, I am at the University of Virginia, which is in Charlottesville, whereas, you know, most people know we unfortunately were the site of the Unite the Right rally on August 11th and 12th, two years ago. And that day was captured in our data set. And we found a lot of interesting tweets that relate to the Unite the Right rally that really like show so many interesting facets of how people think about Venmo and how think about money in their everyday life. So there was one that made a joke about how the neo-Nazis must have Venmo each other for the Tiki torches and it's dark humor. But the idea of the joke is that those guys must be really petty and they must like request each other for just the $2 that their Tiki torch costs. Which says so much about how we think about money and technology and Venmo in particular. There was fundraising or attempts to use Venmo to fundraise for both sides. So people who had been injured who were counter protestors, as well as people who were, you know, right-wing demonstrators who had been arrested and so like attempts to kind of fundraise. There were offers of saying, I will then Venmo $20 to anyone who sends me footage of them, like punching a Nazi. You know, so it was so interesting how you take this one incident in American life that's like something we're really trying to wrestle with, is very traumatic to a community and see how jokes about a new money technology play a role and it illuminates something that I think is really fascinating.

Holly Fearing

(25:38): We're living in just really interesting and weird times for sure. Because what are the chances of those things all coming together and being part of our society right now? So strange.

Lana Swartz

(25:49): Yeah, but I mean, I argue that, you know, money is like really part of the fabric of what we do every day and it finds its way into everything and the way that we do money with the technologies we do it with, tell us something about our larger world.

Holly Fearing

Yeah, well this has been so interesting and I'm so glad that you're gonna be at our event in Seattle in a couple months.

Lana Swartz

I look forward to presenting a totally different facet of my research.

Holly Fearing

Yeah, we're so glad that you're gonna come back cause I feel like there's so much more to talk about on this.

Lana Swartz

I look forward to talking with you then. Thank you so much.

Holly Fearing

(26:21): All right, that's it for the Fill-In folks. Thanks again for listening and thank you for the awesome conversation Lana. We look forward to seeing you in Seattle. If you're interested in learning more about the event, visit Filene.org/trusttech. If you like this episode, please do rate us on Apple Podcasts so more people can find us and make sure you're subscribed to the Filene Fill-In podcast so you can keep up with what's going on at Filene. You'll find us on Apple Podcasts, Stitcher, SoundCloud, Google Play, or wherever you get your podcasts. And if you wanna get in touch about today's show, email me at [email protected] or find us on Twitter at Fileneresearch. Until next time. Thanks everyone.