Faces of Crypto: Motivators of Community Participation

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Running head: FACES OF CRYPTO: MOTIVATORS OF COMMUNITY PARTICIPATION

Faces of Crypto: Motivators of Community Participation Ibtissam Benali

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Professor Andrea Ganzaroli Thesis Digital Business 17th August 2018 - Final Version

MSc. Business Administration - Digital Business Track University of Amsterdam

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FACES OF CRYPTO: MOTIVATORS OF COMMUNITY PARTICIPATION 2

Statement of Originality

This document is written by Ibtissam Benali who declares to take full responsibility for the contents of this document. I declare that the text and the work presented in this document are original and that no sources other than those mentioned in the text and its references have been used in creating it. The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.

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Acknowledgement

I would like to thank a number of people that helped my through my Masters degree and supported me to the end, as well as inspired me to study Digital Business.

I would like to thank professor Andrea Ganzaroli for his support, supervision, and flexibility during the writing of my thesis.

I would like to thank professor Hans Borgman for giving the best first lecture in the Theories of Digital Business course ever, which convinced me to change to the Digital Business track and leave the Marketing track. He and all the other professors in the Digital Business track have been phenomenal professors, and I am very lucky to have attended these classes.

I would also like to thank my mom and sister for their support throughout my studies. I love you both so much.

I would like to thank members of all crypto communities for being the best people I have ever met, as you all are pushing crypto and technology forward. You are probably the most crazy crowd I have ever met, but crazy likes crazy.

I would also like to thank Satoshi Nakamoto for creating Bitcoin. You have gifted us a technological revolution.

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Abstract

This research addresses the question of what motivators drive community participation in cryptocurrency brand communities. Research by Madapu & Cooley (2010) has identified 5 motivators that motivate community participants in traditional brand communities, namely information, self-discovery, social integration, social enhancement, and entertainment. Through qualitative conventional content analysis focus group interviews were analyzed and motivators were identified for cryptocurrency community members. This thesis verifies that the 5 motivators are present in the cryptocurrency community, but it also adds 2 additional motivators, namely professional development and financial motives. We also uncover that there are specific user roles one can take in the cryptocurrency community, hence introducing more refinement to the understanding of what an active user is. Furthermore, it uncovers that different motivators affect different user roles in cryptocurrency communities. The findings of this research can help marketing managers choose strategies for growing their

cryptocurrency communities based on a user role basis, and hence have more control of which user role to grow and to incentivize.

Keywords: Community Participation, Crypto Marketing, Blockchain Communities, Crypto Communities

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FACES OF CRYPTO: MOTIVATORS OF COMMUNITY PARTICIPATION 6 Table of Contents Acknowledgement 4 Abstract 5 Table of Contents 6 Introduction 8

Significance of the Study 9

Scopes and Limitations 10

Structure of the thesis 10

Literature Review 12

Blockchain 12

What is a Blockchain? 12

What is Cryptocurrency? 12

Blockchain 1.0: The Birth of Bitcoin 15

Blockchain 2.0: Ethereum 17

Initial Coin Offerings and Crowdfunding 18

What is crowdfunding? 18

Initial Coin Offerings 19

Paradigm Shifts in Digital Business 19

Community Participation 22

Method 25

Participants 25

Data collection, coding and analysis 25

Results 27

Roles in Crypto Communities 28

Motivation Community Participation 29

Informational Motivator 29

Self-Discovery Motivation 30

Social integration Motivation 30

Social enhancement Motivation 31

Entertainment Motivation 31

Financial Motivation 32

Company - Community Participant Relationship 33

Conclusion 35

Discussion 35

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Limitations and Directions for Further Research 37

References 39

Appendix 48

Appendix A: Focus Group Protocol 48

Appendix B: Memos 50

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Introduction

In 2009 Bitcoin was created by Satoshi Nakamoto (2009). Through the years we have seen bitcoin being mined, rise in value and being adopted by more and more people. At its highest in December 2017, one bitcoin was worth $21.000,-.

Next to bitcoin, other cryptocurrencies have found their way on the blockchain as well. These are often referred to as “altcoins”. One of the most used altcoin is Ethereum. Ethereum is by far the most used platform to launch new tokens, as it offers a smart contract system to the developers which allows them to build decentralized apps (Buterin, 2014).

Recently, we have seen a strong march of blockchain-based companies.

Blockchain-based companies are companies that are basing part of their business model and core product on a blockchain infrastructure. Such a company usually presents their business model idea to a cryptocurrency community, and organizes an Initial Coin Offering (ICO) to sell tokens or coins to a cryptocurrency community in exchange for Bitcoin, Ethereum, and/or NEO to raise starting capital. This ICO can be imagined to be a form of crowdfunding based on the blockchain infrastructure.

After participating in an ICO the holder of a cryptocurrency coin or token is now affiliated with the blockchain-based company in the following ways:

1. They became a co-owner of the ecosystem the company’s product is based on. 2. They can use the token or coin as currency to buy things on the company’s and other

compatible ecosystems.

3. Sometimes, the token or coin can be used as a voting ballot for the ecosystem. 4. The token or coin can increase or decrease in value. Therefore, the holder has a

financial interest in the project succeeding as he or she can also be seen as a trader or investor.

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5. Since the holder has a financial incentive for the project to succeed, the holder is usually strongly present in the cryptocurrency community of the company to stay up to date and to contribute to the development of the company. As token or coin holders, they are involved in some way with the company and its community. In this research, I will mainly explore the fifth point. It is thought that a higher token price - and thus a higher company valuation - is driven by strong cryptocurrency

communities, in a similar way that community commitment drives brand loyalty, and thus firm performance (Kang, 2004; Jang, Ko & Koh, 2007; Thompson & Sinha, 2008). As it is in the holders interest to see the company succeed, it is interesting to see how they perceive the community and what their experiences are, and to learn from this as crypto-marketers to understand how to create the right communities around their companies. Therefore, the research question is:

How do cryptocurrency community members participate in cryptocurrency communities, what roles do they take, how do they experience the cryptocurrency communities, and what

can blockchain marketers learn from this for their strategies?

Significance of the Study

The findings of this study will contribute to the understanding of how cryptocurrency communities function and what motivates participants in these communities to behave like they do. It also aims to inform blockchain-based companies which levers they can pull in order to grow their communities and benefit the company.

It also contributes to new insights in research about community participation motivation as it is the first (as far as I know) that looks into how this is formed and

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constructed for cryptocurrency communities. It points decentralized companies in the right direction as to how they can create value for their community in order for the community to create value for them. There is reason to believe that this might offer some new insights, as there is a new factor at play: the ownership or holding of a coin or token essentially means you own part of the ecosystem.

Scopes and Limitations

The scope of this research is limited to active participants in cryptocurrency

communities, which essentially means that inactive lurking participants are not included. This does not mean that the inactive lurking participant is not relevant for understanding

community participation in blockchain based companies. I will shed more light about the role of inactive participants in the literature review.

In this research I am also purely focussing on the drivers to participate in

cryptocurrency communities, and therefore the question of how participation is maintained and how positive reinforcement takes place will remain unanswered.

Furthermore, this research solely focuses on post-ICO and cryptocurrency communities of which the coins are already listed on some exchanges.

An important note to make is that this research has been conducted during the cryptocurrency “bear” market, meaning that results may be influenced by a negative sentiment.

Structure of the thesis

This thesis is divided into several parts, namely the literature review, the method section, results, and the conclusion.

I will first briefly explain blockchain-related concepts more in-depth in the literature review in order to create some understanding of the type of businesses these communities are

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formed around. I will also discuss the literature relating to the drivers of community participation.

Then, I will explain the qualitative conventional content analysis approach in the method section, followed by the identification of the themes and patterns relevant to

cryptocurrency community participation in the results. Finally, I will reflect on the findings in the conclusion where I will discuss the managerial implications, scientific contribution and suggestions for further research.

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Literature Review

In this literature review we will first establish the concept definitions to be used in this thesis. Afterwards, an overview of blockchain technology and current state will be given. Then, we will zoom into motivations and drivers found in traditional literature regarding why people participate in online communities.

Blockchain

What is a Blockchain?

A blockchain is a distributed database, meaning that parties that are active from their node have a copy of this database and work on updating the chain and each other with new transactions and validations of the legitimacy of transactions. The chain of data is created based on the chronological order of when the data has been added. It is an easy-to-control system that only creates related blocks, making it only possible to create branches of the chain. In this system, two equally distant chains with the same last block are highly similar.

A blockchain is usually publicly available and invites everyone to participate as a node. With proof of work falsification, manipulation and fraud is combatted and made impossible. Private blockchains exists as well. In a private blockchain an authority can determine the rules of who could be a node. An example of this is Ripple who aims to provide a blockchain solution for banks. In principle, Ripple controls all nodes of the XRP blockchain, making it a centralized cryptocurrency.

What is Cryptocurrency?

Cryptocurrency is digital currency that can be used as an alternative to fiat. The first and biggest cryptocurrency was Bitcoin. A term used for all other coins next to bitcoin is altcoin.

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Cryptocurrency is registered in a blockchain. Sometimes there is a separate blockchain for one cryptocurrency, in other cases one blockchain registers multiple currencies and/or other data. A specific amount of cryptocurrency that is the output of a transaction can be used as an input of the next transaction in order to create a chain. In this way, blocks of transactions are created, and thus we have a blockchain. The data per transaction is the public key of the new owner, a hash of the combination of the data of the previous transaction and this public key, and the digital signature of the previous owner. The new owner often can not easily check him or herself if one of the previous owners has not spent the amount several times (known as the double-spend problem that is usually solved through banks - once you pay for something, the amount is deducted and cannot be spent again, the receiver of the fiat money assumes that the money added to his or her bank account is guaranteed for him or her as this is the service the bank offers). The double-spend check is done by a network of nodes that each have an overview of all transactions. It can take a couple of minutes up to a couple of hours until the new owner has sufficient certainty about this. It is definite as soon as it is mined in a new block. Transaction fees (which you can set as high or as low as you want) affect the speed a transaction is processed by the miners.

Subsequently, as new blocks build on the block with the transaction, the transaction reversal by the network is becoming increasingly unlikely. This process is called proof-of-work.

Often a proof-of-work scheme is used for a system of consensus based on computing power that must provide protection against manipulation and falsification. Multiple

transactions are often processed in each block. As soon as a block is found, it is made public. The other nodes control it, and the nodes start on the basis of this and the new transactions that have now been carried out start with the search for a new block.

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automatically assigning it to the finder of the block. This is called the "delving" of new monetary value. The search for a valid block is called mining. The value of cryptocurrency is determined by supply and demand, which also includes the costs of finding a new block, which requires a lot of computing power and electricity in proof of work.

The amount of the reward is fixed in the software (sometimes according to a predetermined schedule, after a number of blocks, this is always reduced, and ultimately zero). The degree of difficulty of the proof of work can also be arranged so that the block frequency remains around the desired level. This is comparable to the extraction of precious metals, whose scarcity and difficulty it takes to mine the value. Furthermore, the value is determined by the total amount already 'mined' and by the users who will trade with it.

The process described applies to mineable coins only. Tokens usually do not require a proof-of-work system, as they operate on top of the blockchain from another coin. The term coin and token is often used interchangeably, but they are different. A crypto ecosystem consists of several possible layers:

1. The first layer is the blockchain, which is the network of nodes that carry the distributed ledger.

2. The second layer is the coin, which usually represents currency in its pure form. When speaking about coins, one does not usually assume specific functions. You could think of Bitcoin as an example, or Ether as the coin for the Ethereum Blockchain.

3. The third layer are tokens, which can be described as multi-faceted crypto equities. A token can be used as a currency, but it usually contains more functions and is built on a coin’s platform if it offers the possibility. For example, the Ethereum Blockchain is built to be able to carry smart contracts of which the transaction fees are paid with

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Ether (ETH, the coin of the Ethereum Blockchain). A token could have functions such as the possibility to vote or the possibility to approve access to specific data. It can basically be programmed to do whatever you want in the detail you want.

Blockchain 1.0: The Birth of Bitcoin

Bitcoin (BTC) is a cryptocurrency and global currency created by Satoshi Nakamoto (Nakamoto, 2008; Nakamoto, 2009). Satoshi Nakamoto is a pseudonym, it is unknown if it is a man or a woman, or perhaps even a group of people (L., 2015). BTC is the first

decentralized currency that functions without a central bank or some central management. The transactions are verified on network nodes through cryptography and are saved in a public distributed ledger known as the blockchain. A simple way of thinking about the blockchain is describing it as multiple copies of a giant spreadsheet (Lee, 2018). Each node on the network keeps a copy and adds new transactions to it.

The first BTC-transaction occurred on the 3rd of January 2009. The transaction contained the following message: “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks” (Heuristic, 2009). Currently there are about 200.000 BTC-transactions per day (Bitcoin Currency Statistics, n.d.). This is expected to increase when the

lightning-network is adopted by more parties in the blockchain ecosystem (Chester, 2018). Satoshi Nakamoto (2009) explains in his paper _{Bitcoin: A Peer-to-Peer Electronic}

Cash System_{how a BTC-transaction is executed. 2 precautions are taken in ensuring safety of}

wallets. The first measure is that one can store bitcoins on a so-called paper wallet. This is simply the printing of one’s public and private key pair on paper, so it does not need to be stored on a connected device which could be vulnerable for hacking. The second measure is

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the creation of backups so that the public and private key are always available even if your electronic wallet breaks due to fire or water for example.

The blockchain contains a ledger of all transactions. The blockchain is public and is distributed over nodes of a peer-to-peer network, also called a consensus network. Everyone is free to join and participate in the BTC-network and to contribute to its development. With cryptohashing the bitcoins can only spent by the owner and cannot be double-spend, hereby eliminating the need for a central controlling party.

The decentralized and distributed ledger of BTC makes it practically impossible for a government authority, or anyone else for that matter, to induce monetary inflation. With BTC the growth of the number of BTCs is predictable and limited to 21 million bitcoins.

BTC-transactions are pseudo anonymous, meaning that no one will know which address is yours, unless you tell them. A typical BTC address looks like the following:

3MQRhE6dnpQzwSM7hTvn1ebjw7BcVgJYWu

In order to make a transaction one needs to have BTC wallet. There are a couple of options for creating a wallet. For example, the user can choose to download the Bitcoin Core wallet (https://bitcoin.org/en/download) or create a wallet by a Bitcoin Wallet Provider such as Coinbase.com. The difference is that by creating a wallet with a wallet provider, you do not own the private keys to the wallet and thus therefore are not enjoying the full benefits and features of a real BTC wallet. When downloading the Bitcoin Core wallet you will be able to generate your public and private key. The private key acts as a pincode and should never be shared. The public key can be shared with anyone and is also retrievable on the distributed ledger. In order to receive a BTC-transaction you will have to share your public address with the sender. The sender will specify the amount of BTC he/she wants to send to you, and then confirms that he/she is allowed to do so as he/she owns the private key to his/her public key

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address that is ready to send the BTCs. When the transaction is confirmed by the sender, the transaction is added to the ledger. A so-called miner will find the transaction and confirm the transaction. This will happen throughout the network. Essentially, if all miners reach the consensus that a transaction is valid, the transaction is officially confirmed as being truthful and thus the receiver of the BTCs is now the new owner of the BTCs. This process is irreversible. A sent transaction cannot be cancelled.

Miners provide the proof-of-work system by mining BTC. They form the nodes in the consensus network. Mining is essentially the search of new blocks that are in line with

specific requirements. This is a highly computing intensive task. Since the difficulty of mining increases, mining pools are created. Mining pools allow a group of people to combine the computing power of their computers to find new blocks. The reward will then be

distributed to all contributors. In this way, one has a chance to earn a part of a bitcoin rather than a small chance for a large reward. Another way of earning money for the miners is through the transaction fees. The higher the transaction fee, the faster a transaction is usually mined.

Blockchain 2.0: Ethereum

Bitcoin in and by itself is a cryptocurrency and has a similar function as a regular currency. However, the blockchain technology serves to be useful in various areas. Others have seen this and thus so called “Altcoins” or alternative cryptocurrencies were created. Some of these altcoins could even be considered crypto equity as it has more functions than simply it being a currency. For example, Ethereum (ETH) allows you to build decentralized apps on the Ethereum Virtual Machine(EVM) (Vitalik, 2014). These decentralized apps, or DApps, are programmed through smart contracts - one of Ethereum’s features. In order to be able to publish smart contracts and to interact with smart contracts, one needs to own some

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ether (Ethereum’s cryptocurrency). You need to pay ether (or ETH) for transactions and the use of the EVM to prevent a DDoS attack on the Ethereum network due to spam transactions, and at the same time to reward miners for their work as they are validating transactions and mining new blocks for the network.

Applications of the blockchain by businesses can be found in various industries such as the management of identities, marketplaces, exchanges, supply chains, asset management, insurance, payments, smart property, Internet of Things, smart contracts, ownership rights, royalty distribution, transparency, healthcare, voting in elections, distribution of

responsibility, distribution of power, certificates and diplomas, and many more. Next to Ethereum, there are also other blockchains that offer similar functionality, such as NEO.

Unfortunately, it is out of the scope of this research to go too much into depth into these applications, as I will be focussing on the motivations to participate in cryptocurrency communities.

Initial Coin Offerings and Crowdfunding What is crowdfunding?

According to Belleflamme, Lambert. & Schwienbacher (2014) crowdfunding is defined as:

“Crowdfunding involves an open call, mostly through the Internet, for the provision of financial resources either in the form of donation or in exchange for the future

product or some form of reward to support initiatives for specific purposes.”

The reward can take various forms such as (but not limited to) a gift, a share of the profits, influence in the company or a discounted product. In the research by Belleflamme et al.

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(2014) the aim was to analyze firms that engage in pre-ordering and profit-sharing forms of crowdfunding. They make several conclusions about this type of crowdfunding, namely:

1. Crowdfunders are willing to pay more if they are interested in participating in the community of the crowdfunded product. More specifically, crowdfunders are more generous when they identify with the community and feel like they belong.

2. Tech lovers specifically are useful in the company’s process of innovation.

The interesting thing is that with an initial crowd offering both pre-ordering and profit-sharing is part of the crowdfunding process.

Initial Coin Offerings

When blockchain projects and crowdfunding come together, ICOs (Initial Coin Offerings) are created. _{An ICO is a form of crowdfunding where a company or project team} sells the public tokens or coins in order to launch a blockchain based company or project. Most ICOs are organized on Ethereum’s blockchain as it offers the smart contract feature, also known as the ERC-20 token standard. In other cases the company or project creates a native blockchain. Other blockchain platforms that offer the possibility to launch an ICO are (amongst others) NEO and Waves.

Paradigm Shifts in Digital Business

Karakas (2009) defines World 2.0 as an “interactive, hyper-connected, immersive, virtual, digital online ecosystem”. He believes that the continuous growth and additional functionality of internet technology is dramatically changing the landscape for businesses. Technology is developing in such a way that it plays into semantics and therefore will make

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users feel as being part of some parallel and simulated universe. He identified 5 paradigm shifts in internet technology that impact the way we do business. He proposed the following:

1. Creativity. Creative and integrative thinking plays an increasingly important role in digital business models. Companies are trying to foster peer-driven collective creativity in order to develop innovative ideas.

2. Connectivity. The ability to connect and communicate through internet technology is playing a crucial role, as it diminishes the limitations of

geographical location on access to knowledge and resources. It also relates to the speed of connectivity, as computers are exponentially growing in their ability to compute and thus make processes even faster. Karakas (2009) refers to some important findings by Stromquist (2002) and Anderson (2004). They found that the hyper-connected user often feels part of a global virtual world more than that they feel part their country. They are sometimes referred to as digital natives and can be recognized by the deep integration of internet technology in their daily lives (Prensky, 2001).

3. Collaboration. According to Karakas (2009) this paradigm shift can be best described by Tapscott and Williams (2006) in their work Wikinomics. Wikinomics describes how people all over the world collaborate online and participate in social platforms to contribute to global social development. Mass collaboration is based on four principles, namely openness, peer-to-peer, sharing and cross-border work. Together, the people participating in mass collaboration, they form the global brain.

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4. Convergence. The convergence paradigm shift stands for the unification of information channels via the internet, hereby creating a powerful force for globalization, innovation and democratization.

5. Community. The final paradigm shift represents the leveraging of digital platforms for community benefits. Social movements and self-organization of virtual communities occurs via social media. Online communities can engage in a variety of activities such as entertainment, politics or business.

Using these paradigm shifts, Karakas (2009) believes that entrepreneurs and managers will gain a better perspective on how the way of doing business is changing. He argues that these shifts mean that companies will need to expand their innovation processes to be accessible for virtual communities, and by doing so use collective intelligence to improve innovation processes.

These paradigm shifts, may be especially represented in blockchain-based companies. Due to creativity, innovative startups are popping up every day. Thanks to connectivity, blockchain-based businesses are often working with remote teams together on Github with people from all over the world. Thanks to collaboration, the blockchain-based business prospers, as it is often open source software that invites others to contribute. And thanks to the community, blockchain-based businesses gain recognition and rely a lot on

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Community Participation

Online communities are interesting to the participants for various reasons (Wind and Mahajan, 2002). Madapu & Cooley (2010) propose 5 motives of participation in virtual brand communities based on the research of Dholakia, Bagozzi, and Pearo (2003):

1. Information: where the sharing and exchange of information is important to the participant, as well as specifically exchanging this with like-minded participants and/or experts. (e.g., Hars & Ou, 2002; McKenna & Bargh, 1999)

2. Self-discovery: where one establishes one’s self through interaction with others by seeking refinement in one’s own thinking or by connecting the self with external phenomena. (McKenna & Bargh, 1999)

3. Social integration: where one is motivated by building social relationships with others that are like-minded, in order to combat loneliness and find support. (e.g., McKenna & Bargh, 1999; Wellman & Gulia, 1999).

4. Social Enhancement: where one is motivated to participate for the validation one is getting from the community and the building of social status (Baumeister, 1998; Hars & Ou, 2002).

5. Entertainment motives: where one is participating to have fun and to relax (McKenna & Bargh, 1999).

According to Nielson (2006) we can identify three participation types, where 90% of the users are so-called lurkers and are solely reading or observing without contributing, 9% are contributing now and then, and 1% are participating very actively to the extent that they become known faces in the community.

Takahashi, Fujimoto, and Yamasaki (2007) researched what the role of these so-called lurkers was in online communities. One might think that lurkers, due to their

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non-contributing behavior, are not real active participants of a community, however, the opposite is true. Lurkers are active members of the community as they derive value from the community-generated content and are often engaging in communication in private

circumstances, such as per email or direct messages. Takashi, Fujimoto, and Yamasaki (2007) found that about 40-50% of these lurkers spend their time this way. The derived value for the company is that often the pressure on customer support channels are alleviated. The derived value for the active community members, however, is still unknown.

The active participants in a community are generally considered those who help answer questions, share relevant content and posts, and participate in the company’s

initiatives. In short, active participants are considered those who are visible in the community in some way that keeps the community going (Rheingold, 1993).

When marketers understand the motivation that drives participation in the company’s communities, it allows them to to reach their target audience faster and in the right way, as well as being able to influence the community in a more strategic way (Dholakia & Bagozzi, 2001). It also allows marketers to empower participants to take a more fulfilling role for the participant and in the benefit of the company, through engagement, collaboration, and advancing relationships with the participants in order to further individual and shared goals (Rheingold, 2002; Wellman & Gulia, 1999).

Active participation in virtual brand communities is essential (McWilliam, 2000) as it improves the endurance and dynamics of a brand community (Bagozzi & Dholakia, 2002). Active participation also indicates brand loyalty, defined as where one will prefer products from the brand one is actively participating in in the community instead of the competitor (Thompson & Sinha, 2008). This indicates that active brand communities can contribute to winning from the competition.

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Marketers are interested in how to create durable and healthy online brand

communities (Carlson, Suter & Brown, 2008) as there is a strong incentive for the company to manage these brand communities well. Community commitment has a positive influence on brand loyalty (Kang, 2004; Jang, Ko & Koh, 2007) and therefore can be leveraged to improve financial performance of a company (Jang, Ko & Koh, 2007; Thompson & Sinha, 2008).

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Method

A qualitative conventional content analysis approach will be used as proposed by Neuendorf & Kumar (2002) and Krippendorff (2004). Using conventional content analysis the most important findings and messages will be highlighted and grouped into themes to answer the research question. This approach fits this research the best, as it allows for identifying and understanding a range of factors of which we currently know little about (Straus & Corbin, 1990).

Participants

11 participants have been identified for a focus group interview using purposive (Stone, 1978) sampling methods. The reason for using purposive sampling methods is that the participants were required to meet specific criteria (i.e. participated in an ICO and active on Telegram) and thus needed to be selected to be able to provide a richer contribution during the focus group. This sampling method may introduce bias in the results as

overrepresentation of high-involvement users, and leaves out at least 90% of community participants.

Data collection, coding and analysis

The focus group protocol - constructed and based on the memos in Appendix B - can be found in Appendix A, and has a semi-structured interview using open-ended questions that searched for the motivation for the participants’ behavior. The recorded data has been

transcribed, coded and anonymized in Nvivo 12. After the transcription process, I proceeded with organizing and reducing data through coding and I have defined the coded data with a description (see Coding Tree in Appendix C). I proceeded with related ideas and themes to draw conclusions and to make sense of the data (Miles & Huberman, 1994) by looking at

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similarities, differences, frequencies, relations, and causations (Saldana, 2015) as also represented in the coded data.

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Results

The results of this research show three main findings. First, it has identified some common roles that cryptocurrency community participants are taking on. Second, it has identified motivators similar to those proposed by Madupu & Cooley (2010) as well as two additional motivators. Third, it has identified that some motivators are more important for some community participants than others, depending on their role. Fourth, it identifies what is important in terms of present factors to facilitate an optimal relationship between the

company and the cryptocurrency community member.

Table 1 _Demographics

Role Gender Age

Developer Male 20

Trader Male 27

Investor Male 33

Developer Female 24

Community Member Female 23

Volunteer Male 38

Volunteer Female 29

Community Member Male 18

Employee Male 27

Investor Male 24

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Roles in Crypto Communities

As you can see in Table 2, there are a number of distinct roles people can play in cryptocurrency communities. The most dominant seem to be the traders and investors, which may sound similar but are actually quite different as the investor tends to hold his or her coins/tokens longer and weighs decisions more than a trader - who trades more frequently (sometimes even daily) and is often led by the news cycles or technical analysis.

Table 2 _{Roles in Crypto Communities}

Role Example quotes

Developers As a developer you always want to develop the next best thing out there, and it is therefore then impossible to not be engaged with the newest technologies. I like that crypto projects

introduce so much variety that truly impact the way we think about organizing our societies.”

Volunteers Sharing the vision of [...] I participated very actively in our community chats and consider myself a volunteer for the project.

Traders … I am mainly interested in trading bitcoin, but I also

occasionally buy and sell altcoins as these have the potential to swing on news announcements quite a bit.

Investors … I identify investing opportunities by analyzing the social activity around a project. Once we decide to buy tokens from a project we usually hold them for a long time, unless the social activity seems to significantly lessen.

Members I do not have a very specific role like some of the others, but I just like to jump on telegram and talk with other crypto people like me.

Employees [...] I have worked for several projects as a community manager.

In Appendix C you can find the exact definitions for these roles. What is more interesting about these roles, is how they relate to the way community members experience

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Motivation Community Participation

The 5 motivators as proposed by Madupu & Cooley (2010) (informational,

self-discovery, social integration, social enhancement, entertainment) were also present in this focus group, however, two additional motivators were also identified, namely the financial motivator and the professional development motivator. All motivators, except for the financial and professional development motivator, were generally greeted with a “yeah” and “hmm hmm” [nodding] during the conversations, which indicates some sort of agreement and recognition in these motivators. When the participants were asked in what way they would agree when saying “yeah” or “hmm hmm” [nodding] they often could not really

formulate an answer per se, but indicated that they thought that what the other said was valid. Informational Motivator

Developers in particular reported various factors related to enrichment as a reason to actively engage in cryptocurrency communities. “By engaging with these new technologies you can build a competitive advantage, as few people possess these skills” one developer noted. Developers in the focus group pointed to personal development like education and skill building as an important reason to engage in crypto communities.

Traders are usually “looking for financial information and indicators” and especially find “roadmaps useful”. Investors would generally agree with finding roadmaps useful, but only if the progress can be clearly tracked and that there is “proof something is getting done.”. Community members are generally also looking for the aforementioned information, but they are also “interested in events that the projects are attending, like Consensus” as they are interested in meeting the teams. Employees are looking for information in order to support their strategies, such as to “collect ideas from other projects and see what they are

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doing” or to “maintain relationships with the other project if we are partnered” as they are looking for “relevant hooks to connect with partners over social media, such as Twitter”.

Self-Discovery Motivation

The self-discovery motivator was especially apparent in volunteers and community members. Many community members and volunteers were “fascinated by the innovation” of the projects and were looking to further develop their own perspectives on topics such as governance, future societies and decentralization. The volunteers and members were interested in discovering a way to position their thoughts about the blockchain world as “it changes how the world is structured” and “it is like I discovered a new world”. It has challenged even political beliefs, as one member describes that “I never thought about a different way of governing, and now I do” and a volunteer mentions “it is like you discover some sort of freedom through technology, as it is all in your control what you do with your money, and your data.” The self-discovery seems to also manifest in a way of feeling empowered, and discovering that one can use the external phenomena of blockchain to change century-old societal structures, as one member states “when I read about government as a service, my mind was blown”.

Social integration Motivation

Volunteers seem to be driven more by shared visions that they are very passionate about and can share with others. As one volunteer indicates: “at home I cannot talk about these topics, nobody finds them interesting… at all”. A community member recognizes this and follows with “same here, if I mention crypto one more time to my wife, she will kill me [laughing].”

A developer indicated that ‘it is not my main goal to be social or anything, but I guess if projects have something like Gitter, I do use that to connect with other developers”. He

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followed with: “actually strong developer communities are probably something I am attracted to automatically, I never really thought about needing to join a community for social

purposes, but I think it is actually taking that role”. When the developer was asked if he also met with people offline, he indicated that he “go[es] to events now and then, but usually [...]at home behind the laptop”. The developer did not want to immediately indicate that interacting online was for social purposes, however, it seems that it may be a possible motivator for him as he is sitting at home alone most of the time and has a need to be in strong developer communities.

Social enhancement Motivation

Volunteers are interested in getting validation from the community as one volunteer indicates “it is nice to hear thank you from the community for what I do” and “the team members of the project often talk to me and give me extra insights, which I really like”. Especially the latter indicates some motivation through the acquiring of social status as the volunteer receives special “insider information”.

Entertainment Motivation

Whilst all participant generally enjoyed participating in communities, traders specifically derived an entertaining value out of it. “I am just addicted to finding gifs and spreading these all over Telegram” and “sometimes I make technical analysis charts on tradingview, just to make people go crazy. I really don’t know how to do technical analysis.” It seems that the traders are perhaps finding some joy in being trolls (acting out on purpose up to the point of getting banned, and then returning under a different name), as they are very entertained by the hysterical reactions in times “bitcoin takes a dump” [meaning goes down in price].

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Furthermore, these traders are also “mostly active on Reddit” as it proves “the most entertaining” value to them. After a long day of work, “turning on my computer with Bitmex and Reddit and a beer is the best thing ever”.

Traders usually use a projects Telegram “to just ask questions and have some fun sometimes” and use “mainly Reddit” for entertainment and relaxing purposes.

Professional Motivation

Developers like to participate in open source cryptocurrency projects not only due to an informational motivator, but also for career purposes. “Practicing with code of new technologies helps me get used to it” was said by one developer. The number of

cryptocurrency related studies seem to be lacking, as the developer indicates that “there are not a lot of resources or courses I could follow, so the best way to learn it is to get your hands dirty”. None of the other participant roles indicated professional development as a motivator.

Financial Motivation

The traders and investors are more interested in financial information about the token. This financial information is sometimes retrieved “by just talking to other community

members about what they think would happen with the price, and make an estimate based on that”.

One might think that everyone cares about the token price, as it is the key indicator of success for a project. However, volunteers have reported to not care about the token price as much, as long as their vision that they share gets fulfilled. Developers sometimes do not even own the cryptocurrency, as they often use faucet cryptocurrency to play with in their

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Company - Community Participant Relationship

In the previous section we mentioned that developers liked to engage with educational and career building content emphasizing their motivator for professional development and informational needs. One significant occurrence seems to be that companies rarely offer enough documentation, tutorials and samples for developers to get started. This leads to developers skipping those projects all together.

What is definitely important in maintaining relationships between the company and the community members is that of timely communication. “Especially for me as a volunteer, I get very annoyed when a company does not communicate timely or delivers on time… I am defending them and communicating for them…” indicating that some harm to social

integration could be done as the volunteer feels the social relationship between him/her and the company is harmed as the company is not providing the volunteer with the very basics. A developer, on the other hand, pointed out: “some people are just too dependent on getting constant updates, they are better off learning to code rather than getting a thousand updates every day for every single change on Github” which can point to a form of social dividedness that may harm social enhancement, as the one participating may not be getting full validation from the community due to differing perspectives on communication in the community. The traders and investors pointed out that “it is especially harmful if a company stays quiet about their financial updates”. This group also thought that “no communication probably meant that the company was suffering”, and are therefore “likely to leave the project”. This indicates a clear financial motivator of participating in the cryptocurrency community, which may be incentivized by providing financial reports.

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A participant with the member role said: “I think that being transparent should be leading in the blockchain world”. All others agreed to this. The developer adds: “Yes, and since they are open source too, they should have embracing strategies for newcomers.

Ethereum does this very well actually. Part of this is getting the information resources right”. In general, all participants seemed to agree with the notion of transparency, however, the frequency and type of communication expected varies per person. Too little information does harm the informational motivator, as the community participants cannot find the information needed for the community to function, e.g. developers are reluctant or cannot start coding without the documentation.

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Conclusion Discussion

Three main themes have been identified in this qualitative data analysis, namely the roles crypto community members take, their motivation to engage actively in cryptocurrency communities, and which factors play a role in their relationships with the company. These findings could have several implications for marketing strategies that manage cryptocurrency communities which shall be discussed per theme next.

We identified that there are 6 distinct roles participants in cryptocurrency

communities could take on and we identified 2 additional motivators, namely financial and professional development (to advance career). The motivators seem to play some sort of role for all of them, except for the financial and professional development motivator. It also appeared that some motivators are stronger for some roles than for others. In the following list the strongest motivators per role will be summarized:

1. Developers main motivators: informational, social integration, professional development.

2. Volunteers main motivators: self-discovery, social integration, and social enhancement.

3. Traders main motivators: financial, informational, entertainment. 4. Investors main motivators: financial, informational.

5. Members main motivators: self-discovery, informational. 6. Employees main motivators: informational.

Furthermore, we have also gained a better understanding of which factors play an important role in the relationships with the company. Participants expect that the company is very responsive and facilitating to their needs. E.g. frequent communication is important for

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building a trust bond with community members, and providing the right resources such as developer documentation is a minimum requirement for developers to consider participating in the projects. Whereas when a company is silent and does not provide frequent

communication, trust bonds are harmed and this creates disruption in the cryptocurrency communities. Weak sense of trust seems to directly affect the financial, social enhancement, and self-discovery motivator.

Implications

This research contributes to the existing research as it gives some important insights in distinct motivators for participation in cryptocurrency communities. First, we can confirm that at least the motivators as defined by Madupu & Cooley (2010) as also at play for

cryptocurrency communities. However, it seems that some motivators are more important than others, depending on the role the participant identifies with. Furthermore, an additional motivator was also discovered, namely financial.

For marketing managers this indicates that building cryptocurrency communities could be done by enabling the right motivators for the user roles you would like to see more. There was no previous research about motivators in cryptocurrency communities, let alone how these motivators affect specific user roles in cryptocurrency communities. By knowing the roles crypto community members identify with, crypto marketers can better target these community members and work on growing specific subgroups in their audiences. Since we know their motivation for engaging actively in cryptocurrency communities, we can incentivize them with that knowledge. For example, developers are motivated by the

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the vision are intrinsically motivated by being able to take part in the execution of the strategy as volunteers.

By taking the desired user role and building a campaign around this, marketing managers can grow their cryptocurrency communities in a way that suits them the best, and thus eventually create a durable and healthy community with the right balance so optimal participation and interaction is facilitated (this balance may vary from project to project).

If marketing managers build crypto communities successfully, they may be impacting firm performance as it was found that community participation and community commitment drives brand loyalty, and thus positively impacts firm performance (Kang, 2004; Jang, Ko & Koh, 2007; Thompson & Sinha, 2008)

Limitations and Directions for Further Research

For future research, it would be interesting to see how important each of the motivators is for community participation per role through quantitative methods. Some motivators may be more true for developers, e.g. information and education, whilst others may be more relevant for volunteers, e.g. self-discovery and social integration.

As it is argued that community participation affects brand loyalty, and increased brand loyalty can enhance firm performance, it would be interesting to research how these dynamics exactly work in cryptocurrency communities. What sets cryptocurrency

communities and blockchain-based companies apart from the subjects researched in current literature, is that the ownership of the company and its ecosystem is quite ambiguous in the crypto world. As mentioned before, by buying a token one essentially bought a part of the ecosystem that is underlying the company, and thus this sense of ownership can motivate community participation and brand loyalty in a different way than it is occurring with traditional companies.

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Finally, the silence of the lurker who is using the community is also deriving some sort of value from this. It would be interesting to see if it is possible to define a user role, identity and a relationship between the company and the lurkers in cryptocurrency

communities to understand their motivators of being engaged with the community in a silent way and how they impact brand loyalty.

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Appendix Appendix A: Focus Group Protocol

This protocol served as a guideline and was not followed strictly. 1. Introduction

a. Word of welcome.

b. Describing the aim of the research. c. What to expect.

d. Consent forms. 2. General

a. Everybody introduces him/herself.

b. Asking participants how they got involved with crypto and to give a more general story about their involvement.

3. Participation

a. Asking participants how often they are participating in cryptocurrency communities.

b. Asking participants why they are involved in cryptocurrency communities. c. Asking participants if they bonded with other crypto enthusiasts.

d. Asking participants about their participation in ICOs and trading.

e. Asking participants why they think the crypto community they participate in is interesting.

4. Company - Community

a. Asking participants to tell something about their relationship with the companies.

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b. Asking participants to tell something about the communication between them and the companies.

c. Asking participants about how the company involves them. d. Asking participants if they feel they can influence the company. 5. Concluding remarks

a. Asking participants if they have anything to add. b. Conclusion.

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Appendix B: Memos

I have had quite some experience with cryptocurrency communities in various forms, which may actually be quite unique to me. I believe that these experiences give me some starting point in this research, since the research on this topic is lacking extremely. I will describe my own roles, motivations and relationships with crypto companies shortly here. This experience forms the basis for the questions asked in the focus group as well. Developer

I have been engaged as a developer in the crypto communities, because I found it cool to try out new technologies myself and play around with them. Usually I would just get what I need from whatever the company provided in that role, and I did not as much engage with the community myself.

Trader/Investor

I bought and sold many cryptocurrencies and I hold some cryptocurrencies for long periods of time. I have also participated in ICOs. My interest in this is that I like reading business plans and making investment decisions as a hobby. Usually for this role, I would be present in the telegram chats passively only for the moments I hold a coin.

Volunteer

I have also been a volunteer for a project I really liked because I shared their vision. I was really active in that group, and also was an admin. I had daily contact with other

community members and also with the company. Employee

Currently I work for a cryptocurrency company, namely the one I volunteered for :). I still hold close contact with the other volunteers and the crypto community.

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Whilst I did hold different roles, my experience as a community manager and talking with many people on a daily basis in the community, is that one does not really mix roles as much. This may indicate that there is a very distinct motivation per user role, so I am curious to see what the focus group will give me in terms of qualitative data.

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Appendix C: Code Tree

Name Description Participants talking References

Motivation What motivates a cryptocurrency community member to participate in the community?

N/A N/A

Enrichment Looking for education, career

improvements, or any other enrichment to further one’s personal goals.

6 18

Financial Motivated to participate in order to contribute to an increase in token price or even a decrease to buy something cheaper.

7 50

Friendships Motivated due to the social value one gets out of the interaction in the community.

8 20

Shared Vision Motivated to participate due to the shared vision and wanting to contribute bringing that to execution or showing your support for it.

8 20

Relationships What is the relationship between crypto companies and crypto community members like?

N/A N/A

Communication The way and frequency of communication between the company and the community member.

9 86

Resources Resources that the company provides to community members in order to spread

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the message or to participate in the project.

Rewards The appreciation of the company to the community member, for example in the form of rewards such as bounties.

6 29

Transparency How visible the company behaves w.r.t. the community member.

7 7

Roles What roles to crypto community members take and how do they identify

themselves?

N/A N/A

Developers Someone who is an active developer. 2 8

Employee Someone who works for a blockchain-based company.

1 3

Investors and HODLers Someone who makes weighed investments in cryptocurrencies and usually holds coins for longer periods of time.

2 9

Traders Someone who trades various

cryptocurrencies frequently and usually is present in crypto communities for the news and updates that act as buying or selling signals.

2 9

Volunteers Members of the community that volunteer by helping out managing the community, e.g. by answering questions and taking a possible admin role.

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