The use of cryptocurrencies in a liquidity crisis environment
SUBMITTED IN PARTIAL FULLFILLMENT FOR THE DEGREE OF MASTER
OF SCIENCE
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RIGORIOS
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SARDANIDIS
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ASTER
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NFORMATION
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TUDIES
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UMAN-
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ENTERED
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ULTIMEDIA
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ACULTY OF
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CIENCE
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NIVERSITY OF
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MSTERDAM
July 21, 2017
1st Supervisor 2nd Supervisor
Dr. Yannis Ioannidis Dr. Frank Nack
The use of cryptocurrencies in a liquidity crisis
environment
Master Thesis - 21 July 2017
Grigorios Tsardanidis
University of Amsterdam
pastsar@gmail.com
ABSTRACT
Although cryptocurrencies have achieved large market capi-talization their use remains limited among the general pub-lic. Our idea is to put the cryptocurrency technology into a different context where it could be massively used as a basic mean of transaction. Our goal is to research whether a blockchain-based cryptocurrency could be widely adopted in a liquidity crisis environment where the dominant mon-etary system has failed. For this purpose we conducted a qualitative survey among experts to gather information on how a cryptocurrency should be designed to fit this context. We produced a basic prototype design which we presented to economic actors in Greece in order to assert their opinion on it, in search for the factors that would influence the adop-tion of the system. Our design had major differences from the current cryptocurrency trends and received mixed re-sponses from the economic actors interviewed. We conclude that more research is needed to fully evaluate the prospect of wide adoption of a cryptocurrency in a crisis environment.
Keywords
blockchain technology, cryptocurrencies, economic crisis, user adoption, monetary systems
1.
INTRODUCTION & MOTIVATION
On many occasions blockchain based cryptocurrencies have been described as a potential replacement for the established monetary system. Some advocates go as far as describing all other currencies as fiat money. (Columbia, 2015) The market capitalization of cryptocurrencies has risen in the recent years, standing today at 25 billion dollars, with Bit-coin leading at 20 billion dollars (CoinMarketCap, 2017). Nonetheless, still cryptocurrencies represent a small share of the monetary circulation and remain unknown to the general public. Many arguments have been raised against them, in particular for their unstable nature and their use for illegal purposes. (Barber, Boyen, Shi, & Uzun, 2012)
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The common context in which cryptocurrencies are used is in an advanced economy by technology experts and finan-cial investors. Our aim is to set a different context for the use of cryptocurrencies. We want to research whether such a currency could be widely used in a case where the estab-lished monetary system fails. The decentralized nature of the currency and it’s scalability makes it an interesting al-ternative for the established currencies in a liquidity crisis environment. Since there is no need to print actual notes or establish finacial institutions, a cryptocurrency could be de-ployed rapidly with limited economic resources. We decided to use the case of Greece as an extreme case of an economic environment facing a liquidity crisis. Greece has been in economic crisis since 2009 and has faced a huge decline in demand and money circulation, while austerity policies have further limited the capacity of the economy (Lapavistsas, Mariolis, & Gavrielides, 2017). Many economic actors resent from using the banking system either because their money would be confiscated or because they fear losing their sav-ings.
Our aim is to research whether in such an environment a cryptocurrency could be implemented and adopted by the economic actors. The first part of our research will be to collect information over how a cryptocurrency should be designed to fit an economic crisis environment. This pro-cess includes a literature research about cryptocurrencies and complementary currencies developed and implemented in such economic environments. We have also conduced a qualitative research among blockchain experts, economic ex-perts and participants of relative initiatives. In the second part we designed a prototype cryptocurrency system based on blockchain, fit to the context of the liquidity crisis based on the information collected in the first part. We created a system description in the form of a presentation for the po-tential users and a prototype of the main transaction task. In the third part we are assessed the acceptance and adop-tion of such a system by basic economic actors in Greece including banks, companies, small businesses and citizens by conducting a qualitative survey. Our goal is identify the factors that play an important role for the adoption of such a system and how they are related with the economic crisis environment and the cryptocurrency technology.
2.
RELATED WORK
2.1
Cryptocurrencies & Blockchain
The first blockchain based Cryptocurrency was Bitcoin and was introduced with the white paper of (Nakamoto,
2008). Bitcoin uses a cryptographic procedure within a publicly distributed digital ledger named Blockchain to keep track of all transactions. (Tschorsch & Scheuermann, 2016). It introduced the Proof of Work mechanism to address the double spending problem whereas members of the network conduct cryptographic tasks to verify transactions (Nakamoto, 2008) and therefore creating a P2P payment system without the need for a central authority.
Since then several cryptocurrencies have been developed such as Etherium or Dash. An extensive research on these currencies have been conducted by Florian Tschorsch and Bjorn Scheuermann (Tschorsch & Scheuermann, 2016). They explain thoroughly the structure and mechanism behind Bit-coin and the blockchain - based currencies in general. They analyze the way transactions are conducted and validated through the blockchain data structure, the process through which new bitcoins are being created and also analyze pri-vacy and security issues.
Generally, the focus of research has been primarily on Bit-coin but most of the conclusions can be applied to most blockchain based cryptocurrencies. There have been sev-eral surveys proposing improvements to the system such as (Kroll, Davey, & Felten, 2013), which develop several cri-tiques against Bitcoin, specifically the mining process, and make the case for a regulation authority in order for such a currency to be successful. An extensive research on the rise of Bitcoin and it’s problems is developed by (Barber et al., 2012) In their paper they describe what they call structural flaws of bitcoin and propose ways to overcome them.
Another interesting contribution has been made through the creation of Peer Coin. (King & Nadal, 2012) Peer Coin uses along with the Proof of Work, used by Bitcoin, the Proof of Stake. The Proof of Stake can replace most valida-tion processes conducted with Proof of Work in a much less power consuming way. This method makes the transaction validation process faster and more eco-friendly. In addition the scalability of the system is empowered.
2.2
Economics of Cryptocurrencies
The rise of cryptocurrencies has attracted researchers from other fields such as economics and law. Apart from the tech-nology perspective, Bitcoin and other cryptocurrencies have become an important field of analysis in the context of new economic structures. Interesting extensive reports have been produced by EY (Peters, Panayi, & Chapelle, 2015) Bank of England (Ali, Barrdear, Clews, & Southgate, 2014) and Deloitte (Life.SPEDA VC, 2016) aiming at exploring the possibilities and limitations of these applications.
Another interesting research has been conducted by David S. Evans (Evans S., 2014) who investigates the governance of such platforms and highlights the contrasts between com-munities and the need for stable governance. In another approach David Columbia (Columbia, 2015) criticizes the structure of Bitcoin and argues the need for democratic gov-ernance of currencies.
In an approach closer to our research Tiziana Terranova and Andrea Fumagalli have developed, in the context of the austerity crisis impacting southern Europe, a cryptocur-rency aiming at ”contributing to the invention of an alter-native economic system as a form of finance/credit money able to remunerate social cooperation and the work per-formed by the general intellect.” (Fumagalli & Terranova, 2015) The cryptocurrency has been launched with a limited
use in Italy’s social centers.
A similar project is FairCoin cryptocurrency developed by FairCoop. Faircoin is based on Peercoin and is aiming at creating a fairer alternative to the current monetary system. (K¨onig & Duran, 2016) Faircoin is distributed through a air-drop process and uses the Proof-of-cooperation as a consen-sus mechanism between nodes to validate transactions. Its has also developed FairCredit as a funding mechanism for social projects and works on creating Fairpay, a card to be used for Faircoins within the existing POS system. (Duran, 2016)
Finally, Alex Oberhauser (Oberhauser, 2014) has made an interesting case for using a blockchain ledger to create a scalable Gift Economy.
2.3
Economic Crisis & Complementary
Cur-rencies
Economic Crisis in general provides a framework for the development of alternative forms of liquidity as a mechanism for stimulating the struggling economy. During the Great Recession in the 1930s such forms of liquidity emerged as complementary currencies in several countries hit by the eco-nomic crisis. One of these examples is WIR Bank in Switzer-land founded as a cooperative in 1934 aiming at combating the crisis with the help of a ”ring exchange system” (Defila, 1994). For this purpose the system provided free-interest loans in WIR currency to encourage transactions based on the Free Money theory. This feature made it popular for the crisis-hit economic actors. The policy was later dropped in 1952.
The global economic crisis which started in 2008 and has been defined as the Great Depression, sparked the discus-sion for alternative currencies once again. Part of this pro-cess had been the digipay4growth, an EU-funded program on researching and developing alternative flows of money to stimulate growth. The focus has swifted on digital means of payments through mobile phones or web-based application. Several report have been produced through the program fo-cused on different countries. 1
Moreover, three alternative digital payment systems have emerged in recent years in Europe. One of them is an alter-native currency named Sardex in Sardinia, Italy. Sardex is a digital mean of payments between businesses aiming at facil-itating transactions. (Sardex, 2016) It is not exchangeable to other currencies. It uses a database to store transactions and balances and the Cyclos2 program to make online and mobile payments. It allows the users to go negative in their balances as a way to provide credit. Sardex itself decides the amount of credit for each user based on his history and trustfulness. The Sardex team is developing similar local currencies in other parts of Italy.
A similar Project has been developed in Bristol, named Bristol Pound - a sterling backed currency aimed at empow-ering the local community supported by the local municipal-ity. (Bristol Pound, n.d.) It is available in paper and digital form and can be used to pay local taxes. It is convertible to pounds by the Community itself. There has been an inter-esting research on it’s acceptance by the Brunel University (Ferreira & Perry, 2014)
Finally an alternative payment system has been developed
1http://www.digipay4growth.eu/deliverables 2
in the Netherlands named Social Trade Circuit3 by the
So-cial Trade Organization (STRO) which also had developed the Cyclos program mentioned above. The Social Trade Circuit aims at creating an alternative flow of liquidity by giving credit to SMEs. The Social Trade Credit approach guarantees are collected in the specific supply chain where the credit is going to be spent. In other words, (a part of) the costs of the credit are paid by the (group of) supplier(s) of the debtor that stand to gain from the access to the new credit. (Social Trade Organization, 2015)
2.4
The Greek Crisis & Alternative
Curren-cies
The adoption of a cryptocurrency has been described as a major step in tackling the Greek economic crisis in sev-eral news articles. Paul Mason, economics editor at Channel 4 News, (Mason, 2015) has argued that a bitcoin style al-ternative currency could be used to boost money supply in the Greek economy. He bases his argument on an article of Greece’s ex-minister of economics, Yanis Varoufakis in 2014. (Varoufakis, 2014) Varoufakis claims that a bitcoin-like cur-rency could be developed in the Eurozone to provide an al-ternative source of liquidity for government spending. This currency would be issued by the state but it would be self regulated and future taxis revenues could be used as collat-eral. Varoufakis claims that it could be a useful alternative method of payment for companies and individuals.
There have been several more calls for Greece to adopt a parallel digital currency, without always referring to a cryp-tocurrency. Such a case is NEURO proposed by Christian Gelleri and Thomas Mayer (Gelleri & Mayer, 2012). Gelleri claims in an article in 2015 that such a digital currency, is-sued be the central bank, could be able to tackle the crisis faced by all southern European countries, raise demand and stimulate economic growth. (Gelleri, 2015)
Another proposal has been set by the US based Levy In-stitute. (Papadimitriou, Nikiforos, & Zezza, 2016). They propose a complementary currency used for a Employer of last resort program. Half of the payments to employees will be payed in this currency, named GEURO, to raise demand and revive the economy.
Finally, a UK based project named Drachma Project, launched a cryptocurrency based on the Nxt Technology (Nxt Community, 2014) in the Greek Island of Agistri as a use case of an alternative currency used by local people in the context of the economic crisis. (Drachmae Project, 2015) None scientific reporting has been made available for this project.
2.5
Technology Adoption
Several methods have been proposed to research the ac-ceptance of new technology. Our problem becomes more complex because the user must not only accept a new tech-nological product but a monetary system seriously affecting his everyday life.
A theory proposed for such drastic changes has been in-troduced by (Markus, 1987). Critical Mass theory states that since using technologies involves more than one person in terms of the result of the use as well as the use itself, an individual technology use would be determined by the col-lective behaviors of the community to which an individual belongs. (Markus, 1994)
3
https://www.circuitnederland.nl/
An interesting survey has been conducted by Roos regard-ing the adoption of cryptocurrencies by Small and Medium Enterprises. He uses the Unified Theory of Acceptance and Use of Technology 2 model to examine the factors that drive cryptocurrency adoption in SMEs. (Roos, 2015)
A research work still undergo from (Roussou & Stiakakis, 2016) concerns the adoption of digital currencies by compa-nies in the EU. The research has started in April 2016 and no results have been made available yet. They have combined Diffusion of Innovations (DOI) Theory and Technology Ac-ceptance Model (TAM) to assert the digital currencies ac-ceptance.
3.
RESEARCH GOALS
Our goal is to research whether there can be a cryptocur-rency that can be put in use in a environment of liquidity crisis. We focus our research on a digital currency using the blockchain technology. We also specify the context of the usage of the currency as an economic environment which faces low demand, low money supply and where the bank-ing system in not operationally capable of stimulatbank-ing the economy. We are using the Greek economy is an extreme ex-ample of such an environment. We want to research whether an environment where the economic actors are having prob-lems carrying out economic activity with the base currency, is more friendly for the adoption of a cryptocurrency as an alternative mean of payment. In this context we formulate two research questions.
3.1
Research Questions
The first research question is ”How should a blockchain based cryptocurrency be designed in order to be implemented in a liquidity crisis?”. The question aims at identifying the requirements for a cryptocurrency able create additional liq-uidity and also be implementable in a large case. Our goal is to research how the cryptocurrency technology could be implemented into this new context.
The second research question is ”Which factors play a role in the acceptance of a cryptocurrency in a liquidity crisis environment”?. Our aim is to identify the factors that play a role in making the economic actors, such as business and households, accept the use of a cryptocurrency in the context of a liquidity crisis.
3.2
Research Structure
The research has three parts. In the first part we con-ducted a field overview research including the existing liter-ature, already analyzed in the Related Work, and a qualita-tive survey with experts. The goal is to collect information regarding what the experts of the field are proposing for the case we present them.
In the second part we are working on creating a basic design of such a cryptocurrency fit for our case, taking under consideration the literature study and the expert interviews. We also created a prototype of the main transaction task of the system. The goal is to use the collected knowledge to produce a presentation and a prototype which we can present to economic actors and assert their opinions.
In the third part we are going to present the design overview and the prototype to economic actors in Greece and ask for their opinion. A qualitative approach will be followed. The goal is to find the important factors that would make the economic actors accepts such a cryptocurrency.
We consider our work preparatory for future research. Many alternative designs and a large sample are needed to fully answer the research questions set. Moreover, we ac-knowledge that further research regarding economic factors will be needed to fully define the design and the implemen-tation of such a cryptocurrency in order to be economically successful but this goes beyond our current project.
4.
FIELD OVERVIEW
The first part of the research is focused on gathering in-formation useful for the design process. For this purpose we conducted a literature study and made expert inter-views. We decided to talk with experts on Economics and Blockchain to get their opinion on how such a cryptocur-rency should be designed. We also conducted interviews with members of existing initiatives who could share their useful experience.
4.1
Overview Goals
The goal of the field research is to gather information for our first research question: ”How should a blockchain based cryptocurrency be designed in order to be implemented in a liquidity crisis?”. Within this part of the research our main aim is to define the requirements for the cryptocurrency.
Important components of this design are the type of the blockchain mechanism, the methods used to verify and store transactions and the distribution and money creation pro-cess. Another important aspect is the payment methods the currency should support. Our aim is to research the various ways the general public could use the currency.
Moreover we aim to define the structural elements of the currency: The governance of the currency, the role of the issuer, the control of the money supply and the way it can be implemented.
Given the open nature of our questions we decided not to focus on specific aspects but undergo a unstructured ap-proach and let the experts freely share their experiences and opinions.
4.2
Field Research Methods
4.2.1
Literature Study
The literature study is extensively discussed in the Re-lated Work section. For the literature study we mainly used Google Scholar and took under account the relevance to our research subject. We also focused on the work of specific ex-perts already known to have discussed the matter in the pub-lic sphere. We considered the experience of working projects very important and had particular interest in understanding how they function.
4.2.2
Quasi-Conversation
In addition to the literature study we conducted a qualita-tive survey among field experts and members of initiaqualita-tives. For the interviews We decided to use the Quasi-Conversation method proposed by (Bogner, Litting, & Menz, 2009), Ac-cording to this method the interviewer tries to create a Quasi-Conversation with the interviewee. The interviewer as a quasi-expert starts a conversation with the expert and tries to make him/her feel like talking to a colleague about their common field of interest. This way the expert feels that the conversation is more natural and thus can more easily express his/her views and ideas on the subject. We decided
to undertake this approach because we wanted to focus on the view of the experts for the overall idea and we did not seek answers to some specific questions. Especially for the members of existing initiatives this method of interviewing made them feel very comfortable in expressing their views and bringing forward their own proposals on addressing the issue described.
To apply this quasi-conversation method we decided to conduct all the interviews either face-to-face or via video calling. Facial contact plays an important role in building a comfortable environment for the expert to be expressed. The interviewee was presented a small description of the idea4 and was asked to comment on this and share his own approach. Than ,according to the way the conversation was unfolding, several question were asked. We had prepared some example questions reflecting some of the aspects of the system design we considered important. 5 The
ques-tions were posed in accordance to the expert’s particular interests and knowledge within the context of the develop-ing discussion in order to resemble a conversation among colleagues. As a result not all questions were posed to all experts and many question were answered within the con-versation without being clearly posed.
4.2.3
Sampling
Due to the limited time available a convenient sampling method was applied. We chose the experts based on their preoccupation with the subject of the research but also on their availability during the period of that phase of the re-search in Spring 2017. The initial goal was to conduct inter-views from two group of experts: Economics and Blockchain. The first group includes economic experts who have been preoccupied with monetary theories. Our focus was on ex-perts who have proposed cryptocurrencies and alternative currencies as a solution for an economy facing a liquidity crisis. The second group is blockchain experts familiar with cryptocurrencies.
We wanted to interview three experts from each field. Although as the survey was developed it became visible that some experts were working on both the technologi-cal aspect and the economic aspect of the cryptocurrencies. Moreover we came across members of initiatives that were not experts in none of these fields but had valuable expe-rience to share from their participation in such projects. In addition, it proved difficult to interview experts on the blockchain/cryptocurrency technology. As a result we re-constructed the experts groups as economics, blockchain and initiative members and decided not to constrain the number of interviews based on the interviewee’s category.
4.2.4
Interviewees
The interviewees as we discussed above where selected under a convenient sampling method. Most of them were selected because their research work was related with our subject and were cited in literature. Other interviewees are member of initiatives which aim at creating additional liq-uidity in a crisis environment. Lastly some of the intervie-wees were introduced by the Bitcoin Wednesday Meetup.
6 All interviewees agreed verbally on reveling their roles
in their projects and also their names, apart from one who
4
See Appendix A.1
5See Appendix A.2 6
preferred to use an alias. All the interviews took place in April and May 2017. Beneti, Duran, Theofilis and Stavrou were interviewed in person in Amsterdam and Athens while Zezza, Lietaer, Littera, Papaioannou and Peerpeep were in-terviewed via videocalling. We introduce them ordered al-phabetically:
Aspasia Beneti is a developer at FreeCoin7, an
Amsterdam-based project on building a toolkit for social digital curren-cies.
Enric Duran is an activist and member of the FairCoop. He is also one of the core member of the FairCoin cryp-tocurrency aiming at creating a sustainable alternative to the current monetary system based on cooperation.
Zennaro Zezza is an associate professor of economics at the University of Cassino, Italy. He is a member of the Levy Institute’s Macro-Modeling Team and a co-author of its Strategic Analysis reports. He has also co-produced a research making the case for a complementary currency to be used in tackling the Greek Economic Crisis (Papadimitriou et al., 2016)
Bernard Lietaer is an Economist and Professor at Paris-Sorbonne University and Research Fellow at the Berkeley Center for Sustainable Resource Development. He is the writer of the ’Future of Money’ and a leading thinker in the field of complementary currencies. He now participates in the Bancor project8.
Giuseppe Littera is the ICT of Sardex, an alternative currency in Sardinia, Italy which aims in creating additional liquidity within a business to business trade exchange net-work to tackle shortages.
Christos Papaioannou is a founding member of TEM
9
, an alternative currency in the city of Volos, Greece aiming at creating a productive community so people can cope with the effects of the economic crisis.
@peerpeep10 is the project lead of the PeerCoin cryp-tocurrency. PeerCoin introduced the Proof-of-Stake concept in the cryptocurrency field (King & Nadal, 2012)
Petros Stavrou is an Economist in the Management Or-ganization Unit Of Development Programmes of the Greek Ministry of Economy and Development.
George Theofilis is a blockchain expert at Synaphea11, a Athens-based start-up aiming at creating blockchain-based solutions.
4.2.5
Thematic Analysis
The data collected was analyzed as expert literature with the use of thematic analysis as described in (Bryman, 2016). The goal is to identify different themes inside our data and try to spot what the interviewees have express on these theme. We use the Framework strategy as described in (Ritchie & Lewis, 2003). We construct an index of central themes and subthemes which we represent in a matrix, filling in the approach on these themes by the interviewees. Due to the nature of our subject and the interviewing method undertaken not all cells of the matrix are filled. Some in-terviewees were unable or unwilling to respond on certain questions, while not all questions were set to all
intervie-7http://freecoin.ch/ 8
https://www.bancor.network/
9https://www.tem-magnisia.gr/ 10
The interviewee decided to remain anonymous and used his PeerCoin chat username
11
https://synaphea.com/
wees.
With this method we try to find repetitions, similarities, differences and generally the relations between the different approaches in order to map them and develop more coherent proposals. Moreover, we have concluded the main findings per theme in the section below to give the reader a better un-derstanding of the views of the interviewees. The complete framework matrix can be found in the Appendix12. More
themes and subthemes could be identified in the interviews but because of the limited time available we decided to focus on the ones closer to the scope of this research. The tran-scripts of the interviews can be made available upon request for further analysis, after consent from the interviewee.
4.3
Field Research Results
4.3.1
Structure
The theme Structure contains the structural characteris-tics of the currency. This means the way it is build and functions as a currency.
Currency Issuer One of the keys subjects that came up in almost every interview was who is going to issue such a currency. Some of the interviewees considered the govern-ment the most appropriate institution to do so. According to this perspective shared mainly by Zezza and Peerpeep only the government has the ability to implement such cur-rency in a broad way in order tp have an actual positive impact in a devastated economy. The government could push the use of this new cryptocurrency with it’s institu-tional power and through the taxing system - an opinion also shared by Stavrou, although the latter thinks that such a cryptocurrency could also be developed by social move-ments or municipalities. This bottom up approach is closer to the ideas of Duran, Benneti, Papaioannou and Littera. They make the point that these types of currencies can be implemented more successfully if they are issued by com-munities, social actors or municipalities. This bottom up method can help in creating trust within the community. The community will feel the currency as it’s own asset and as a result treat it as an added value currency not only as a mean for transactions. These different approaches also re-flect the field where the currency should be implemented. A national alternative cryptocurrency requires government action to be introduced while a community cryptocurrency is more efficiently deployed by communal institutions or ini-tiatives. Nonetheless both different approaches see this al-ternative cryptocurrency as a complementary one at least in the fist stages. Theofilis ,although is not against the state issued currency, seems to follow an approach closer to latter one and consider that a cryptocurrency that is regarded as a token for internal transactions inside a community could prove more useful and easy to implement. He also makes the point that such a tokenized cryptocurrency would be considered legal to use in Greece. Finally in a different ap-proach Lietaer argues that such a project should be under-taken by international institutions including the EU and the IMF which can issue bonds to back the additional liquidity. Finally Littera also talked about another proposal he has developed for Digipay4Growth program regarding a tempo-ral currency that would be traded to Euros after 90 days (Littera, 2015) but we decided to focus and reflect on his
12
experience with Sardex as we considered it more important and detailed.
Money Supply The subject of the Money Supply was also present in all the interviews and is has also been a cru-cial part of the debate regarding cryptocurrencies in general. It became apparent from all the interviews that for a cryp-tocurrency to be useful in a situation as described the money supply should not be fixed as it is now for most cryptocur-rencies including Bitcoin. Therefore some sort of governance is needed which will have the ability to decide on the money supply of the new currency. Two different approaches have emerged from the interviews in reliance with the opinions for the issuer of the currencies described above. Zezza and Peerpeep propose that the money supply for such a currency should be decided by the government based on it’s economic policy. Zezza goes in to more details and claims that the government should be taking under consideration the cur-rent account of the country and the state of the economy aiming at stimulating growth and simultaneously restrain from inflicting inflation or jeopardizing the trade account. On the other hand Duran and Benneti claim that the com-munity should decide for the amount of the money supply. Big nodes of the network such as Cooperatives or Municipal-ities should come together and decide to raise or decrease the money circulation according to the needs of the community. On another approach Stavrou thinks that money supply is set by the economic activity itself and what the government needs to do is focus on how the money flows would be kept inside the country.
Credit As Stavrou stated from the beginning of his inter-view the ability of such a currency to create extra liquidity is crucial to achieve the primary target of it’s implemen-tation, which is to stimulate economic activity. Most of the cryptocurrencies in use, including Bitcoin, do not allow money creation ’as debt’, as the conventional currencies do. In the contrary, they criticize this feature of the so called fiat currencies. To overcome this setback Duran and Littera propose the alternative of negative balance. The nodes of the system, the actual users of the cryptocurrency, can go in negative balance in order to provide extra liquidity to the system. The extent in which they can go negative is related with the trust they have in the community. Nonetheless a cap must be in place to prevent extensive money supply that could destabilize the system. Duran states that for this con-cept to work two currencies should be implemented, one as a mean for transaction and one for credit. Only in the latter the user can go in negative balance. Papaioannou through his experience in TEM found the negative balance system ineffective and proposes that people should contribute with work to the community to earn credits. Zezza on the other hand perceives such a currency as complementary and as a tool for the government to increase liquidity by spending the additional money to directly pay for new jobs as described in (Papadimitriou et al., 2016). In this context the blockchain cryptocurrency is just a technical solution which can poten-tially be fit for this plan. Finally Lietaer proposes that by using smart tokens the user can buy on credit and repay later. He talks about farmers as an example that could ben-efit for such a system and use microcredit to finance their production and pay back when the corps are sold.
Convertibility & Value The convertibility of the cryp-tocurrency and the link with other currencies and especially the base currency - in our case Euro - was a key point of
discussion in many of our interviews. Zezza suggests that the currency should not be traded by the initiating institu-tion and only private agents should trade it if they wish. The nominal value of the currency should equal the base currency and be accepted at this value by the government.Littera sees this alternative flow of value as an independent system not convertible to other currencies. This view is also backed by the experience of Papaioannou who suggests that prices in the cryptocurrency should be independently set, since the one-to-one relation to the base currency results in peo-ple avoiding the use of the compeo-plementary currency as they consider this relation untrue. Stavrou also fears that the cryptocurrency could end up being devalued and used as a ’bad currency’ when traded by private actors. He say ban-ning exchanges would help if there is no actual trust by the public to the cryptocurrency. Finally, Duran and Peerpeep suggest that the economic actors should be able to widely convert their currencies as they wish.
4.3.2
Technology
In theme Technology we deal with the technological aspect of our system.
Transaction Storage In the conventional transaction systems the banks are the main actors who store transac-tions, account balances, bond ownerships etc. In the blockchain approach the data regarding transactions are disturbed to all nodes. With this method an alternative scalable transac-tion system can be implemented with a very small cost. This appears useful in the case we are examining. As Zezza and Stavrou mention the banks would not accept transactions in such a currency. Stavrou goes as far to suggest that Euro-pean Central Bank proactively seeks to limit liquidity and would strongly oppose any mechanism adding extra liquid-ity. Both economist had limited experience with cryptocur-rencies but they admit that in this context a blockchain-based cryptocurrency can emerge as creditable method for managing transactions between nodes. Peerpeep and Duran, both actively involved in cryptocurrency projects also back this idea as well as Theofilis. They see that, at least as a mean for transactions, a blockchain based application could adequately respond to the requirements set. On the contrary Littera does not consider the blockchain method important and claims that conventional databases could also be ap-plied. Finally, another interesting contribution is made by Beneti when she argues that all transaction and balances should be public to increase transparency within the com-munity. This is not shared by other interviewees although all of them agree that the Digital Wallet of this new cryptocur-rency must be personalized and the owner formally identi-fied. Theofilis considers the storage of the private key for the digital wallet a critical issue. He considers that the safest option would be a hardware wallet with a semantic question backup mechanism but he thinks that solution is not im-plementable in the case we are examining. Instead a public actor could be in charge of storing the digital wallets in a similar way as it is done with the digital signatures. A Rest API could than be provided to access the Digital Wallet by any authorized application.
Transaction Validation Peerpeep is clear on stating that a cryptocurrency in this context should use Proof-of-Stake to validate transactions. (King & Nadal, 2012). This means that the next block is generated by one of the nodes of the system with the larger share of the currency. Instead
of a competition process where the nodes compete by using their computer power capacity as in Proof-of-Work - Peer-coin uses the concept of Peer-coinage to select the node which will generate the next block. Coinage is a metric of how much currency a node has and how much time it has it. The nodes that contribute to this process are rewarded in a procedure named minting. This way the system can be bet-ter controlled by a central party, such as the government, which would hold a big percentage of the circulating liquid-ity. Peerpeep In addition the system would be more scalable since there would be no need for massive energy consumption to validate transactions.Peerpeep also proposes that a mech-anism based on NXTCoin could be used that works entirely on Proof-of-Stake.(Nxt Community, 2014) Duran follows a similar approach but sees the validation work as an offer of the nodes to the community - mainly the bigger ones such as collectives or municipalities. He claims that the process should not be profitable but the miners and minters should only be compensated for their electricity costs. He proposes the Proof-of-Coop as a concept that validates transaction as described in (K¨onig & Duran, 2016). It is a form of Proof-of-Stake that takes under consideration whether the node cooperates well within the community. Moreover, Theofilis is also in favor of a Proof-of-Stake mechanism. Although he acknowledges that it might not be as safe as the Proof-of-Work, it is the only way the system can achieve the scalabil-ity needed for our case. Moreover, he considers that such a cryptocurrency would not operate as wealth repository but as a daily mean of transaction and a result the accounts and the transactions will mostly carry a relatively small amount of coins weakening the motive for attacking the blockchain. Means of Transaction All the interviewees agreed on the importance of providing multiple means of transactions. Littera and Papaioannou both have been experienced with Cyclos developed by the Social Trade Organisation in Nether-lands13, an open-source software framework that offers
mul-tiple ways of payments including mobile banking and mobile POS. (Social Trade Organization, n.d.) Duran considers im-portant that the cryptocurrency should also be able to be transfered through the existing POS system and for this reasons proposes FairPay (Duran, 2016), a paper debit card compatible with the current POS system. The software for this system is currently under development by Chip Chap
14
. Finally Stavrou says that making payments digitally is important because than capital controls can more success-fully be imposed in case of an extreme liquidity crisis as the one faced by Greece in 2015.
4.3.3
Acceptance
In theme acceptance we focuses on the characteristics of the currency that would make it acceptable for the economic actors.
Adoption Different approaches emerged on how such a cryptocurrency could be adopted by the users. Zezza and Stavrou consider the ability to use the currency to pay taxes a crucial step for it’s adoption by the wider audience. They claim that since the government accepts it as mean of pay-ment for taxes or public services, economic actors would be keen to use it at least for these payments and as a result legit-imize it’s use generally even though it’s not recognized as a legal currency. On the other hand Duran, Bennetou,Littera
13http://www.socialtrade.nl/?lang=en 14
https://chip-chap.com/
and Papaioannou perceive that economic actors would adopt such a currency based on trust build within a community. In this context the currency becomes something more than a mean of transaction. Such seems to be the case regard-ing Bristol Pound (Ferreira & Perry, 2014) even though we can assume that the backing of the municipality also played an important role. The idea is that you use this currency to support your local community or build an alternative to the current monetary system which is perceived as unfair or dysfunctional. Within the state of an economic crisis, economic actors seek to exploit every possibility to improve their situation and as a result are keen to try new ways of economic activity as Papaioannou points out. He uses the example of TEM alternative currency in Volos which be-came very popular in the beginning of the Greek Crisis due to the initial credit it gave to every new member. Lietaer makes the case that mobile banking could be easily adopted by the users for transactions since most of them use a mobile phone already. On the other hand Zezza remains skeptical over this, claiming that when it comes to wider population digital transactions are not so common and many people, especially in Greece, would struggle to adopt the new tech-nology.
Initiation All the interviewees made the point that the currency should be spread gradually to the economy. Zezza proposes that it should be used to make public payments, specially for hiring workers in a program against unemploy-ment. This way the currency would make it’s way into cir-culation. The users would be eager to keep it or spend it at it’s nominal value since it could be used to pay taxes. Li-etaer says that the whole process could start as a Crowdsale of the new cryptocurrency aiming at collecting collateral to give government grants or tax credits to economic actors and in this way spread the new currency into the economic cir-cuit. Others, including Duran and Bennetou suggest that an airdrop process could be used to allow users to participate in the new currency. Finally Stavrou suggests that the accep-tance of the currency from businesses could be introduced by legislation as it has been recently with the POS system in Greece. Nonetheless he states that only if it would gain trust by the economic actors, it would be actually adopted - regardless of legislature.
5.
SYSTEM DESIGN
The main goal of our design process is to create a presenta-tion and a basic prototype which we can present to economic actors in Greece in order to gather information for our sec-ond research question. We are going to present this proto-type as a starting point for interviews with economic actors in order to discuss with them which factors they identify as important for them to adopt the system. We acknowledge that their reaction will be based on our prototype and won’t be necessarily applicable to all cryptocurrencies in a liquid-ity crisis environment. Further research would be needed to identify whether these factors can be generalized and more-over which of them are linked with the cryptocurrency tech-nology specifically and not with currencies in general.
As for the process of designing our prototype, we based our design on the interviews conducted in the first part of the research and and on related literature. We have to men-tion that we consider our work preparatory and we suggest that several more designs should be developed and tested to better assert the most applicable solution. In addition, due
to the very fragile and temporal framework of the subject, one must bear in mind that different solution might work in different circumstances. The key is to identify the common factors that need to be reflected in the design of the system in each situation.
5.1
Context
Two different contexts for the implementation of the cryp-tocurrency emerged through our first part of the research. The first approach regarded a community-based currency that would be backed by people’s time and work and would be controlled by the community itself through democratic procedures. (Duran,Benneti ) The other approach was cen-tered on a government that issues such a currency in order to stimulate growth. The government controls the money sup-ply of the currency and tries to spread it inside the economic circuit. (Zezza,Peerpeep)
Even though we consider the first approach closer to the cryptocurrency culture, we decided to develop our prototype within the second context. The main reason for this is that the existing literature was more detailed and provided more concrete solutions to organization problems. Especially the proposal developed by (Papadimitriou et al., 2016) provided a basic framework for the initiation of such a currency. Fur-ther more, it became apparent from almost all interviews that a local currency initiated by a community would have limited impact to the economy as a whole and could not reverse the consequences of the economic crisis, which was the initial goal of our design. (Zezza) Nonetheless we con-sider the community-based approach equally important and we are looking forward in designing a cryptocurrency proto-type in this context in the near future.
Through our design many of the current cryptocurrencies characteristics have been altered to fit the new context. The goal now is not to create a currency independent of any regulation or governance but to give a state actor the ability to create a digital currency that could stimulate growth in a liquidity crisis environment. In this case the base currency is not in the government’s control or is actively limited in it’s money supply (Stavrou) . The case of Greece during the liquidity crisis, but also Italy or Spain fit this context in a very large degree. (Littera)
One core aspect that remains similar with most of the existing cryptocurrencies is the avoidance of the traditional banking system. In our case since the banking system is controlled by the European Central Bank it is impossible under it’s current rules for a government to use it to create an alternative flow of liquidity. (Zezza,Stavrou). In this case the blockchain technology offers a valid technological alter-native to the traditional banking system at least as a tool for transactions (Peerpeep). A government with minimum economic resources could create a scalable secure alternative transaction system in a very short time. With this idea in mind we propose the use of a cryptocurrency in the context described.
5.2
Structure
The cryptocurrency we design will be aiming to stimulate growth by initiating an alternative flow of liquidity outside the current banking system.
The government would initiate the cryptocurrency through a state agent. The currency will be backed by taxes - by fu-ture revenue the state is planing to receive from taxation.
(Zezza,Stavrou) The money supply of the cryptocurrency will be controlled by the government based on economic pol-icy and aiming at stimulating growth and simultaneously keep the current account of the country in order. (Peer-peep,Zezza)
The cryptocurrency would be used to make public pay-ment to employees or suppliers of the state. The paypay-ments would not be made entirely in the cryptocurrency but party in the cryptocurrency and partly in the base currency - Euro in our case. The state would also accept payment of taxes, bills to public companies and other public payments in the cryptocurrency. Again not the entire payment could be made in cryptocurrencies for all payment but only a pre-defined percentage. (Zezza) For smaller payments such as energy bills the whole amount could be paid in cryptocur-rencies. The state accepts the cryptocurrency as equal to the base currency for all payments. Private actors won’t fully comply with this, even though they will be asked to by the state. (Stavrou). In practice they will trade the cryp-tocurrency at whatever price they want. The goal is that the economic actors, since they can use the cryptocurrency equally with the base currency in state payments, would not be keen to trade it in a lower value in the private sector and demand that they get a price equal with Euro. (Zezza)
The cryptocurrency is not convertible by any public insti-tution to the base currency. As a result it cannot be used for payments abroad. Nonetheless private actors can trade it as they wish. The payment system of the cryptocurrency will be independent from the banking system. It’s up to banks to decide whether they will receive payments in the cryptocurrency and keep reserves in it.
5.3
Interaction
5.3.1
User’s Account
Every citizen or legal entity will have access to the cryp-tocurrency through a private account which will take the form of a digital wallet. The digital wallet will have a unique number which will be linked to the unique taxing number every individual or legal entity has. In the case of Greece the database of the TAXIS taxing system could be used to issue the digital wallet unique addresses to every economic actor in Greece. With this address and their personal credentials each user could access his digital wallet. A verification pro-cess will be applied for every user or legal entity to receive his personal digital wallet. That could be through the TAXIS system or in person with his ID through physical points of service set up by the state for this purpose.
A core application will be delivered by the state through which the user could access their digital wallet and make transactions. This application will be available for mobile phones and as a web application. An API will also be avail-able in order for third parties to create applications that could trade the new cryptocurrency. (Theofilis) A certifi-cation process will take place in order to assert that every third party application is safe for the economic actors to use. Moreover, the users could download an executable file containing their wallet and take themselves control over the safety of it as it is the case with the existing cryptocurren-cies. We assume though that a very limited numbers of users would proceed this way.
All payments will be made through the digital wallet ei-ther through the applications provided by the state or by certified third party applications. To make payments the user can use the unique digital wallet number or the unique taxing number as a proxy of it. The application would store the user’s transactions and as a result labels such as surname or company name could be used for future transactions.
For businesses there will be a mobile POS and conven-tional POS application available in order to accept payments in the cryptocurrency. (Duran, 2016) The POS will be linked to the digital wallet of the company.
All payments will be made through a blockchain mecha-nism allowing secure direct payments. There will no be need for waiting periods as with the traditional banking system.
5.4
Technology
5.4.1
Digital Wallet
The digital wallet private key, will be stored by a pubic institution and linked with a legal or physical entity as it is done today for digital signatures (Theofilis). In the case of Greece this institution is APED - Hellenic Public Adminis-tration Certification Service. The link between the Digital Wallet address and the physical or legal entity would be cer-tified with common practices such as identification papers and other legal documents along with physical presence of the citizen or the representative of the legal entity. The keys will be stored in databases of the public institution and a 3xA security process will be applied.
The user will be able to get an executable file which will function as his digital wallet but in this case he/she will take on full responsibility for the safety of the wallet. The common practice will be to use applications provided by the pubic institution in charge of the cryptocurrency or by certified third party applications. A REST API will be de-veloped in order for the applications to gain access to user’s private wallet keys and thus to the blockchain. (Theofilis) Credentials (username & password) will be issued for each user with which he will be able to authorize the application to enter his digital wallet. Retrieving the password will be at least a two point security process. For example phone number and email. Generally all the best practices followed for accessing banking accounts could also be applied in our case.
5.4.2
Blockchain Mechanism
For our design we are going to use a Blockchain Mecha-nism based entirely on Proof-of-Stake. (Peerpeep,Theofilis). This means that the nodes of the system will not be com-peting over the generation of the next block by solving cryp-tographic puzzles and consuming electric energy as they do in Proof-of-Work. Instead, the node that will create the next block will be selected through a stochastic procedure among the larger holders of the currency. The concept is that nodes that have a big stake in the currency have also a great interest in preserving the system’s security and as a result have a motive to provide the resources for it. Limited energy consumption is needed under this mechanism which results in better scalability.
In our case we will use the NXT-coin technology as pro-posed by Peerpeep. The (Nxt Community, 2014) provides the framework for our design. The ”coin” in an account can be thought of as a tiny mining rig in the NXT mechanism.
The more coins the node has the more chances it has to gen-erate the next block. The process to gengen-erate the next block is called forging and through that the selected node collects unverified transactions to create the block and the corre-sponding transaction fees trough which it gets rewarded.
Several measures have been designed to protect the in-tegrity of transactions. A cumulative difficulty value is stored as a parameter in each block, and each subsequent block de-rives its new ”difficulty” from the previous block’s value. In case of ambiguity, the network achieves consensus by select-ing the block or chain fragment with the highest cumulative difficulty. (Nxt Community, 2014) Moreover, the ”coins” cannot be used in process of forging immediately but af-ter 1,440 blocks in order to prevent nodes for moving coins around accounts to generate blocks. Finally there is a mov-ing checkpoint set at 720 blocks, before which no chain re-organization is allowed to prevent an attack on the whole blockchain. In our design extra checkpoints can be broad-casted by the public authority responsible for the cryptocur-rency as is the case in Peercoin (King & Nadal, 2012) to further ensure the safety of the system. In addition, since all nodes are officially registered, it will be easy to identify any bad-intentioned node and take legal action against it, further enhancing the safety of the system.
The NXT-coin was generated beforehand and transaction fees are deprived from the money supply provided. In our case though the goal is to create a cryptocurrency subject to governance, the money supply of which is fully controlled by government (Peerpepp,Zezza). For this purpose we propose to provide rewards for the nodes participating in the preser-vation of the system in a different manner such as discounts in electricity bills as we explain below.
In an NXT Proof-of-stake mechanism any node partici-pating is the system is also a minter and has the ability to process and broadcast both transactions and block informa-tion. (Nxt Community, 2014) In our case most users that will actually have a private key and access to the blockchain will not download any software to their system to process transactions and won’t be active as nodes. To surpass this issue we propose to create a distinct role for minters as is the case for miners in the Bitcoin scheme. (Nakamoto, 2008) In our case, any holder of a cryptocurrency’s private key could apply to become a minter while some institutions such tax-ing authorities and public insurance funds will be obliged to participate. The nodes will be selected randomly according to the current needs of the system. The nodes will be com-pensated for their electricity cost (Duran) even if they won’t create the next block. Since the Proof-of-stake is going to be used we presume that most of the blocks will be gener-ated by public institutions which will hold large part of the money supply. Small discounts in the electricity bills will be awarded as transaction fees for the generation of new blocks in order to provide motive for private actors to participate in the transaction validation process and also minimize the cost on behalf of the government for the preservation of the system. 15
5.4.3
Payment Compatibilities
As we stated earlier users will be able to make payment
15Greece’s main electricity provider is public and thus we
assume that the production cost of the electricity proves to be minimal. Nonetheless further research is needed to better assert whether such a solution is economically viable.
with their digital wallet through mobile or web-based appli-cations since many users are used to these methods of pay-ments (Lietaer ). Nonetheless we consider the use of POS equally important. Most cryptocurrencies today use QR codes to make payments through mobile applications and as a result a traditional POS approach does not seem needed. Moreover ePOS applications are developed for e-shop form big corporation such as Coinbace16. Duran claims that a
cryptocurrency should and could be using traditional cards within the existing POS terminal system and works in devel-oping this technology with the Spain-based company Chip Chap. Coinkit 17 also claims that it is developing such a POS terminal to be used with cryptocurrency cards. We consider important for our design an additional traditional POS - debit card system to work along the QR code - mobile application system in order for more users to feel comfort-able to use the cryptocurrency. Although we have not yet found a concrete and reliable technological solution for this issue we assume that such a solution could be developed with the technology at hand in the near future.
6.
SYSTEM EVALUATION
The third part of our research regards the acceptance of the cryptocurrency designed. Our goal is to address our second research question ”Which factors play a role in the acceptance of a cryptocurrency in a liquidity crisis environ-ment?”. We will undergo a qualitative survey using semi-structured interviews aiming to identify the factors that play a role in the acceptance of the currency and won’t estimate the acceptance itself. We are going to take interviews from economic actors in Greece, a country that in recent years has been facing a deep economic crisis and we assume that the perception of these actors will be partially influenced by this event. Our goal is to put the cryptocurrency technology into a different context and identify the key ways in which the economic actors perceive it.
One must take under consideration that our focus in on whether the economic actors will adopt the cryptocurrency and not on whether the cryptocurrency itself will have a pos-itive economic impact. Further research is needed to fully es-timate whether such a cryptocurrency could be implemented successfully in this kind of economic environment.
6.1
Methods
We conducted semi-structured interviews with different types of economic actors in order to analyze their views to-wards the system. We presented a coherent overview of the system to the interviewees and set a series of questions re-garding certain elements of the system and based on the Technology Acceptance Model and the Critical Mass The-ory.
6.1.1
Technology Acceptance Model
The basic theoretical framework for our survey is the Tech-nology Acceptance Model. (Davis, 1989) A series of ques-tions have been set that aim to identify the factors influ-encing the perceived usefulness and ease-of-use. We focused mostly in the usefulness part as many aspects of the ease-of-use depend on the application itself of which we had only a basic prototype. Questions include whether the users would
16http://bit.ly/2trCNxv 17
https://coinkite.com/
find such a system useful and if it would improve their every-day life. Then we continue with questions considering the trust of the user in different aspects of the system such as the issuer or the technology. We also pose questions on whether the new system for transactions would be more difficult to operate than the one they use now.
6.1.2
Critical Mass Theory
Moreover, we based some of our question on the Critical Mass Theory (Markus, 1987) and the prepositions it sug-gests. We want to explore whether specific functions the system support, such as payment types, play a significant role in accumulating the critical mass for the adoption of the system. We also try to identify whether specific user groups or economic actors are key to act as first users in order for other users to adopt the system.
6.1.3
Presentation & Prototype
In order to demonstrate to the interviewees our ideas we used a visual and oral Presentation and an interactive pro-totype both in Greek, the native language most of the in-terviewees. For the presentation we used a power point pre-sentation 18. In the presentation we explained briefly the
concept of the cryptocurrency and how it works. Then we went on to explain the cryptocurrency in the liquidity crisis environment and it’s main goals. We also explained it’s char-acteristics and how the economic actors could use it. Finally we briefly explained how it worked. You can read an English translation of the presentation script in the Appendix19
In addition, we developed a basic interactive prototype. The prototype visualizes the main payment action of the system and was demonstrated after the presentation of the system. The user is being asked to make a payment to one of his friends or business partners. He can use the unique tax number to send cryptocurrencies through a form while in a table he can see all his transaction. You can see a screenshot of the prototype in the Appendix20. The prototype was de-veloped in HTML,CSS and JS with the use of the AngularJS and the Materialize Framework. Data were stored locally in a JSON file.
6.1.4
Interviewing
Our aim was to take interviews by different types of eco-nomic actors. We define the basic ecoeco-nomic actors as follow: government, banks, business and citizens/households based on Economic Agents classification of Macroeconomic Mod-els (Dwivedi, 2005). We wanted to interview one executive from the government but we failed to find someone willing to address the questions. We interviewed one bank execu-tive. We interviewed people from different business types: an owner of a big company, a founder of a small start-up and a freelancer. We also conducted two interviews with citizens, who were asked to answer the questions as em-ployees/households. Due to time and resources limitations a convenient sampling method was applied. The intervie-wees were selected through the acquaintance network of the researcher in Athens based on their availability. All inter-views were made in person and in Greek between the 10th and 30th of June 2017.
18See online at http://bit.ly/2txznZF as it was presented in
Greek
19See Appendix B.1 20
The interview process undertaken was as follows: After the presentation the interviewee was asked if he had any questions. We addressed his/hers questions and then pre-sented the prototype. The user was asked to make a pay-ment using the prototype without any guidelines.
After that the questions were posed. A semi-structured approach was undertaken. First the interviewee was asked some questions regarding his or hers own profile such as whether he has ever used a cryptocurrency, if he uses dig-ital means for transactions and if has faced liquidity prob-lems due to the economic crisis. After that the intervie-wee was asked to generally comment on the idea presented. Than the question were asked about perceived usefulness and perceived easy-of-use. Finally some question based on the Critical Mass Theory were posed. You can see the full list of question in the Appendix21 We developed two dif-ferent questions sets. One for the bank and the government representatives and one for the businesses representatives and the citizens. The questions are quite similar in nature but are posed in a different way reflecting the role of the interviewee.
6.1.5
Interviewees
All interviewees of our evaluation process will remain anony-mous. We present here some details regarding their profile to provide some oversight. Sex and approximate age is set in the parenthesis.
Banker (M 50) is a bank executive in the asset manage-ment departmanage-ment in one of Greece’s largest banks.
Business 1 (M 40) is the owner of a medium food com-pany.
Business 2 (M 25) is co-founder in a small startup digital agency.
Business 3 (M 30) is a freelance photographer. Citizen 1 (F 50) is a public servant.
Citizen 2 (F 60) is a migrant house assistant that has been in Greece for 15 years.
6.2
Results
In the section below we have summarized the most impor-tant issues raised in our survey. Full transcripts in English could not be provided due to the limited time available.
6.2.1
Profile
In this section we asked some question about the profile of the interviewee mainly regarding their economic situa-tion and the way they conduct transacsitua-tions. Most of the interviewees did not state that they face serious problems linked with the economic crisis. Citizen 1 stated that their salaries have been lowered and don’t meet their needs any-more, while Business 2 said that most of their clients face liquidity problems forcing them to delay payments and as a result the payment of his company are delayed too. Citizen 2 stated that because of the crisis she was forced to find a second job but now because she works seven times a week makes more money in total. On the other hand Business 1 claimed that the crisis helped his business because many of his competitors were forced to close.
As for the way they make payment almost all participants did most of their payments digitally either by debit cards or via web banking. They proactively support the digital methods of payments because they consider them safer and
21
See Appendix B.3
simpler. The Banker was reluctant to make digital pay-ments and was forced to do it because of the capital controls imposed in 2015. 22 Citizen 2 does not make payments dig-itally. She only uses the banking system to send money to her homeland. She deposits cash to a transaction agency and her daughter receives it in cash from banks in her homeland with a special code she has received from the agency.
The interviewees did not state to face any severe problems regarding the use of the banking system. Business 1 talked about frauds they have encountered with fake account num-bers while Business 2 referenced that transaction costs are too high. Finally, all participant had heard about cryptocur-rencies, in particular Bitcoin, but only Business 2 had used one of them (Etherium) and only for private use.
6.2.2
Perceived Usefulness
Some key factors emerged trough our survey as influencing the Perceived Usefulness of the system. One very important factor is security. All interviewees were very eager to be reassured that the system is secured. The way the system works technologically was not totally understood and this produced doubts on whether such a system is safe. The interviewees wanted authorities which they regard trustful to guarantee that the system will work correctly and if not that they will not lose money because of any mismanagement or third part bad intentioned use. For example Citizen 1 needed for someone to guarantee that if someone steals her codes, she could get back any money transfered as it was done recently with her bank account. In another example the Banker wanted the system to be guaranteed by large international rating agencies.
Another important factor identified was the direct per-sonal economic gain of the user. Although most of the users did perceive that such a system could potentially ben-efit the economy as a whole, in order to adopt it they want to be granted a direct economic reward in the form of a discount for example. As Business 3 said ’I can do all my transactions through my web banking why should I adopt something else without having a direct gain?’, while Citi-zen 1 said that her credit card gives her a bonus for doing more transactions through it, she would like to have a bigger bonus through this system in order to adopt it.
One other point raised mainly by Business 1 and Busi-ness 2 was the issue of transaction costs and simplicity. They would support the use of such a system because they consider it more simple to use and they want to stop paying the hight transaction cost they pay to Greek banks. They also claim that it would help if it had an impact in trans-actions with the state. For example Business 1 says that if the state could pay it’s dept to it’s providers in this cur-rency they could with it pay taxes, electricity bills, salaries etc while now payments are just paused. Business 2 shares a similar approach and says that he would like to have auto-matic payments of taxes through this systems and be saved from all the bureaucratic work he needs to do to pay VAT for example.
In this context we also see that, apart form Business 2 and the Banker the participants don’t seem to be influenced by whether banks participate or not in the system. Although they don’t consider the state fully trustful they seem to be-lieve that such a system should be endorsed by the state
22In June 2015 capital controls were imposed in Greece that
