Summary
- The stereotype of the “crypto bro” is far from the reality of the average crypto investor; in the United States, Black people have adopted crypto at higher rates than their white counterparts.
- Research highlights the realities of Black crypto buyers’ motivations, as well as the cultural and historical factors driving their financial practices.
- The report also highlights the risks that are associated with participating in any new technology ecosystem — and provides a call to responsibility to address how these risks are magnified for Black people participating in crypto and Web3.
- This article originally appeared in January 2023 on Medium, published by the Crypto Research and Design Lab (CRADL).
Who is actually participating in crypto?
For a relatively new financial instrument, cryptocurrency has spawned vivid tropes. Primary among them is the white, wealthy, somewhat cavalier “crypto bro” who spends their day on Twitter discussing the merits of new coins. (Or, alternately, proclaiming that Bitcoin is the only coin.) So common is this stereotype that many lay people assume all of Web3 is being built, funded, and run by people who are male, white, and monied.
This is far from the reality.
Black people in the United States are adopting crypto at high rates relative to other groups, making these individuals part of an emerging economic vanguard. Over the course of recent research, the Crypto Research and Design Lab (CRADL) interviewed a wide range of Black cryptocurrency investors and entrepreneurs, including people building for their individual and communities’ futures.
Three Months of Field Research
This research culminated in Black Experiences in Web3: An Exploration of Crypto Adoption in Web3 by Black People. The CRADL team conducted three months of in-field and primary research; digital ethnography in online and Web3 spaces frequented by Black adopters of crypto; and robust desktop research to create this report. The team’s analysis shines a light on the realities of Black crypto buyers’ motivations, as well as the cultural and historical factors driving their financial practices. The report also highlights the risks that are associated with participating in any new technology ecosystem — and provides a call to responsibility to address how these risks are magnified for Black people participating in Web3.
Why explore these topics now? Because the past year and a half have been a roller coaster for crypto, and the fallout from crypto winter and associated crashes have created repercussions for many people who do not fit the “crypto bro’’ mold. Nearly 44% of crypto traders are not white, 41% are women, and 35% have household incomes of less than $60K annually. Many non-white adopters of crypto entered crypto later, and were investing for the first time, exposing them to greater risk than people with more diversified portfolios.This means the well-publicized catastrophes and less visible successes impact a wide variety of people in very real ways.
Cryptocurrency may still be an emerging industry, but its accessibility and popularity make it an economic force to be reckoned with. We at CRADL want Web3 industry players, the traditional finance industry, and policymakers to use this report as a call to action. for meaningful and evidence-based solutions that enable more equitable wealth-building opportunities.
We want people to take crypto seriously, to acknowledge the scale of its reach, and to understand the specific hopes and fears it prompts in historically marginalized communities, starting with Black communities.
Read on to learn about the insights our team drew from their explorations.
Insight 1: Generational financial trauma shapes investment behaviors.
Understanding why people are motivated to buy alternative digital assets (particularly volatile ones) requires an understanding of the historic events, economic policies and practices that shape their present-day financial behaviors. Most people know that Black people in the U.S. have been excluded from the existing financial system and underserved by financial tools and services, but few realize the depth and breadth of this exclusion. (Read the CRADL report on the barriers to generational wealth and the role of crypto for more on this topic.) Even fewer recognize that the past 400 years of discrimination, erasure, and exploitation endured by Black U.S. residents has culminated in generational financial trauma (“GFT”) that impacts behavior in the present day.
GFT is the cumulative harm that people have experienced historically, expressed in the present day through financial behavior, and in social, health, and relational outcomes. It may manifest in Black U.S. residents as a mistrust of banks and traditional investment vehicles, hyperfrugalism, or a desire to participate in wealth-building activities outside of the mainstream.
Crypto’s new financial ecosystem is often framed by its advocates as an opportunity to democratize access to financial tools and services. This egalitarian vision holds tremendous appeal to prospective Black crypto buyers who may experience GFT as a result of the historic theft of their and their ancestors’ assets, and from the. policies that have prevented them from accumulating assets. (The report’s timeline on GFT captures some of these key historic moments.) Many of the people CRADL spoke with viewed crypto as a possible tool to reverse GFT, by providing an alternative to systems that have historically excluded and caused harm to them. We also spoke to people concerned that crypto could instead aggravate GFT, by replicating the harms of existing financial systems and policies without more thoughtful approaches.
Insight 2: Afrofuturist ideals align with crypto and Web3 possibilities
The report’s research design did not consider Afrofuturism as a starting point for understanding Black peoples’ interest in crypto and Web3, but key parallels soon emerged. Many Black people the team spoke with and observed online described their motivations for learning about cryptocurrency using four key themes: liberation, the future, imagination, and technology. These four themes also underpin Afrofuturism, a contemporary framework encompassing a diverse range of thinking that reimagines the future for Afro-descendants. Although most interviewees did not mention Afrofuturism by name, many referenced these themes. Others did make explicit connections between Afrofuturism and blockchain, citing it as a key reference point for their entry into Web3.
The thematic connections surfaced direct parallels between participants’ lived experiences and Afrofuturist theories. Sovereignty, security, and technology as tools for reimagining a better future are all concepts with rich cultural precursors in the Black experience — and within Afrofuturist frameworks — that predate blockchain and cryptocurrencies. Blockchain’s key offerings echo these traditions, priming blockchain to be seen as a technology to enable the Black people’s goals of self-sovereignty and wealth-building.
Insight 3: Blockchain feels like an opportunity to rewrite the rules
The team repeatedly heard that Black people are optimistic about the potential for blockchain to improve their lives in fundamental ways. In fact, many told us that the arrival of this tech feels like an opportunity they’ve been imagining and anticipating; a chance to support the creation of new systems where Black people can be financially successful and free from a financial system that wasn’t built for them.
“Web3 decentralization allows you to be in a position to really maintain your wealth. To be able to determine where it goes.”
— Melanated Studios founder Nea Simone
The excitement around leveraging crypto and blockchain to fundamentally rebalance structures of power stems, in part, from some of the core technological values of decentralization and immutability. These values speak to a sense of egalitarianism and fairness that is absent from the traditional financial industry. During one of the team’s fieldwork trips to Atlanta, Melanated Studios founder Nea Simone spoke to these values, saying, “Web3 decentralization allows you to be in a position to really maintain your wealth. To be able to determine where it goes.” Her perspective reflects a common line of thinking amongst many of the people with whom we spoke: Web3 products can have fairness coded into the tech, from smart contracts to decentralized currency to the possibility of lending without racism. And while much of Web3 is in its nascent phases, it is perceived by many to offer more hope than the current and dominant financial system that Black people must navigate right now.
Overall, it’s clear that economic, cultural, and technological forces are converging to create interest in and optimism about blockchain technology in Black communities.
Insight 4: Early participation in crypto brings high risk
Engaging with any innovative technology or new space during its early days brings a certain amount of risk. Web3 is no different, but in this case some early adopters are more at risk than others. The forces that contribute to GFT have made it challenging for many Black people to build strong financial foundations using traditional financial instruments. This means they may experience amplified risks when entering Web3 and investing in crypto, compared to white buyers.
The volatility of the crypto market, the impact of GFT on financial behaviors, and the lack of clear industry norms in Web3 converge to make a perfect storm of liability. This storm has already wreaked plenty of havoc. Historically marginalized communities have lost the most in recent crashes, magnifying impacts in traditional market cycles in ways that echo traumatic past events. Adding to this already fraught dynamic are conspiracy theories and misinformation. These ideas often spring from wariness of the nascent crypto market’s volatility, paired with the presence of real bad actors in the space. Fueled by existing mistrust of financial systems, conspiracy theories can take on greater traction when delivered by community leaders and other creators using familiar language or accessible modalities like social media.
A lack of industry norms in these early days of Web3 contributes to an already complex environment susceptible to scams, and Black investors intrepid. enough to invest in a new financial ecosystem ahead of the curve may lose large. Some Black investors have begun to feel that the volatility of crypto affirms their distrust for financial institutions.
The flip side of this coin is FOMO: fear of missing out. Black people have been excluded from access to tools that support the acquisition of property, accrual of equity, and many other wealth-building activities. Some see crypto as a chance to finally begin building generational wealth. The dynamic nature of the crypto market can create an incentive for some people to rush in and “get theirs” before the opportunity passes.
Community leaders such as Najah Roberts and Black Bitcoin Billionaire are already working to mitigate risks by guiding people to not buy valueless cryptocurrencies, and urging them to create financial plans. Still, more systemic actions are needed to ensure safe participation and equitable access to benefits. We believe that given the high appeal of crypto to Black communities, the crypto industry and policymakers must create better products, clearer regulations, and consumer protection measures that better mitigate risk without precluding innovation. Industry leaders and policymakers alike need to start designing with Black people, and with Black people in mind.
We must not ignore or dismiss crypto.
Participation in crypto is fundamentally altering historic trends in traditional approaches to wealth-building amongst Black people in the United States, with implications for policymaking and industry. Dismissing the importance of Web3 now, as it is still emerging, could have disastrous repercussions, especially for a population that sees this technology as a pathway to financial liberation. It is a rich and evolving environment that holds hope and possibility – especially for Black U.S. residents, a group that has been systematically and relentlessly excluded from wealth-building opportunities.
There is an opportunity here to be more thoughtful within this new technology and financial paradigm. The CRADL team’s ambition for the report is to inspire policymakers and builders to champion products, processes, and policies that better enable a wider range of people to safely participate in Web3.
Read the full report here.
This article originally appeared in January 2023 on Medium, published by the Crypto Research and Design Lab (CRADL) – a research organization committed to objectively documenting people, organizations, and activities in the crypto ecosystem and their impact on the broader industry.
