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the brave new economy

A free(er) market is emerging and has been emerging ever since the advent of the Internet and the Web. Newer technologies have accelerated this. Old inefficiencies in knowledge and access to the market are quickly disappearing. Participation is increasingly peer-to-peer (P2P). Participants can produce, create, curate, give, lend, sell, share, auction, consume, take, borrow, buy, reuse, rent and/or barter goods, services, cash, credit, currency, equity, debt and/or knowledge. The resultant economy is highly collaborative and is sometimes referred to as the ‘sharing economy’. Efficiencies are being introduced and value is being created in the smallest of markets. Non-profit activities are thriving as well, in addition to for-profit ones. The marketplace is becoming, at once, global and local. An important subset of the new economy is collaborative and crowdsourced, and may be described as commons-based peer production. Asymmetries in information are diminished by algorithms (Google, of course), social networking  & media (Facebook, Twitter), social bookmarking (pinterest, reddit, StumbleUpon, digg, del.icio.us, Slashdot, etc.) and crowdsourced knowledge sharing, review and Q/A platforms (wikipedia, stackoverflow, quora, yelp, tripadvisor, zagat, etc.). While some e-commerce and P2P-commerce tools and enabling technologies (Amazon, eBay, PayPal, craigslist, etc.) hearken back to the earliest days of the Web, many others have flourished in the new Web 2.0 ecosystem of social apps and mobile access.

What follows immediately below is an attempt to categorize and list, in no particular order and without attempting to be exhaustive, some useful new tools and platforms that enable this new economy. In general, these tools and platforms tend to be open, social and peer-to-peer. Special sub-sections are then devoted to P2P finance, in all its forms, and to crowdsourced science.





P2P finance


A significant and growing number of people are increasingly interested in being personally invested in their own investments, loans and charitable giving. Prominent concerns include accountability, investing ethically, investing locally, investing according to one’s values, investing for social impact, giving personally and giving responsibly. The range of financial transactions span donations to loans and investments, where risk sharing and transference can be all or nothing and everything in between.


To address the above needs, a plethora of P2P finance platforms have appeared on the scene. They are described variously under the categories of crowdfunding, P2P investing, P2P lending and P2P charitable giving. They take their inspiration from both classical institutions of online charitable giving (World Vision, Compassion International, etc.) and from microfinance -- with Grameen Bank (which predated the Web by at least a decade) being the archetypal and most notable example. They are being used variously for small business enterprises, social enterprises, philanthropic work, citizen science, citizen journalism and personal projects.


Organization
Founding, HQ, Revenue, #Employees, Market
Type
Value-add?
Issues?
2006, San Francisco, 28.6M, USA,
Undercut market debt-interest rate (7% APR onwards)

2005, San Francisco, , 75, USA

1983, Dhaka, 176M, 22149, Bangladesh


2008, New York, , , USA
501(c)(3) non-profit; urban impoverished women in inner-city USA – savings, credit establishment, financial education

2005, San Francisco, 11.5M, 109, world-wide
microcredit
501(c)(3) non-profit; Kiva itself does not collect interest. KivaZip.org gives 0% direct loans to entrepreneurs
MFIs that actually make the loan charge extremely high interest
2002, Washington D.C., , , world-wide
501(c)(3) non-profit;
15% transaction fee
2009, Sterline VA, , , world-wide
p2p microfinance
501(c)(3) non-profit; loan repayment performance comparable to MFI-mediated approach; costs lower

2008, Seattle, , , world-wide
student loans microfinance
501(c)(3) non-profit; excellent loan repayment performance
repayment after landing a job (moral-hazard?); targeted funding takes away agency?
2008, Bangalore, , 20, India
microcredit
non-profit; 1% transaction cost (with 0.5% set aside for default protection); 8.5% interest among lowest
8.5% interest – 4%-5% for field partners and 2% for creditor
2010, Singapore, , , India (NRIs can support)
microcredit
5% fee is charged field partners (entire loan is given to recipient)
12%-18% interest
2009, , , , world-wide
microcredit for renewable energy tech
501(c)(3) non-profit; 0% loans; carbon offsets; nanoloans

2005, London
p2p lending


2009, London, , , UK?
p2p lending


2010, London, , , UK?
p2p lending
Lending to small and medium businesses
average return of 5.8% after fees and bad debt
2012, London, , , UK?
p2p lending
Lending to SME & property developers

2009
crowdfunding


2008, Chicago
medical crowdfunding

7% fee
2010, San Diego
crowdfunding for life-changing events (medical, graduations, etc.)

5% fee
2008, San Francisco
crowdfunding
4% fee for successful campaigns; 9% for keeping funds from unsuccessful ones; 0% for returning money

2009, New York
crowdfunding
Funds disbursed only if goal met
5% fee for kickstarter; 3%-5% more for Amazon Payments
2012, Seattle
crowdfunding scientific research
Funds disbursed only if goal met
5% fee for microryza; 3% more for payment processing

civic crowdfunding
ONLY civic agents (governments, public-private partnerships, NGOs) can list projects; refund (minus fees) if project not funded or green-lighted or launched
5% fee for neighbor.ly + fees for bank transfers
2009 (2011 rebranding), San Francisco (formerly, Austin)
crowdfunding
all donated money is kept
5.75% fee
2010
crowdfunding
4% fee + 4% payment processing fee for successful campaigns; 8% fee + 4% payment processing fee for keeping funds from unsuccessful ones


crowdfunding for medical, adoption,  missions & tuition
0% commission; 3% payment processing; donation model of revenue; all donated money is kept

2012, , , , Chicago
equity crowdfunding for small/local businesses
No fee
only for accredited investors<![if !supportFootnotes]>[2]<![endif]>
2010
equity crowdfunding
startups
only for accredited investors
2012
equity crowdfunding
startups
only for accredited investors
2011
equity criwdfunding
startups
only for accredited investors
2010
equity & debt crowdfunding
startups
only for accredited investors
smallknot

crowdfunding local small businesses
3% commission (for successful campaigns) + 3% payment processing fee; rewards/perks instead of equity

TODO: Mosaic, somolend, pledgie, artistshare, sellaband






A good comparison of many crowdfunding and P2P finance platforms and tools may be found here. The crowdfunding blog seeks to maintain an exhaustive directory of online crowdfunding. Two comprehensive lists may be found here and here.

Physic Ventures and Collaborative Fund focus on building investment portfolios mainly or exclusively focussed on the share economy.

Slowmoney (see also credibles) connects capital with sustainable and small local farming and food systems. BALLE (bealocalist) focusses on education, networking and advocacy for sustainable and local-centric economies. The Forum for Sustainable and Responsible Investment provides similar education, research and thought leadership.


Larger investments and sources of capital may be leveraged by accredited investors on platforms like AngelList to support startups. Investors’ Circle is a similar network of accredited angel investors, focussing on for-profit enterprises that produce and maximize positive social and environmental impact. MicroPlace is similarly interested in positive-impact investments, specifically in poverty alleviation around the world. It focusses on portfolios using microfinanced securities and is open to un-accredited micro-investors.

Inventors and makers are the focus of quirky, while innovative solutions, ideas and products are pitched using FundaGeek.

Three crowdfunding sites dedicated to science are experiment.comsciflies and scifundchallenge.

The World Bank recently released a report on crowdfunding's potential for the developing world.


crowdability is a great aggregator and search-engine for equity crowdfunding portals.


Decentralized, digital money


The currency of the new economy is increasingly electronic and, in particular, is taking the form of alternative digital currency. Chief among these are cryptocurrencies, popularized recently by Bitcoin. These currencies tend to be peer-to-peer and decentralized. A full list of digital currencies may be seen here. A sub-category of digital currency, noteworthy in its own right, is digital gold currency. Digital currency exchangers function as markets of exchange between different digital currencies and/or between digital currencies and national fiat currencies.


Crowdsourced & open science


The increase in and increasingly easy access to cognitive surplus and volunteer computing, owing to the surplus of computing resources, are being leveraged to attempt to solve big mathematical, scientific and engineering challenges.


Metaphorically described as the global brain, this surplus is significant and dispersed across the globe. Two examples are GalaxyZoo, an attempt to do morphological classification of galaxies on a large scale, using cognitive surplus, and Folding@Home, a massively distributed computing based research project on protein folding and computational drug design.


Volunteer computing was pioneered by the SETI@home project, run by Berkley Open Infrastructure for Network Computing (BOINC), which is now the most widely used infrastructure for such projects. Astronomy projects hosted there include Einstein@home and Milkyway@home. A more fuller list may be seen here.


An important facet of this new movement is massive collaboration and openness. Known as open science or Science 2.0, the scientific activities and consequent results of these endeavors are typically highly collaborative and open, and the raw data, experimental data and results are freely and widely available.


The free and open source software movement (FOSS) may be seen as the pioneering symbol of this revolution, and, in many ways, as the forebear of the new economy, by virtue of FOSS being critical to the development of the latter’s enabling software technologies. The open movement is now broader and encompasses the whole scope of scientific inquiry and knowledge production.


The emergence of wikipedia signalled that knowledge could be produced in a widely distributed fashion. Massively distributed iterative improvements on a massive scale, sometimes called the wisdom of the crowd, would lead to maintenance of quality -- a function that was once thought to be the exclusive domain of rigorous peer-review by experts.


The growing opposition to copyrights and circulation restrictions of scientific articles crystallized in a recent movement within academia, dubbed Academic Spring. This has led to the proliferation of open access journals. A more complete list may be seen here.


The Polymath Project is a recently started approach to conduct massively collaborative mathematics.


Related Reading

Two books:

  1. the mesh by Lisa Gansky
  2. What’s Mine is Yours by Rachel Botsman and Roo Rogers
Websites:
  1. the crowd cafe

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