Theorizing the 2017 blockchain ICO bubble as a network scam

Abstract

In the popular imagination and in academic literature, scams are usually seen as dyadic, involving a con artist and a mark. This article retheorizes scams as networked, collective activity. Scams, like all commerce, are shaped by and in turn shape communication channels. The “network scam” is therefore offered as a lens for understanding scams in the digital economy more broadly. As a case study, this article documents the 2017 Initial Coin Offering (ICO) Bubble. ICOs were supposed to be a new, radically disruptive way of crowdfunding to finance the development of a new, radically disruptive blockchain technological ecosystem. All told, ICOs raised an estimated $5 billion in 2017 alone. But by all analyses—both from observers and participants, both during the bubble and after—the vast majority of ICO turned out to be scams. This article uses these scams to theorize the “network scam” as a collaborative effort to bring about a shared future, but one that is fundamentally characterized by arbitrage on uneven belief among participants in that future ever coming to pass.