“Mutual aid network”

MMM describes itself as a “mutual aid network,” whereby participants become eligible to receive financial support by donating funds to others. This kind of practice is familiar to many people in the developing world, who frequently participate in informal savings groups with people they trust in lieu of traditional bank loans. This may be why MMM has gained so much traction in churches and other community groups, where people enjoy a high degree of social trust.

While MMM accepts local currency, it strongly encourages participants to donate to the network using Bitcoin. The benefits for MMM are obvious: it is much more difficult for governments to track and freeze cash flows coming in and out of MMM if they are not passing through the formal banking system. After countries like South Africa and Nigeria attempted to shut them down in 2016, MMM paused their operations, only to return at the beginning of 2017 with a new marketing focus: Bitcoin.

Today MMM offers bonuses and higher interest rates for contributions made in the cryptocurrency. For those who might find it daunting to set-up a Bitcoin wallet, MMM provides step-by-step documentation, suggesting that “you can start using Bitcoins even if you don’t know all the technical details.” In many ways, MMM has provided one of the most consumer-friendly support services for new users of the cryptocurrency.

But the technical complexity of Bitcoin means that many consumers also rely on MMM to give them advice on what they should do if something goes awry. For example, Bitcoin recently made a significant upgrade to their protocol. MMM cited this software upgrade as a reason for keeping one’s Bitcoins with their organization, rather than in a personal wallet under user’s direct control. In a memo to participants, MMM claimed,

The present situation may (and undoubtedly will!) stir up fraudsters who take advantage of gullible users. Therefore, for safety reasons, we recommend safekeeping your bitcoins with MMM rather than at a personal wallet to prevent your money from being stolen.

The confusion surrounding Bitcoin’s software upgrade created an opportunity for MMM to make a case for why users should cede control of their money. Users would have no clear path to recourse if their trusted advisors decided to disappear with all of their cash. In this way, MMM wields a powerful combination of feel-good rhetoric and technological mystique in order to lure people into handing over their money.

Bitcoin magicians like MMM enchant people with the promise of miraculous returns on their investment, and then disappear into thin air. That’s precisely what happened in 2016, when MMM abruptly shut down their first Bitcoin-based ponzi scheme (dubbed the “Republic of Bitcoin”). In a memo, the organization informed users that their “experiment” had failed. In lieu of payment, users were transferred over to their country’s local MMM site, where their Republic of Bitcoin balances would show up as “old” balances that may or may not be repaid.

It remains unclear how much money has been returned to Republic of Bitcoin users. While accounts were frozen, MMM encouraged users to participate in “promo tasks” to enlist new people to their local MMM branch, promising that if their country developed a big enough network they would eventually get their money back. However, MMM schemes around the African continent struggled to regain traction under increased scrutiny from governments and local media.

Later that year, millions of people lost their money after country branches went bust in Nigeria, South Africa and Zimbabwe. Yet miraculously, MMM re-emerged in all of these countries by the beginning of 2017, and is spreading rapidly to other low-income communities around the world. MMM’s promise of easy riches with the help of magical new technology seems to have a resilient allure.

It is challenging to cut off the flow of cash to schemes that use Bitcoin’s open network rather than more centralized mobile money systems popular in Sub Saharan Africa. Kenya’s Public Likes project was effectively shut down after the country’s largest telco suspended all incoming and outgoing transactions from their mobile money account. In place of monetary controls, governments like Kenya have issued public statements, warning people of the risks of engaging with cryptocurrency businesses that operate in a legal grey space, beyond the purview of traditional consumer protection frameworks.

These public service announcements are easily lost in the deluge of misinformation and marketing materials produced by large ponzi operations like MMM. Like many multi-level marketing schemes, MMM rewards participants for promotional work, such as recording testimonial videos and holding recruitment sessions in their homes.

In order to effectively reach consumers, governments could learn a thing or two from MMM, by embracing more grassroots channels of communication. That might include hosting information sessions in communities where MMM is really taking off (i.e. churches).

In addition to government efforts, prominent humanitarian organizations also have an important role to play in stemming the spread of such schemes, by more clearly differentiating real opportunities from empty sales pitches about cryptocurrency saving the world. Echoes of MMM’s altruistic rhetoric can be found in some of the world’s most well-respected humanitarian circles.

These days, there is a steady stream of articles about technologists who plan to solve some of the world’s hardest problems with the help of cryptocurrency. In spite of the fact that most of these technologists have limited experience working with such vulnerable populations, they have been able to access highly influential spheres of power. They are invited to speak at the United Nations and the World Bank. They attend meetings at the World Economic Forum in Davos.

Their acceptance in these elite spaces is driven by a mixture of opportunism and fear: there is a lot of optimism around the potential for this technology to make substantial improvements to a wide range of issues: secure supply chain management, universal identification for refugees, or distributed electric grids. But understanding how cryptocurrencies work requires a fairly sophisticated understanding of a range of technical fields, from cryptography to distributed systems design.

Due to technical complexity, business leaders have turned to technical experts to provide them with guidance on how they should use the technology in their organization. Typically, these socially focused technologists have deeper expertise in cryptocurrencies and computer systems than in understanding the complex social problems they are trying to solve. Often, they approach problems with ambitious technical solutions but without a clear, defensible theory of change. This makes it challenging to critically evaluate the potential of new projects that enter this hype-driven space.

In order for us to start differentiating the good guys from the MMM’s of the world, we need to lift the veil of technological mystique surrounding cryptocurrency and start asking hard questions. This may require developing a broader understanding of new technology like cryptocurrency. But it also means taking a context-specific, problem-driven approach to addressing complex issues like global poverty.

For humanitarian leaders, the real challenge lies in resisting the urge to embrace “innovative solutions” in favor of doing work that is often much less glamorous, but it will have a lot more impact.

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