By Sean Z
As we’ve been reporting for a few months, Kickstarter’s announced plan to move to a platform built on the blockchain protocal set off an immediate and vocal backlash among both creators and backers. Since the December announcement – amid creators leaving the platform – Kickstarter representatives have promised more information on the move would be forthcoming. Yesterday, a statement and an updated FAQ on the plan were released – while they provided some more information, many observers are still unsatisfied with Kickstarter’s reasoning for the move. Still, Kickstarter seems to be tapping the brakes on the move, promising more investigation of how it will work, and acknowledging some of the existing flaws in in the blockchain.
Beat reporter Sean Z. was given an opportunity to interview Kickstarter COO Sean Leow about these issues, with a few questions added by Beat editor-in-chief Heidi MacDonald. As far as we know it is the first time a Kickstarter executive has spoken publicly on the blockchain move. Leow’s answers may not satisfy everyone, but at least Kickstarter is starting to address the many troubling aspects of their announced new platform.
(This interview has been edited for clarity and length.)
The Beat: Why did Kickstarter decide to move to blockchain? And what are some of the issues with the current platform that blockchain would address?
Sean Leow: I want to clarify upfront that we haven’t moved to blockchain. A lot of what we are trying to communicate today is that we’re exploring this path, and we’re excited about some of the possibilities to come.
But we’ll be testing and working out in the open so people can see that there will be value it before we move Kickstarter to the blockchain.
I want to step back and provide some of the framing. There’s roughly 20,000 creative projects on Kickstarter each year. And we’re super proud that we’re able to help all those people bring their ideas into the world. But we know that there are a lot more creative ideas that should be coming into the world every year. Just think about your city or your state or country; there’s a lot more than 20,000 projects. So the question is, what is holding back people from actually using a tool like crowdfunding to make their ideas into reality?
When we think about that, about the problems, we think about that people don’t feel confident that their project is actually going to reach all the potential backers that it could, because you’ve got this really short 30-day window. You have to find everybody who’s interested in your one niche thing, about sci-fi anime in Japan, and bring your audience. How are you going to make sure that it reaches all the potential people around the world? That’s one core challenge.
Another core challenge is that people aren’t always sure they’re receive their rewards. Sometimes rewards are late, or they’re never delivered, or they arrive, but at a low quality. So backers don’t trust in the model of crowdfunding.
Those are just two long standing challenges we’ve seen in crowdfunding that we think is holding back the overall market, though there’s a much longer list.
But the move to look at a protocol is all about how can we move from a mentality where it’s just Kickstarter trying to solve all these long-standing issues, to how can we enable an ecosystem to solve them with us? How can we get other people to help us pull in more backers? How can we get other people to help potentially reduce the risk of a project by giving expert peer review on what might go wrong with a with a project?
And right now, some of that stuff happens. There’s lots of third-party services, and lots of users who are helping, who try to contribute in small ways. But how can we do that on a systematic level, where people can trust that if they contribute to the system, they will get rewarded.
So that brings us to what a protocol would do and what a blockchain would do. A protocol would allow us to standardize how people would contribute to Kickstarter, whether that’s a third-party service that’s helping you promote your project better, or somebody helping you manage your pledges. There’ll be a clear and transparent way for people to know what the rules of the game are. Because it’s not just controlled by Kickstarter. It’s not just us making decisions about how part of our fee could go to one of these services that helps advance a project, but it’s written into the rules of the protocol. Say if you help a project reach say 50 more backers in a certain locale, because you’ve built up a newsletter a community, you can feel confident that you will be rewarded. The rules are written into something that is not just controlled by Kickstarter, but it’s controlled by everybody who participates in the system.
THE BEAT: Much of what you’re saying is focused on decentralization, the idea we can have different parts of Kickstarter that are outside of Kickstarter’s control. Yet, in the FAQ, it says that Kickstarter still plans to process all of the payments themselves – there’s no plan to accept crypto currency, and all transactions still go through Kickstarter and Stripe. If Kickstarter is centralizing payments, isn’t Kickstarter still in control, regardless of where data is stored?
LEOW: Right now, Kickstarter controls all of the payment processing with Stripe, our main partner. We’re thinking two to five years into the future.
We don’t know exactly what parts of the payments we might be processing, versus how a protocol might be processing those payments. There is definitely a world where, with a protocol, we aren’t processing the payments. But there are a lot of questions to answer before then to do that in a secure, reliable way where people can feel like they’re not going to be scammed, or that their funds are not going to be stolen by somebody.
And those are problems that we need to answer and feel confidant in before we actually roll out a solution. In the near term, like there are no plans to force people to use cryptocurrency or to fully move our payment system over. But that is, you know, a possibility as we move into a world where there’ll be progressively parts of the system that might be decentralized.
THE BEAT: If we talk about decentralization outside of payments, why not open-source Kickstarter itself and allow anyone to host part of the infrastructure? A blockchain is simply a distributed database, so what is blockchain offering that you can’t get from other technologies, or from making an open project?
LEOW: I think there’s two parts to it. One is the data that would live as part of a campaign. A campaign has data related to it like the video, the campaign details, the backers, all of that stuff. We believe that that data can be structured in a way through a blockchain where it is, at the creator’s permission, published there, and that data can move in a much more efficient and effective way between services, including Kickstarter, including some of these third parties, in a way that open source doesn’t allow.
THE BEAT: Could you give a little bit more details on that? Right now, blockchain is remarkably slow – it can take up to four hours to complete a single transaction on the Etherium network (which powers NFTs). Meanwhile, we have open-source systems like OAuth authentication, which is used between countless services. We have systems like Swagger that make it easy to build on APIs that transfer data between systems. Given that, if the goal is interoperability and data transfer, why not use something that already exists and is extensively used? Or, to put it another way, what is the killer feature of blockchain that could not be achieved through existing technology?
LEOW: I’ll admit that I’m not the technical expert on this. And there’s a lot to explore here. But we think that, based on some of the more technical investigations into this that the data can be structured and moved more efficiently on blockchain.
We’re also able to give governance rights, potentially, to participants in the system, whether they’re users or these third parties, through a blockchain system. I’m not super familiar with how governance is done in the open-source world, but our understanding is that that is done more effectively with blockchain then with open-source.
THE BEAT: Could you explain what you mean by governance and rights?
LEOW: A protocol is like defining the rules of the game, like how fees flow to a project. Right now, the project raises X number of dollars, Kickstarter get 5% of those, the creator gets 95% of those, and some percentage goes to Stripe. Those are the rules of the game.
But what if, in a future world, we define that some small slice of our 5% would go to another participant, say someone who helped promote the project, or someone who helped reduce risk on the project, or someone who helped calculate shipping better for the project, things that would actually help solve some of the core challenges that we see in the system.
The protocol defines those rules that need to be updated over time, because they might not be optimal for how the system is works in the future, or it might not work for certain communities. And we don’t want to be the single arbiter of how those rules change, we don’t think that that is an effective way to give more empowerment to the people who are contributing to the system.
What that will look like in terms of how people would potentially voice their opinions and vote on changes? There’s a lot to be figured out there. We take this part of it really seriously. That’s why we announced starting a Governance Lab to focus on these types of questions. Because what we see in the web3 world, and in the crypto world generally, is people are a bit hand wavy about governance. They say it’s an important thing, but I haven’t seen a lot of people solving governance in a really effective way. And our belief as Kickstarter is that if you don’t think carefully about how governance or systems will work, they will tend towards profit maximization, that’s just the world we live in.
Kickstarter, the company, reincorporated as a Public Benefit Corporation (PBC) to try to hold firm on our mission and not be solely driven by profit maximization. We want to try to solve what we see as potential industry wide issue around governance. Different implementations of blockchain or web3 are going to tend towards profit maximization. So how can we design our systems so that it is the governance leads to a mission, rather than just solely in the direction that you see with a lot of NFT hype and all of the stuff that we honestly have a lot of problems with, because we don’t think that that is what we’re trying to solve for.
THE BEAT: You’ve mentioned you’ve had many, many conversations on this proposal. Could you talk about the reaction to your announcement? Were you surprised by how vehement the pushback was?
LEOW: First, I would say, Kickstarter is made up of many different creative categories and domains. The reaction has been varied across all those. Some people are very excited. Some people are very skeptical. And I think that’s good. That’s on us to show the value of this stuff and explain ourselves, rather than just shrugging it off, which is certainly not what we’re trying to do.
We’ve had a lot of tough conversations and all and we need to come back with better answers. We want to keep engaging in those conversations and making sure that people know that we’re not going to force people to do anything until we’ve answered those questions appropriately and shown value that this is a net benefit for our users. We’re not blockchain or bust.
Does this solve problems for users? Does it help advance our mission? I think we look at these technologies, we think they are relevant and not going away. And then you have two choices: you have a choice to shy away from them and hope they go away. Or you have a choice to try to, you know, thoughtfully engage with them. Challenge them, find the opportunities, and shape them towards our mission, which we think is really important compared to the profit maximization that some of the bad actors you see in this space are doing.
THE BEAT: A big problem in the NFT space is the issue of reversibility. If there is a fraudulent transaction, because there’s no central governance, because it’s distributed system, there’s no arbiter for you to complain to. No mechanism to reverse a charge.
If problems like this cannot be solved, and the advisory committee recommends you don’t continue, would Kickstarter abandon blockchain? Or is the advisory committee more focused on how to use blockchain in the most efficient way, rather than if it should be adopted?
LEOW: Maybe somewhere in-between? The net benefit to our users and our mission needs to be clear, otherwise we would not adopt this. There’s a long period of exploration that we need to get to before we can prove that out and feel confident.
And that’s what the Advisory Council is for — to challenge and to say these are really serious issues that need to be solved. And we need to come up with the right answers for those. I don’t think that we’re expecting to have the advisory council vote one way or another, they’re part of helping us solve the problems that we laid out in the FAQ. I don’t know if reversibility was in there. But we have a long list of problems that we think are our risks and challenges with this approach. And it’s on us to work through those in the coming months and years to feel like we’re going to get to that net benefit for the system.
THE BEAT: You’ve mentioned a mixed response. We’ve seen several headlines recently, from creators like Spike Trotman, who have expressed skepticism about the move and have pledged to go to other platforms. How would you respond to these creators?
LEOW: It’s heartbreaking to see someone like Spike leave the platform. I’ve met her many times, and honestly wish her success wherever she’s going to launch a project. I mean, that is at the core of what we want to see in the world. It’s up to us to win back her trust and the trust of people that have left the platform and show them that we’re going to continue to invest in our current platform as it is now, where there are lots of things that we need to fix. That is the majority of our effort at Kickstarter.
And then it’s also up to us to answer these questions that people have around safety, around reliability, and accessibility with blockchain. It’s up to us to show the work, to show the value rather than just talk about it. And I think if we do that we will hopefully win back the trust of these people so that they feel comfortable coming back to Kickstarter.
THE BEAT: Looking back, is there anything you wish you’d done differently with this?
LEOW: It’s a great question. I think we’ve learned a hell of a lot in the last couple of months.
I think we underestimated the size of the cultural discussion around this and how divisive this can be in certain communities, and how much people care. I love to see that because these are the people that we serve, this is their livelihood. And it’s on us, at the end of the day to help them bring their creative projects into the world and sometimes pay their rent, keep their business going, pay their employees and we can’t be in a place where we would be messing with that. And that’s why part of the announcement today is that we’re not moving on without those people. We’re going to test and do things out in the open so people can see what is happening, and that the value can be shown. And then people that want to be a part of this can test it out. But there’s nothing that’s going to be forced on people.
THE BEAT: With that statement, that nothing is going to be forced on people, will we end up with two Kickstarters? A way to run a campaign while opting out of blockchain?
LEOW: I don’t know what it’ll look like. But I think realistically, there’ll be probably a separate app, a mobile app or a web app, that is not kickstarter.com, that will be a first implementation of this. It might just be in certain categories, it might have limited functionality, or only be in a certain country. And we want to learn from those type of things, from multiple experiments that are going on out in the open, before we consider which parts of those experiments are relevant to Kickstarter, which parts of those are going to be net benefits for creators and backers? And then, at that time, we’ll figure out how to integrate them in a thoughtful way.
 Rewards are usually offered at the beginning of a crowdfunding campaign to encourage people to back the project. For example, a crowd-funded comic book might offer a copy of the book if a backer pledges more than $20.