Level the Playing Field: The Rise of Black-Owned Cryptos, NFTs & DAOs

Level the Playing Field: The Rise of Black-Owned Cryptos, NFTs & DAOs

Move over Bryan Armstrong. Black-owned crypto businesses, projects and organizations are putting wealth back in the hands of the community.

Level the Playing Field: The Rise of Black-Owned Cryptos, NFTs & DAOs
Darry Port

Published Apr 29, 2022Updated Aug 11, 2022

Crypto

Crypto

DeFi

DeFi

NFTs

NFTs

Cryptocurrency is arguably the hottest sector in tech, often touted as a tool for equality, transparency and fairness.

Kudos to Andreesen Horowitz, Softbank and other high-profile VCs for pledging millions to funding entrepreneurs of color. But the lack of Black representation in tech goes beyond just meeting quotas.

But can it help solve structural racism and the wealth gaps that have historically held back minority groups like Black and African Americans? We’ve seen an increase in the number of Black entrepreneurs over the past few years for sure, particularly Black female entrepreneurs. According to the Census Bureau, Black women are the only racial or ethnic group accountable for more businesses than their male counterparts. But if there are currently more Black-owned businesses than ever before, what’s the problem?

Well, only 2.3% (134,567) of US businesses are Black-owned, according to the Census, even though Black people comprise almost 14% of the population. Not to mention, Black-owned businesses have spectacularly high failure rates. While 20% of small businesses fail within the first year, 8 out of 10 Black-owned businesses fail within the first 18 months. 

So, what are some of these challenges that Black entrepreneurs are faced with, particularly in the tech industry? And how can blockchain technologies like cryptocurrencies, NFTs and DAOs offer a better way?
 

The lack of Black voices in tech

Now you might still be skeptical as to why there’s a need for Black-owned crypto businesses. I mean, can’t we just move past skin color in the metaverse, where our avatars can look however we want them to? Well, not really. Because this goes way deeper than skin color. At the end of the day, it’s about equal opportunity. 

You see, even after slavery was abolished in the US, the gap between African Americans and white Americans continued to grow with regard to homeownership, household income, employment, education, and other economic factors. 

For a minute there it seemed like this was improving. Racial segregation in the late 19th century forced Black people to move into the same communities, (like South Side Chicago), where thousands of Black entrepreneurs began to establish businesses like banks, insurance companies, restaurants and retail stores that catered to Black customers. But following the Great Depression, income fell so drastically that many Black entrepreneurs closed shop and switched over to high-paying jobs in munitions factories. 

A century later, and Black people now occupy roles in predominantly white industries like law, finance and tech. Ashley Caines, a Web3/Blockchain Project Lead at the Black-owned media company Blavity Inc, has spent most of her career working in these white-dominated jobs, always feeling like an outsider. “All of those places required me to carve out space for myself or eventually leave,” Caines says. 

People have always known that tech, famous for minting 20-year-old billionaires, is an industry in which Black people are significantly underrepresented. But it was only after the George Floyd protests that top tech players began to really focus on boosting their diversity statistics. 

To Najah Roberts, a crypto entrepreneur and educator focused on closing wealth gaps in the Black community, a lot of these efforts “feel like people are trying to tolerate us, as opposed to allowing us to have the opportunity to be in this space because we come with the skills, you know?”

Don’t get me wrong. Kudos to Andreesen Horowitz, Softbank and other high-profile VCs for pledging millions to funding entrepreneurs of color. But the lack of Black representation in tech goes beyond just meeting quotas. Let’s explore what real diversity is all about.

What is diversity and why does it matter?

We all experience the world differently. The more diverse we are in terms of race, nationality, religion and gender, the more we have to learn from each other. And if tech companies and VCs don’t leave their bubbles filled with people who look and think the same, and have similar experiences, they can’t truly hope to change the world for the better.

Looking back on her childhood, Roberts remembers how she and her friends used to be teased for the way they looked, dressed and talked. Fast forward to 2022, and Black culture has permeated every facet of the society, from the music we listen to and the clothes we wear to the beauty standards prompting many young women to go get lip injections.

Now the main issue with VC diversity initiatives is that they can be gamed by simply ensuring that some percentage of their workforce is non-white, or by directing a sliver of their funds to Black entrepreneurs. Real diversity (i.e. inclusion) is about actually empowering minorities by giving Black folks an equal opportunity to close large funding deals or reach top positions in major companies.

“I believe that working at a Black-owned company fast-forwarded my journey because it allowed me to feel comfortable in my own skin”, Caines remarks. “There weren't these other environmental factors that made me hide the actual knowledge that I had because I was trying to combat discomfort.”

The vicious cycle that startup ecosystems perpetuate

A startup ecosystem consists of various people and organizations in a shared location, working in concert to build, fund and sell startups. To better understand structural inequalities facing Black entrepreneurs, we need to explore how Black people are being left out at multiple levels of the startup ecosystem. 

Universities

In 2018, about 7% of graduates with a STEM bachelor’s degree were Black, according to the Pew Research Center. This shows that Black people are underrepresented among STEM college graduates compared with their share of the adult population (12%). This could be chalked up to a decline in outreach efforts, peer mentoring and affirmative action, among other factors.  

Another problem concerning universities is that many players in the tech industry are known to mostly recruit or fund graduates from elite universities like MIT and Stanford as opposed to historically Black colleges with great STEM programs. 

Venture capital firms

Black VCs are few and far between. According to the National Venture Capital Association, only about 3% of all venture capitalists are Black. And the percentage of venture capital firms owned by Black Americans is naturally even smaller.

One of the main barriers to diversity in this sector is that the limited partners that invest in venture capital funds will only trust new VCs with their money if more established investors can vouch for them. And this, in turn, makes it all the more difficult for Black VCs to establish strong track records on their own. 

Startups

In the first half of 2021, Black entrepreneurs managed to raise nearly $1.8 billion—a more than 4x increase year-over-year. This is undoubtedly great news. But to put it in context, Black entrepreneurs still only received 1.2% of the record $147 billion invested in U.S. startups during that time.

So why is this? Well, one explanation is that Black Americans don’t generally attend the elite universities that birth most VCs, which means they have a harder time getting in touch with them. According to Harvard Business Review, only 10% of VC deals result from cold email pitches, with the bulk of deals coming from VCs’ former colleagues. 

Without proper financing, it’s difficult to grow a company at scale and compete in a cutthroat market. This forces some Black entrepreneurs to explore less desirable funding options like bank loans. But with Black Americans having the lowest median household income in the US, most can’t provide the collateral banks require.

“As a tech founder, I feel very strongly that we're being left out,” says Roberts. “I see millions of dollars going to kids that are graduating college with just an idea. And here I sit in a company that is actually doing the work, and it's like pulling teeth to get someone to fund or do anything in this space right now”. 

But what if Black business owners had an alternative path to startup riches?

Blockchain technology as an equalizer

Even though the tech industry has traditionally failed to move the needle on diversity, it looks like technology itself could finally start to put the Black community and other underrepresented communities in positions of power.

Throughout history, we've tried to address inequality through the tax and benefits system. But what’s needed is a system that anyone can join to enjoy the benefits of economic growth. That’s where crypto comes in. 

Blockchain technology and crypto assets are set to transform everything from financial services and supply chains to government services, making it possible to address inequality at its root. The reason it’s so revolutionary is that blockchain removes many of the traditional barriers to acquiring, storing and transferring wealth. It's permissionless, meaning consumers don’t have to go through a central authority to access crypto assets. Blockchain also allows just about anyone to access early-stage high-growth projects without having to meet the wealth requirements of an accredited investor. What's more, crypto assets don’t tend to have large investment requirements—often, investors can get started with as little as $10. 

Mind you, crypto investors still need access to the internet, a computer, and knowledge of how to operate these blockchain platforms. But outside of that, crypto is the asset class that comes closest to providing us with a level playing field.

As an example of this, look to Equity Coin, a Black-owned cryptocurrency project that buys affordable housing units all over the country. Token holders, in turn, get the rights to property cash flows.

“There's no way to close the wealth gap with just regular money because it's not even keeping up with inflation,” Roberts remarks. “It is my opinion that we, as African Americans, need to purchase Bitcoin and hold it for the next five to 10 years.”

However, some critics point to the fact that crypto is too volatile. But Caines thinks that this volatility, counterintuitively, benefits Black people. “You can literally take $50 and walk away with a hundred thousand, at some point, if you choose the right coin or NFT."

And according to Roberts, the crypto industry already seems to be more welcoming of minorities. “Believe it or not, the Bitcoin mining industry has been really about hiring Black people, and Black men specifically. My son, for instance, landed a lucrative job in Austin, Texas, starting with no Bitcoin mining experience.” And while crypto is still something of a boys club, the gender gap is gradually closing. Gemini’s State of Crypto 2021 report shows that 53% of crypto curious adults in the U.S. are female, indicating a coming shift in gender diversity. It’s also worth mentioning that half of the people currently working at Binance, the largest crypto exchange in the world, are women.

Is blockchain the great equalizer?

Is blockchain the great equalizer?

Can blockchain level the playing field?

Black-owned DAOs and crypto businesses working to close the gap

Tech accelerators like Smarter in the City, Black Founders, and Blacks in Technology provide workspace, collaboration opportunities and advocacy for African American entrepreneurs. Decentralized Autonomous Organizations (DAOs), defined simply as blockchain internet communities with a shared bank account, can take things one step further. 

Roberts believes that “DAOs are the answer to most of our problems as it relates to sharing the wealth. If they do not give you a seat at the table, I am a firm believer that you need to build the table and stop asking them to sit at it.”

Black-owned blockchain businesses, projects, and DAOs help with both access and funding.

Because DAOs aren't run by any centralized leadership, they're less likely to exclude people on the basis of identity factors like age, gender, or race. And this lack of discrimination goes beyond DAOs into blockchain as a whole. 

For an example of this, Caines points to Long Neck Ladies. This is an NFT project created by a 13-year-old Black girl that's generated millions in revenue. Roberts, on the other hand, operates a brick-and-mortar crypto exchange that's making crypto more accessible to the unbanked.

“Over 60 million Americans are unbanked or underbanked,” says Roberts. “They can't go to Kraken, Gemini, or Coinbase. So if you come in, we’ll help you set up a wallet and show you how to become self-sovereign from day one.”

One of the most groundbreaking features of DAOs is that community members collectively decide on how to allocate treasury funds by voting on proposals. In other words, DAOs can help provide Black-owned businesses with equal access to capital by both eliminating racial biases within the funding process and providing greater opportunities to Black entrepreneurs around the country by being fully remote.

“To me, Black excellence is community decision making that isn’t based in fear,” Caines remarks. “Where we, for instance, don’t fear having to make ends meet if a venture doesn't work out."

Just imagine how many other culture-shifting innovations await us as more Black founders get comfortable relying on DAOs or other crypto-native solutions to back their ventures.