Initiative Q Is Too Good to Be True, but Probably Too Free to Be a Scam

It's too good to be true, but too free to be a scam. 

by James Dennin

It’s not unusual for crypto and crypto-adjacent companies to to argue that they can not only make you rich, but topple governments, re-shape economies and eliminate the need for trust.

But the goal of Initiative Q is considerably more modest: To modernize a payments processing industry that’s still beholden to credit cards. But to accomplish this, it’s giving away the equivalent of millions of dollars in Q, its currently worthless currency. Right now, new-sign-ups can qualify to receive the equivalent of $20,000 by recruiting new members, among other tasks. By sharing a link and enlisting two colleagues to sign up, I’ve already made the equivalent of roughy $5,000.

To be fair, even Initiative Q concedes that it will be a while before I can use my easily-gotten earnmy easily-gotten earnings. For that five grand to become viable for transactions for transactions, Initiative Q is following something lisomething like a a Field of Dreams strategy: Recruit enough people to use its presently worthless currency, and then it will be worth something.

Initiative Q’s founder Saar Wilf tells Inverse that this this vaguely pyramid-scheme-sounding premise is necessary to solving the central problem of innovating in payments. If people can’t use a new payments system wherever they want, they won’t use it at all.

“[Early internet payments systems] failed because it was very hard to get the critical mass … which means the worst technology won, which is credit cards,” he explains. “It had a critical mass of buyers and sellers, which made it relatively easy to migrate to the online world.”

Building a new system that takes advantage of all the technological improvements since then, Wilf says, requires its seriously epic give-away. So far, Q’s premise has proved alluring enough to draw in some 5 million sign-ups since its Facebook ads first began getting picked up by the press at the start of October. That’s more than double the number of sign-ups Initiative Q had when they spoke to Vox on November 8, the equivalent of tens of thousands of sign-ups per day.

How Does Initiative Q Work?

While it plays in the same space and has adopted many of the similar marketing tactics, Q is not a cryptocurrency, which its founders argue managed to replicate the scarcity of fiat money but not the stability. Volatility and speculation are both part of why cryptocurrency has thus far proved to be less than useful for buying and selling things (and helped give rise to the “stablecoin” phenomenon.

While it might not have replaced the economy just yet, what crypto has undoubtedly accomplished, however, is demonstrating to consumers that governments aren’t the only entities capable of manufacturing value, apparently out of thin air. Initiative Q thinks it can take advantage of that psychological shift to create a new currency which will make up the building blocks of a modern payments network.

Once it’s recruited a critical mass of buyers and sellers via its giveaway, Initiative Q will use superior technology to make using Q comparably cheaper than traditional cash. Unlike bitcoin and most cryptos, however, human beings will still control the supply and value of Q through the creation of a monetary policy committee. It hopes to form its committee in 2020, and begin launching its payment network at some point in late 2021.

Initiative Q has drawn comparisons to pyramid schemes over its aggressive marketing tactics. 

Is Initiative Q a Cryptocurrency?

There are a lot of reasons why the concept is a little controversial. For all their open-mindedness about hyperbolic marketing, the crypto community seems to regard Initiative Q as an anathema for calling itself innovative while still envisioning what will be a largely centralized financial system. Writing for the blockchain publication Breaker Mag, the journalist David Morris said that Initiative Q’s marketing captured all of the bad parts of crypto while offering none of the good parts.

“Initiative Q is a really bad idea,” Morris writes. “It’s premised on sketchy hype … [it] seems to be promising nothing more than doing ‘more of the same, but better,’ which isn’t an actual innovation.”

Wilf actually didn’t dispute that second characterization as much as you think he would. The payments innovations Initiative Q plans to implement aren’t revolutionary: Faster transaction times, lower transaction fees, and more robust fraud detection. These are all objectives that virtually every financial incumbent is working on in some way or another, though Wilf thinks by providing better incentives than those incumbents (basically, mountains of free cash), his project can beat them to the punch.

“We’re not into bypassing governments or redistributing power,” he says. “We’re a payments company, we’re out here to solve a huge problem, that all of us pay a bit more for transactions than we should, we experience a bit more fraud than we should, and we get our money a little slower than we should.”

For its tiered recruiting  system  and frequent framing in media as the "next bitcoin," Initiative Q has drawn criticism for its marketing tactics. 

Is Initiative Q a Scam?

In a few key ways, Initiative Q does resemble the kind of pyramid schemes that your second cousin twice-removed keeps trying to recruit you for on Facebook. When you are invited to join Q’s network and verified by who invited you, you receive about Q4,000. For for the next few people you recruit, you get about Q1,500 more. As you rise through the ranks, you get new tasks to earn up to a total of around Q20,000. But the similarities to pyramid schemes end there, according to Victoria Crittenden, a professor of marketing at Babson College who has studied the kind of multi-level marketing that is so often associated with pyramid scams.

“Pyramid schemes base compensation on recruiting other participants with little to no focus on selling products,” Crittenden explained to Inverse in an email, describing a system that sure sounds a lot like Initiative Q. But, she goes on: “Revenue is generated by selling the opportunity rather than the product, start up costs are generally high and promises of significant earnings with little effort and time commitment are often made to recruits.”

“They’re building the world’s biggest database of people who want to get rich quick,” explained the tech vlogger Ivan on Tech in a YouTube video. “It might be the case that in the future you might get emails from different random people presenting to you different investing opportunities in different penny stocks .. or just investing in a plain scam.”

While you can quibble with the marketing, it strains credulity that Initiative Q is simply a play to gather a big list of gullible people’s emails. Q notes that while the $20,000 figure seems large, it’s an estimate that was developed in tandem with a reputable economist and monetary theorist, George Mason’s Lawrence White. And while some of White’s ideas, including his arguments for abolishing the Federal Reserve may be fairly described as a little outside the economic mainstream, his prestigious postings (which include the Koch-founded Cato Institute and a visiting scholar appointment at the Atlanta Federal Reserve) make it hard to believe that this is a group that’s so hard up for cash it would dabble in social media marketing scams.

To some extent, there’s also scholarship backing up the ideas behind Initiative Q. As the The University of Queensland’s Brendan Markey-Towler noted in The Conversation, its mix of conventional and emerging ideas could wind up creating “a novel blend of institutions oriented around streamlined payments processing.”

While it seems an unlikely scam, it’s also unlikely to work. Even Wilf says the future of this experiment is “far from guaranteed.” While the 5 million sign-ups they’ve gathered so far sure seems like a lot, it’s still a drop in the bucket in terms of the global population. And even if they do recruit the critical mass of consumers they need, there is still the matter of recruiting vendors and building a payments platform that can deliver on all of Wilf’s other promises. It takes more than a good idea to translate a viral moment into a sustainable business.

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