Civil unrest: like a blockchain-based journalism startup mumbled its launch

In March 2018, Matthew Iles – the head of Civil, an ambitious startup blockchain-for-journalism – was in a small conference room in New York with some colleagues sitting around him. Wearing a peach-colored sweater, Iles watched a camera mounted to talk to dozens of colleagues around the world on how bright the future of Civilization was.

"We feel very confident about the value of our tokens as it refers to the value estimated in all the agreements that we have shared with you guys so far," said the CEO in an internal video recording obtained by Ars.

Civil has the goal of orchestrating the creation, sale and management of an Ethereum-based crypto-token, known as CVL, to serve as a foundation for a number of newly established ambitious news sites.

"Compared to the $ 0.75 estimate we've made with each of you and if we do our right work and run the way we want, it seems we could see two to four Xs in that value when this token sale is complete , and I think it's exciting for everyone, "Iles continued.

But even that valuation of $ 0.75 put the tokens to more than 789 times what was actually listed in a formal deposit. This document has been marked as a reserved "Restricted Token Agreement" and has been provided to Ars. He cited the "fair market value" of a CVL at "$ 0,00095 per Token".

Now, months later, in a long telephone interview, Iles refused to explain this discrepancy to Ars.

In any case, Civile did not even get far. The initial offer of coins (ICO) has failed, badly. By October 2018, the civil ICO only raised $ 1.4 million for a $ 8 million goal. The sole investor of Civil, ConsenSys, bought the overwhelming majority of that investment: $ 1.1 of $ 1.4 million.

People who tried to buy CVL tokens had to go through a complex and long series of steps that included online quizzes to show that investors knew what they were going to. (All money collected as part of the ICO was repaid, according to Civil.)

"Victim of a fraud"

Now, some within the civil community have raised significant concerns about the entire premise of the company. In particular, a co-founder, Daniel Sieberg, told Ars that he considers himself a "victim of fraud" after being fired in July 2018.

"The fact that they are the people who make a mockery of some saviors of journalism – everything has reached the point where, as a victim of fraud, seeing this continue is so offensive," he said, still complaining that he was not as skeptical as he should have been. "At the time, I felt I did not know enough about the blockchain for the quantity that had to be evaluated? Yes, I will take it to the grave."

Jay Cassano, a former reporter from Sludge, a site affiliated with the Civil, said journalists were encouraged to take future salaries based on this valuation of $ 0.75 in exchange for cash in favor of multiple tokens. But when this did not materialize, he quit after five months. Since the ICO has failed, journalists are paid in full in cash.

"Even if they started with the best intentions, they have now become bad actors and are intentionally deceiving journalists who work for them and the general public," Cassano said.

In addition, Civil's main lender, ConsenSys, announced at the beginning of this month that it would cut 13% of its workforce. How exactly this will impact on Civil is anyone's guess, but it can not be beneficial.

"It's complicated"

The Civil Media Company, which has existed for more than a year, has propagandized its bold plan to "feed sustainable journalism" through a "decentralized model based on blockchain and cryptoeconomics".

Translated into simple English, it means that the company wants to act as an umbrella entity for numerous independent online media operating since June 2018. These "newsrooms" cover a wide range of topics, ranging from local journalism (Colorado Sun) , money and national politics (Sludge), news on the marijuana industry (CannabisWire) and more.

Few members of Civil's staff have experience as working journalists, they do not employ journalists. (The editors, however, as independent entities, obviously employ journalists and editors.) The CEO Matthew Iles himself studied journalism, but told Ars that "I will never call myself a journalist".

He recognized that Civil's first stab at creating a blockchain-based solution for journalism was problematic, but he remains confident in the model and promises that Civil will continue.

"It's complicated and we have complicated it too much," he said.

In a long telephone interview, Iles explained that he was driven by admiration for the profession of journalist and wanted to help develop a new business model to finance and sustain it. He said he wants to help online media get rid of the traditional ad-based model, dependent on Facebook and Google.

"The reason why employees and why people are committed to this project want to be thrown out because we are putting our sweat in this, and we want to grow this network where the value of our network is consistent with our mission , which is a global platform for journalism sustainability, "said Iles.

Revenue and constitutions

However, the media seeks conventional sources of revenue subscriptions, advertising, branded content, which is quite difficult without having to introduce blockchain into this equation.

Thus, CVL is the theoretical vehicle for achieving these goals. The well-intentioned token is described as "vital to the general model of Civil, as it unlocks two vital functions for journalists: self-government and permanent archiving".

It is not clear exactly what is meant by "unlocking … self-governance" – all the news sites, by definition, are autonomous. All these media entities choose what, when and how to publish. Some even have publicly accessible ethical codes and other guidance documents.

Civil has also created something similar called the Civil Constitution, which, in many respects, reads like a conventional journalistic ethical code. However, the Constitution goes a step further by establishing a "Civil Foundation, with the mission of supporting and defending the fundamental values ​​defined in the Civil Constitution".

The Foundation was formally organized as a non-profit entity based on Delaware in September 2018. It appoints the members of the "Council", the governing body for the entire civil platform. However, the Council has never met to discuss substantive issues, according to two members who have received anonymity from Ars. In fact, by project, the Council – made up mainly of journalism veterans – only reunites when there are disputes, and there are not any.

"I think it's legitimate to ask what happens to that role if the problem concerns the same civil company," one member said. "[That’s n]something that is clear to me right now. "

The Constitution can not be ratified without the "Token Holders" who approve it. Until this happens, its binding power appears largely meaningless.

"Permanent storage"

Regarding "permanent storage", supporters often refer to the history of DNAinfo and Gothamist, news sites that were temporarily torn up after their founder had been upset by the unionization of staff. But the archives of those sites were quickly restored. (In fact, DNAinfo.com redirects to Block Club Chicago, a civil editorial board.)

In fact, there are numerous websites that have years of archives that have not been disturbed. For example, 20 years of Ars's archives are freely available on our website.

Neither of the two pillars of Civil, or "business features", seems to need a blockchain-based token to address them.

"At one point, I thought that the model made sense to foster relationships between readers and journalists more directly and cut the rich sponsors of the newsrooms as the only model for journalism today," Cassano told Ars. "But over time I realized that Civil was a solution looking for a problem, because we do not need the technology to do those things … Look Civil – they've raised $ 2.5 million in funding."

In October 2017, ConsenSys donated $ 2.5 million in cash to Civil, with an additional $ 2.5 million in donations of services in kind, including office space.

"What technology did Civil create with those $ 5 million?" Cassano added. "From now on there are [over] a dozen or so WordPress sites that have been launched. They needed $ 5 million for that? "