Zumo Money’s Quiet Revolution

We investigated the role an Edinburgh based company is playing in the movement to create a new green, decentralised financial system, in an article originally published in FLIP magazine

The continued financial turbulence of the past decade has evaporated any illusion that our savings sit quietly in bank accounts. In fact the money we lend to them is hyperactive, loaned to governments, invested in world markets, exchanged with hedge funds. And yet, despite all the work it does, savers see little return: interest rates have been close to zero for most of many customer’s financial lives.

Edinburgh based Zumo Money is part of a growing movement seeking to usher in a different financial system in which money flows securely and seamlessly without the mediation of banks.

Zumo speaks a language of quiet revolution, envisioning ‘a new fiscal democracy’ that ‘breaks borders,’ in which we take ownership of our savings beyond the ‘control’ of ‘the one percent.’ Refreshingly, the company is just as forthright in its commitment to acknowledging and addressing the blockchain’s carbon footprint.

CEO Nick Jones, who founded the company with Chief Product Officer Paul Roach in 2017, is quick to acknowledge that many attracted to the promise of decentralised finance have continued concerns about the sector’s environmental impact. As each transaction extends the blockchain ledger, extra computing power is required to crunch the numbers to mine new coins.

“Transparency is key for us,” Nick says. “As we grow we have to account for more transactions. We want to be upfront about owning our own carbon footprint.”

Zumo Environmental and Sustainability Advisor Kirsteen Harrison notes;“the industry’s efforts to mitigate its carbon output are still in their infancy. It’s difficult to obtain accurate data on its electricity consumption precisely because the blockchain is decentralised.”

“Some crypto is mined in countries which burn a lot of coal, others in countries focussing firmly on renewables; some is mined through inefficient equipment, others through state-of-the-art tech.”

“There are so many ways of measuring the data that it can be easily manipulated to suit different narratives,” she adds.

“We have recently calculated our carbon footprint, taking scope one, two and three emissions into account.

We’re not just looking at our direct carbon footprint, but the whole value chain: our IT purchases, business travel, staff working from home and office electricity use.”

Zumo’s carbon commitment inspires its work with WasteAid, a charity sharing refuse management and recycling skills in developing countries without waste infrastructures.

“Our partnership with WasteAid came from our search for a credible 100pc recycled or biodegradable alternative for Zumo’s debit card,” Nick explains.

“We couldn’t find one, so the least bad option was to print regular plastic cards and find a partner working to reduce plastic usage. Like us, WasteAid is a lean startup. They’re not a ‘white saviour’ charity: they are all about empowering people locally, working with them to set up their own waste management programmes.”

As well as providing ongoing support, Zumo runs fundraisers — a virtual 3,680 mile walk last year from Edinburgh to Cameroon capital Yaoundé, where WasteAid has a project, raised nearly £4,000 — and app users will soon be able to make micro donations.The company’s work with WasteAid also highlights one of the blockchain’s most compelling features: its potential to ensure fair and seamless transactions in economies that don’t have established financial infrastructures.

“A whole generation is just not bothering with banks, making direct payments through mobile wallets instead,” says Nick.

“We’ve had really interesting conversations with WasteAid about how litter pickers might be paid fairly using blockchain contracts, verifying they are paid properly for the waste they take to recycling centres. That’s a very practical example of locked blockchain transactions in action.”

For Nick, banks are parasitical intermediaries between people and their savings. He says: “our current system relies on trust in central banks, which arguably are not doing much to retain that trust as they devalue the currency and manipulate the economy; and in retail banks, which do all kinds of risky things to make themselves money. We’ve reached a logjam with the current financial system, with the prospect of negative interest rates in the UK later this year meaning we’ll actually have to pay banks for the privilege of holding money in our accounts.

“Decentralised finance envisages a frictionless financial system in which the intermediaries that might benefit from it are removed. You could borrow against your crypto assets, rather than relying on an arbitrary credit score. And you would be much better able to earn interest on them. That’s particularly attractive to millennials, who have never earned any income on their savings and probably never will.”

Zumo is inspired by the classic blueprint for a decentralised financial system published by the enigmatic Satoshi Nakamoto in a 2008 white paper. In less than ten pages, it sets out the conceptual framework for a self-regulating system of exchange in which digital currencies can be exchanged without financial or legal brokers.

Nakamoto — who disappeared soon afterwards — proposed a digital coin, effectively a series of numbers on a computer screen, that could be exchanged with other holders through a peer-to-peer network, and used to buy products, services and ‘traditional’ currencies by merchants willing to accept it. Each transaction is recorded in the ‘blockchain,’ a public ledger that serves as a cumulative digital record of all the transactions — called ‘blocks’ — ever exchanged. New exchanges are verified against a single common record of all transactions. Fresh coins are minted — or in crypto parlance ‘mined’ — in the course of the verification process. To preserve the currency’s value the paper specified that only 21 million coins should be mined, although they can be divided.

Zumo is developing an ecosystem of services to allow users to manage cryptocurrencies and mainstream money within a single app. As the platform is rolled out, users will be able to exchange crypto seamlessly with regular currencies and pay for goods and services anywhere with a convertible debit card. Unlike a bank, Zumo does not have access to its users’ money, offering a friendly user interface to funds held securely on the blockchain.

Decentralised finance is gradually gaining public and institutional acceptance. Bitcoin payments are now accepted by PayPal and Tesla, and, with the pandemic wreaking havoc in the markets and government recovery programmes stoking fears of inflation, more investors are looking to it as a long term store of value.

However, Bitcoin’s wild price swings mean many are still wary. As Nick comments: “Bitcoin as it is now is certainly not fit for purpose as a currency. It’s unstable and transactions are too costly and slow.”

Others are intimidated by the sometimes forbidding tech speak that saturates the decentralised finance world.

“As often with new tech, early adopters like making it seem like sorcery to everybody else,”

says Nick. “It’s been deliberately badly explained by some who like having it to themselves! And it has been a bit of a boy’s club.

“The user experience on some long standing crypto platforms is terrible, something that we and other companies are trying to make as easy as possible. And like other new technologies — think of the early internet — it’s been beset with scams, appealing to the get rich quick mentality. There have been security concerns about crypto being used to fund the dark web, or terrorist organisations.”

Another barrier to adoption has been its threat to vested interests. “The traditional financial world has taken a fight rather than flight response,” Nick continues. “Something with huge potential to change things has come along, prompting much nay saying from the establishment.”

But crypto is maturing as the technology evolves and investors and institutions recognise it’s not just a short term speculative bet, but here to stay. “A lot of the new blockchains coming through are focused on getting back to the original tenet of fast, trustless, low cost transactions. They behave more like a currency, designed to be much more stable.”

And during lockdown many people have had more time to investigate alternative ways of putting their money to use. “We’ve just done some research indicating that 45% of people in the UK are considering investing in bitcoin — and that really is a huge change from even a year ago.” Whilst the revolution may be quiet, it seems overwhelmingly apparent that it gains apace in a manner that increases in potential year on year.

This article was originally published in FLIP magazine, produced by Label Ventures in collaboration with Boom Saloon. To buy your copy visit https://www.label.ventures/flip-magazine

To find our more about Label Ventures visit label.ventures