Universal basic income models based on blockchain systems are being developed, but are they practical?
Universal basic income, commonly referred to as UBI, dates back to the 16th century when Sir Thomas More depicted a society in which every person receives a guaranteed income in his famous book Utopia. While Utopia is a fictional work, the reality of a basic income has come to fruition, as it has been reported that the number of people unemployed in the United States has reached 36 million — a number comparable to the Great Depression.
Yet as the U.S. federal government attempts to distribute a one-time stimulus payment to American citizens, it has become clear that many issues with current UBI models remain. For example, many individuals have yet to receive their stimulus checks, leading to questions over how that much money can be moved reliably and repeatedly. Additionally, how can fraud, glitches and abuse of these vulnerable systems be prevented?
The CEO and co-founder of the cryptocurrency investment platform eToro, Yoni Assia, believes that blockchain technology may help solve some of the challenges associated with UBI models. After spending over 10 years building out eToro with the goal of making global markets open and transparent, Assia turned his attention to a project focused on delivering UBI worldwide.
Assia told Cointelegraph that the nonprofit initiative known as GoodDollar has the goal of creating a world in which everyone has access to basic economic assets. The project, which is being sponsored by eToro, aims to give away small amounts of basic income to onboard new users into the digital asset space while creating a better society. He said:
“The idea behind UBI is that every person gets some kind of monthly income, irrelevant to their work or educational status. There is also the assumption that UBI models can only be launched nationally, where a local government increases taxes to fund UBI programs. However, this model is unappealing to most. There is also less trust in governments today, which is why we believe the opportunity for a model like GoodDollar can flourish.”
According to Assia, the GoodDollar initiative is built on the Ethereum public blockchain and includes a cryptocurrency known as “G$,” which is distributed as basic income to network participants. Each transaction is recorded on the blockchain and can be easily traced to ensure that basic income is going to the correct recipients, with smart contracts being leveraged to send out recurring payments.
Assia explained that the capital behind each GoodDollar is generated from interest earned on crypto or by staking crypto through protocols such as MakerDAO or upcoming platforms such as ETH 2.0, which is designed for staking. He added:
“The initial value of GoodDollars will either be created by people buying and selling goods/services for GoodDollars or by people voluntarily staking assets for the purpose of improving equality in the world.”
How does the GoodDollar model work?
GoodDollar launched its digital UBI wallet at the beginning of May to start delivering capital. While a public demo version of the wallet is now available online, it’s important to point out that an internal project was initially conducted by eToro in January of this year to test how a blockchain-based UBI model would perform.
Assia noted that the goal of the project was to stimulate trade in GoodDollar’s G$ coins between individuals in a closed marketplace. He said, “Over the five month closed beta, hundreds of participating eToro employees conducted tens of thousands of dollars worth of commerce.” Following the internal test, Assia explained that over 300 eToro employees used their UBI wallets to donate $100,000 to local Israeli charities that are combating the coronavirus pandemic, saying:
“This internal project ended two weeks ago. We gave all eToro employees $200 dollars and let them choose from one of the four charities to donate their GoodDollars to. For every $200 donated to a hospital, we would match that amount in fiat (shekels), which was then distributed evenly across the four charities to make an impact.”
Can this model be applied in the real world?
While Assia believes that society is getting closer to the point in which any monetary policy can be defined by code — noting that cryptocurrencies such as Bitcoin have proven to be globally accessible and exchangeable — problems still remain with a blockchain-based UBI system.
According to Assia, technology is the number one challenge for building a decentralized system at scale. While the GoodDollar beta currently runs on Ethereum, Assia explained that social identity is needed for a project to scale, an element which is currently being researched.
The need for a unique digital identity was exemplified by the team behind the cryptocurrency Manna. Launched in 2017 and managed by the nonprofit Hedge for Humanity, Manna created a project that applies the universal aspects of UBI to a blockchain-based system.
Manna’s co-founder and director of networking, Brandon Venetta, told Cointelegraph that Manna immediately started gaining traction after it was launched, which was around the same time that Bitcoin (BTC) reached its all-time high of nearly $20,000. He noted that the project grew from a few thousand users to nearly 100,000 in a matter of months. However, while Manna was initially successful, Venetta explained that the project was not scalable, saying:
“In terms of capital, the first phase came from donations. We had a wallet that was preloaded with Manna tokens for our users. Unfortunately, while there were lots of people signing up for the platform, we discovered that many accounts were fake or created more than once. This led us to believe that unique identity is a problem much bigger than we had anticipated.”
In order to solve this problem, Manna partnered with the social identity network BrightID. Hedge for Humanity board member Philip Silva told Cointelegraph that BrightID provides digital uniqueness through social analysis, noting: “BrightID builds out a social web where a person’s connections vouch for their identity. No personal information is required, as groups are leveraged in the platform to prove that users are unique.”
While Manna’s initial blockchain-based UBI system was flawed, Hedge for Humanity and Manna are now working on a new initiative called “Citizen Income Experiment” in which any asset — such as stocks, bonds or crypto — could be used to deliver basic income to those in need. BrightID is being leveraged to prove users’ identities to combat the issues found in the previous UBI model. Silva added:
“The Citizen Income Experiment will start as a raffle that will allow people anywhere to sign up for the chance to win a one year UBI paid out monthly as $100 worth of crypto (either BTC, ETH or DAI). BrightID will be leveraged to ensure that users enter the raffle only once. This will help us validate BrightID’s capabilities.”
In addition to digital identification, Assia noted that decentralized UBI systems require a network effect in order for value of new capital to be created. He noted that in order for GoodDollar’s coins to obtain value, a network effect is needed to enforce the usability of the currency. However, this is easier said than done. Alex Howlett, an economist and the founder of Project Greshm, told Cointelegraph that blockchain is not a reasonable technology for UBI models.
Howlett said that when designing the Greshm system — a complementary monetary system that sits on top of the U.S. dollar, similar to the dollar’s former link to gold — he looked to blockchain to see if it could assist with certain challenges but found that it was irrelevant, telling Cointelegraph:
“Money has to have a standard value that is maintained independently of the market. The pricing standard has to be set in terms of something not subject to market forces. There also needs to be an outside authority of the market force to create a standard of value for the economy.”
While this is one opinion, UBI expert Scott Santens, who is currently involved with former U.S. presidential candidate Andrew Yang’s UBI project, noted that blockchain-based UBI systems are theoretically possible. However, he pointed out the biggest barrier is getting enough people to use the new currency, adding: ”It needs to be extremely user-friendly, and it needs to be accepted as widely as Visa and Mastercard.”
Despite skepticism, Assia remains aware of the time it could take to implement a project such as GoodDollar, mentioning that this could be a very long-term initiative. He further noted that many other projects, such as the Citizen Income Experiment, are building out protocols to develop open UBI models, saying:
“All of us are executing non-profit concepts and trying to understand how to enrich other projects in the space. There are lots of big ideas that need to be crystallized in execution, which will eventually benefit many people.”