J2 SAY 07 Martin Lundfall Circles – Universal basic income on the blockchain

so thank you all for coming and thank you to the conference organizers my name is Martin landfall and I'm from circles if you were expecting a talk from circle then you're subject to an unfortunate typo and actually circles is not has not just acquired Polonius but we are a universal basic income project based cryptocurrency and so I'm gonna do a little bit of an experiments in this presentation and differ from how I usually present circles because usually the way we talk about circles is that we start talking about universal basic income and firmly establish how awesome universal basic income is and then we think well if this is so good then why should we wait for governments to implement universal basic income why can't we just make it ourselves and then we come to the circles conclusion which is universal basic income basically now instead of waiting for the government to implement it but for this presentation I'm gonna talk a little bit more about currency systems monetary systems in general and tokens also in general and value in general so a little bit of a more philosophical take on what tokens are what value is and and what in particular we would like our tokens to represent and through that I hope to reach the conclusion that if you want to make a currency system that is truly fair and decentralized it becomes kind of hard to imagine a different scheme than circles so let me begin by saying the tokens are representations of value and so the design of a token determines which particular value that token will encode not merely in terms of the code or the implementation of the token but also in terms of the the cultural means that we attach to the token and when I talk about tokens here I talk fairly generally about tokens so not just year C 20s or tokens on any cryptocurrency platform but also tokens like fiat currency also being a token or a diploma from a university being a token that represents the value of education or you know an art and artists retrospective also being a token that shows that an artist is really valued by the community but the fundamental proposition that we are that we believe that the current monetary system does a very poor job of encoding the values that we share as a society so the Fiat monetary system is not a very well designed system for encoding the types of values that we share and there are some particular things that we can say about the the Fiat monetary system on why this is mainly it favors the few it is a system in which a subset of actors a very tiny subset of actors have privileges of printing and allocating new money and furthermore it's and this is through a fractional reserve banking of course and furthermore through fractional reserve banking and through this whole process when you are minting new tokens and giving them to people as loans not only is all money created as debt which if you've read David Graeber might have always been the case but it's also debt that is attached to interest so that you constantly need to pay back more money than exists and the only way to fuel this system is through infinite growth and our growth economic growth is not inherently coupled to the destruction of the planet but it is tightly correlated and if it is decoupling then that decoupling is not happening quick enough so it's very very hard to imagine that in our current monetary system we're gonna move away from from the type of environmental destruction that we're seeing right now because in its inherently something that arises from the design of our monetary system under fractional reserve banking and there are some nice sources if you doubt that claim that outline that proposition in more detail so if the monetary system does not capture what we what we value then then maybe we should say first what we do value as a society and of course this is extremely hard and something that should be discussed at length however various glasses of various substances but but I don't have time to go into that sort of discussion right now so I'm gonna say some fairly uncontroversial things that many of us can agree on that we all value and those things are people and equality that's fairly uncontroversial to say that that those are two things that almost everybody values so if these are the things that we want to capture in a monetary system then how does that influence a design choice when it comes to designing a monetary system well I'm arguing that what we should strive for is fair pre distribution to all and what I mean by pre distribution here this is a term that is used in economical circles in a slightly different meaning but but what I mean in it by it here in terms of tokens I mean by pre distribution the allocation of the initial supply of the token and the allocation of newly minted tokens if that is something that the token has built in so to say that we are striving for fair pre distribution means that the initial supply and newly-minted tokens where those tokens go should not be determined by a proper subset of the actors in the system unless those actors have been given explicit privileges by the rest of the community so nobody should be able to change the rules or the specifications of how new tokens are allocated and that's the first condition and the second condition is that the early mover advantage should not be extreme and now I think it should be clear that the first condition is not met by fiat currencies because we have banks under fractional reserve banking that are given privileges that the rest of us don't have in terms of minting money and that the second one is what disqualifies most cryptocurrencies that there is really an unfair advantage if you got into cryptocurrencies early and that really doesn't make it a fair system if we look at how wealth is distributed within cryptocurrencies this is of course pretty hard to measure for for different reasons Bitcoin for example is pseudonymous and and several people can own a single address and a single person can own several addresses so it's hard to establish a notion of who owns what but we do know that there are whales and that the whales are pretty significant in terms of the wealth that they own and it's really hard to really make the claim that you have the same opportunity to to get in and share a piece of the pie if you got into Bitcoin now as a couple of years ago and so this is an interesting graph which i think is taken from September last year which again has a bunch of problems associated with it like we know that many of these addresses might belong to exchanges and so those addresses might not reflect really one single owner but but several people owning that share of the pie collaboratively but still whenever we try to estimate the wealth distribution within cryptocurrencies it does look a lot worse in terms of equality than than most countries like if you measure the Gini coefficient which is a measure of how much of the accumulated percentage of the population owns which percentage of the accumulated wealth then it is kind of hard to believe that there is any substance in the claim that cryptocurrencies are more decentralized or more equal in this sense than most countries are so yeah just just to highlight there's four point eleven percent of all Bitcoin addresses that owns ninety six point fifty three percent of all of the Bitcoin so in this aspect the claim of decentralization is hard to make there of course other factors that go into it but this is what we mean by an extreme early mover advantage so enough critique of cryptocurrencies and enough critique of the Fiat monetary system I don't think that for this audience I need to critique the the Fiat monetary system very much because most of us are here because we we think so and so instead we should answer the question of well how should we design a better system how can we do the design a monetary system that do have these properties that they're the yeah well you know the properties I saw said them already so and this is where we propose circles as a fare cryptocurrency and the architecture of circles can be pretty much split up into two parts the primordial soup of personalized currencies which is really that the core of the idea of circles and then just some cherry on top I'm gonna speak a little bit quickly about community currencies that's the wrong direction so what is circles circles is a system in which users are continuously given newly minted tokens and the thing about this is that the tokens that they are given is particular to each user so everybody gets a personalized currency and they are continuously given new units of that personal currency and then to make trade with others and to really build a network out of this instead of just having your coin for yourself every person operates within a web of trust so you individually choose which other people you know are actual people and not Sybil accounts and then you say hey I'm willing to accept your currency one-to-one with my own because we're people and we're gonna want to do trade with each other we're gonna operate as humans in the system and this is how the Sybil attack vector is mitigated by making sure that everybody chooses individually which other people they're willing to do trade with and if somebody accepts a Sybil accounts into their web of trust then the the attack is localized to that particular account because it's really only you that suffer and not the entire system so the Sybil account Factory is localized and so this really makes circles a trust our currency because the web of trust is that focus and the universal basic income is built into the monetary system so this is the base layer and the underlie core idea of circles so now we have a currency that has universal basic income as issuing scheme and that is decentralized so that's great but it's kind of a difficult system to use oh but before I go on I should talk about transitive transfers so if we imagine us operating within this web of trust then at some point I'm gonna encounter a person that I don't know probably and I don't have in my direct network of trust but there might be that this person is only one hop away or a couple of hops away from from me in the web of trust and I can still do trade with that person using the mechanism of a transitive transfer and this works as follows let's imagine that we are Carol in this scenario and we want to pay Bob some money because he is offering us a delicious sandwich so Bob doesn't trust us directly so he's not going to accept our currency but Bob does trust Alice and Alice trusts us so we can still transfer money to Bob by going via Alice and this is something that's gonna happen automatically in the system this is not something that Alice is gonna be aware of even happening but what we're gonna do is that we send Alice five of our Carol coins and Alice sends five of Alice coins to Bob and therefore Bob has always received currency directly from a person that he trusts and we've been able to pay for the good that we wanted this delicious sandwich and this can also happen in several steps we can do this yeah transitively basically for as many hops as we need okay but but still this system does require a lot of input from the users and if we imagine people that are less into thinking about what money is and indifferent monetary systems and are mainly interested in buying sandwiches and not so much managing their trust network and dealing with all of this complicated stuff then it's easily imagined a system on top of this primordial soup of personal currencies that we can think of as community currencies which is people coming together to form a community that has a unified token so one token that is the same among every person in the community and this is not only nice because people in the community can now exchange goods way easier but you can also imagine that the currency are sorry that community implements a changing exchange rates over time for the personalized currencies of the people in the community so as to try to establish stability of the community currency and here it becomes obvious that if we do imagine community currencies to exist on top of circles then we can't really separate governance from the monetary system because these communities are gonna have to make decisions they're gonna make decisions like who is a part of this community what is the the monetary policy of the community they can't change the fact that everybody is going to get their community currency as a basic income otherwise it wouldn't be circles but they can change the exchange rate so to try to establish the stability and they need to make a decision on that and they need to make a decision on how they value other communities currencies and this makes it obvious that they're gonna have to make decisions somehow and this is where it becomes really interesting to explore different governance models for these communities and we really want to maintain the sort of individual freedom and still have the community decision-making respect that so we're gonna explore some different models when it comes to how these communities make decisions but there's also an interesting point that can be made here which is that since these community currencies will make choices on how to accept other community currencies then instead of this being simply the second step we can sort of see this as an induction step that makes the whole system sort of composable and and that the community currencies now operate on a similar ground as the individual currencies okay so now I'll go through the usual claim for white circles is nice which is basically the claim that universal basic income is nice and I won't spend a lot of time on this but I'll say the most important things in my opinion on my universal basic income is really nice first of all there are many studies that have been made on the topic that have shown that it reduces poverty obviously it reduces crime because people are not stealing food to survive and stuff like that it does reduce inequality it improves health so in general there are many societal aspects of actually real value being created and also monetary value if that's really something that you want to put into the equation which which you might but more importantly I think are the sort of political or cultural changes that a universal basic income can bring about which is that we start thinking about labor and work differently there's a decoupling of labor and compensation which which can really change the the current political environments where everything is being done for the ultimate purpose of creating more work to an environment where we start to really experiments more freely with what it means to be human and do human things rather than just working and there's also a psychological change in humans that happen when they have their basic income being met which is that they start going from the cutthroat survival mode that you're in if you are really poor and you constantly need to prove to some institution that you are really doing what you can to get a job or whatever and it changes you psychologically to go into a more of a human mode where you can really think about well what would I like to do and how would I like to help my community how would I like to partake in society so those are the the ups and some of the downs that people usually bring up when it comes to universal basic income are really misconceptions and so if you if you doubt these I have sources for you so the common misconceptions is that people are gonna if they get a basic income basically become couch potatoes that drink a lot of alcohol and do a lot of drugs but this has been shown in quite a few studies that it doesn't really tend to happen number five here is a nice meta study that contains a lot of different experiments around the world where it's actually been shown that generally people tend to consume less temptation goods and the amount that people stop working when they have basic income is very minor and usually if people stop working they tend to do pretty other pretty nice productive things like get educated take care of the elderly and work on community projects like that which is no it's recognized as labor by our current society but it's still something that we think is important for people to do but of course circles is not a universal basic income as much as it is a distributed basic income because universal basic income is too important to wait for the government to implement and and we can already do it because we have this fantastic blockchain technology that allows us to build our own monetary systems and this is what we should explore and this is what we should be building with these systems and so I'm gonna end by basically oh I'm not gonna end quite there I'm gonna talk about our sort of roadmap for the project if you are if you've heard about circles before then you might have heard it from Martin Kaplan who has been thinking about this for a long time and has been writing about it for a long time but it was only fairly recently that we started working on this as a team and actively developing it and now our plan is to roll out a pilot project in Berlin this year we have a cafe set up there where people are actually going to be able to spend their circles and we're talking to different vendors to make sure that that we're really bootstrap the economy that circles needs in order to become useful as currency and then we have prospects of of where we can take this experiments after Berlin and if this is something that interests you and you feel like you have a good site in mind then please come talk to us because we really want to experiment with different types of communities and different types of economies and see how circles functions in that particular locale so here's where I'm gonna end instead I'm going to end on a little bit of a call to arms because it's become kind of disenfranchising I think the way in which this community is developing which is that we all came in or at least most of us came into the space under the narrative that that blockchains would really bring a decentralized future that would that would be a decoupling from the monetary system and would bring us all of these nice things like a new way to establish Commons a new way of collaborating between people to solve coordination problems but so far it's kind of hard to see that as having been done and really what is most particular about the space right now is that it has made a bunch of white males fairly rich so we know that story like that has happened before so that's not a very interesting story and that's not the story that I would like the blockchain to tell and I think we really need to work hard on establishing the purpose of blockchains as really maintaining the Commons building monetary systems that make sense and collaborating and coordinating people and it's not going to happen on its own it's not gonna happen if we just put a blockchain on some random business process I mean it might be a tiny improvement but it's not the entire significant change that I think that blockchain is really capable of bringing so so yes thank you all for for my talk these references for the claims that I was making if you doubt them then you can find the slides and the references on on Twitter thank you very much [Applause]