It is time to reimagine money
It is time to reimagine money.
We can have a currency that is accessible to all of us.
Nearly half of the world’s population — more than 3 billion people — live on less than $2.50 a day. Too many people lack the very basic necessities of life. This is unacceptable, unsustainable, and a giant waste of human potential.
It is time to ensure that every person on earth can afford clean water, nutritious food, and access to education.
Ensuring universal access to these basics will jump start a revolution that can reshape the world and create a better place for all of us. The return on investment for humanity of providing water, food and education to everyone will be enormous.
As with an increasing number of things in the world, humanity as a whole does not have a scarcity problem with money; we have a distribution problem. It is time to work on solving this.
The Problem — The current monetary system
For most of modern human history, money has been controlled by local strongmen. Kings, warlords, and, nowadays, our national governments have forced us to use their money to conduct commerce. Up until recently, most people have had little choice when it comes to the money we use. Few of us (especially those living under powerful and stable currencies) give it much, if any, thought. Our money works fine; why should it change?
The existing monetary system is top-down, centralized, and unfair.
Governments permit their central banks to magically create new money.
The central banks then cheaply lend or give this brand new money to the private bankers.
The private bankers then lend, somewhat less cheaply, the new money to already-rich people.
Everyone greedily grabs everything they can as the money slowly trickles down through the system.
By the time it reaches the bottom, there is hardly any left.
If we were not all accustomed to the existing financial system, no one (who did not already know they would land at the top of the system) would ever choose it or think it was fair.
Imagine trying to explain the existing system to a child as if it were a board game. No one would want to play that game. It is so obviously flawed, unfair, and nonsensical.
I believe it is time to rethink this distribution model. When we create brand new money in the world (money that did not exist yesterday), why would we primarily give it to the people that already have lots of money?
The Solution — Distribute money better the first time
What if, instead, when brand new money was created in the world, it was distributed equally to all people on an ongoing basis? Instead of the money inefficiently trickling down through the economy, it could instead vigorously grow up from the bottom, creating more wealth, opportunity, and equality for all.
I am not talking about redistribution of money, but simply distributing new money fairly the very first time around, at its genesis. In case you are concerned, this is not anti-capitalism. Savvy entrepreneurs and compelling businesses will flourish meeting the needs and desires of all these paying customers.
Across the world there are now an increasing number of projects working to create new forms of cryptocurrencies that will be distributed equitably to all people. This growing collection of projects can be lumped together under the name cryptocurrency Universal Basic Incomes (UBI). CryptoUBI.org is a great resource for tracking this growing movement. I am actively following many of these efforts and applaud the good work they are doing and the great ideas they are generating. None of us have it all figured out yet, yet many groups are making significant progress.
But wait… how would any of this possibly work?
Here are my thoughts on the key principles. There is far more to say about each of these topics, but I will have delve deeper into these in future posts. I will also welcome and encourage input from others with relevant expertise in each area.
Identity —
Everyone must be eligible for an account. The trick is to ensure that everyone can have exactly one account and no more. If we are going to give things of value to all the people of the world, we need to know that everyone signed up is a unique human being. Since this network needs to be open to all of humanity, it must not be limited by or controlled by any form of national government.
A group of us have formed the Kuwa Foundation to explore the creation of a decentralized, self-sovereign, and permissionless identity system. This system does not care about your name, nationality, religion, gender, address, or anything other than the fact that you are a unique human being. While this is a technically challenging thing to confirm on massive scale, we believe it is a solvable problem. If you are indeed a unique human being, it should be sufficiently easy to convince the system of that reality. If the ‘person’ is actually a Sybil bot (computer algorithm) trying to have multiple accounts, it will be increasingly difficult to perpetrate or continue the fraud.
There are many other promising projects also working on other forms of user-controlled decentralized identity. I am confident that we (humanity with the help of AI) can find viable ways to ensure a fair system. Proving unique humanity may be a squishy process, but the answer is binary. Either you are a unique human or you are not.
Distribution —
It would be simple if there was only going to be one single universal currency, but I believe that is very unlikely. There are already thousands of cryptocurrencies in existence, and the number grows daily. Many of these will fail, others new ones will rise, and in the end, a bunch of them will settle in to having value just as many currencies, precious metals, and companies have value today.
I envision creating a Universal Faucet to share digital tokens of value with all people. First we create a viable ID system, then we start flowing a new crypto-UBI token to all eligible people, and then we encourage other people and projects to use the same ID system to distribute other tokens of value. As new ideas and tokens arise, the system will be able to adapt.
The Universal Faucet could distribute a wide range of things including: cryptocurrencies (both existing and new), tokenized shares of companies, voting tokens, store credits, access tokens… really anything tokenized.
From a user perspective, once you have a digital wallet and a valid ID, tokenized distributions will flow regularly into your wallet. Once they are there, you will have the opportunity and be encouraged to use them.
Usage —
The primary and easiest way to use most cryptocurrencies and tokens is with smartphones. Even the very basic inexpensive models can be used for a wide variety of cryptocurrency transactions. Ideally, both parties to a transaction have an internet-connected device, but technologies exist that enable some crypto transactions when only the receiving party has access. While mobile access is not yet omnipresent, over 5 billion people have access to mobile phones and over 2.5 billion have access to smartphones. Both continue to increase rapidly and should further increase as citizens benefit from UBI distributions.
Once both participants of a transaction have appropriate wallet apps installed, transacting in cryptocurrencies is very fast, easy, and inexpensive. Utilizing existing crypto technology, you can easily buy a cup of coffee at your neighborhood shop or pay a hotel in Tahiti for a luxury reservation. In either case, the transaction can be verified in seconds and the transaction fee is near zero. Cryptocurrencies can seem very complicated but once you actually send or receive one, you will see just how fast, easy and convenient they can be. Someday, our grandchildren will be confused as we try to explain the old transaction system of dirty slips of paper, heavy metal coins, unverifiable checks, and plastic cards with raised numbers.
Value —
Why will this brand new money have any value?
Why does the US dollar have value? It is not backed by anything.
Why does gold have value? Sure, it has some industrial and ornamental value, but the vast majority is not used for such purposes. Most has been buried back underground in bank vaults and serves no purpose except as a store of value.
Money is a human construct. It only has value because a group of people believe that it has value. If that group stops believing, the value can quickly evaporate. Just ask the citizens of hyper-inflating currencies like the Venezuelan Bolivar (today), the Zimbabwean Dollar (2000s), or the German Mark (1920s). Beyond just these crazy examples of hyperinflation, there are over 20 national currencies currently inflating at over 10% annually.
The primary value of this new money we are proposing will come from many people having access to it and believing in it. At the very beginning, when the money supply and user base are small, the value will be supported by a small group of committed advocates, philanthropists, dreamers, and entrepreneurs. As the community grows and adoption increases, we believe, so will the value.
How exactly we will drive early value and adoption deserves many full posts, but for now I will sketch out one example of how it could grow and become valuable to people.
A truck full of good —
Imagine you drive a truck full of nutritious food, clean water, and hygiene supplies into a poor village that has never heard of these UBI tokens before. You start explaining to people how the UBI token system works and offering to help them set up accounts. People may be reluctant at first, but eventually a few people sign up. You then offer to sell them some of the food from your truck in exchange for their new tokens. They may still be a little confused about what just happened, but they are happy to have the food. You invite them to come back tomorrow and to bring their friends.
A few days later, 50 people have signed up for UBI tokens and purchased all of your supplies. You leave the village with an empty truck, a cellphone full of tokens, and a promise to return soon with more provisions. The excited villagers are eager to become your new paying customers.
When you return to the village again, the sales process goes much faster. Many people are already signed up and understand the exchange process. People are starting to see these tokens as a form of money. Before you return a third time, one young entrepreneur has realized the opportunity and offers to do other families’ laundry in exchange for tokens. Suddenly, there is more than one thing that people in the village can do with their tokens.
By the fourth visit, another villager offers to repair leaking roofs and a local shop owner starts offering a few items for sale for tokens. More and more villagers begin offering to do work or provide goods in exchange for tokens. As the village economy starts to grow, everyone begins to benefit. Eventually, you might even have to lower the token prices on items from your truck to stay competitive with all of the other competing options people have for spending their tokens.
Some of the entrepreneurs seize the growing economic opportunity by offering to pay their neighbors to come work in their businesses in exchange for tokens. This creates employment in the village and the increased production of profitable goods. As more and more of the villagers have good work to do, the lives of all are enriched. Tokens are moving around between people and lifting the entire community. One day, one of the villagers decides it is time to bring this movement to the next village. She borrows tokens and goods from her community and then fills her own truck with basic supplies. She drives to another village an hour away that has never heard of the UBI tokens. She explains the token system to the villagers and the process starts anew. Every time new members join, the system is strengthened and the tokens become a bit more useful and valuable to everyone within it.
Concerns —
There are all sorts of challenges involved in any or all of this working. Here are a few of the concerns I hear more frequently. Responding to each could fill another whole article, so I will just leave a few quick thoughts. All of these will certainly need to be addressed thoroughly.
Sybil attacks — the network will have to constantly work to ensure each account is controlled by a unique human being. This will be an endless cat and mouse game, but we believe the network will be able to stay ahead and keep Sybil attack fraud to a de minimis level.
Getting it to everyone —UBI will provide a great opportunity for entrepreneurs. Every new user is a potential paying customer. Participation will also spread quickly within social networks (both real and digital) as people want to tell their friends and families. Every additional person who enters the system adds value for all existing participants.
Government actions — Some governments may see these new forms of money as a threat to their control. That is probably a reasonable concern. Some governments may try to place limits on UBI programs, but doing so is directly against the interest of their citizens. If the UBI systems are truly decentralized and permissionless, attempts to block them will be very difficult and unpopular.
Energy usage —This is a meaningful concern for Proof-of-Work (PoW) blockchains like the current implementation of Bitcoin. There are many other consensus algorithms and second layer protocols that are extremely energy efficient. We will work towards finding a secure, scalable, and energy efficient system.
Corruption — It will be important that we develop strong governance systems to protect the network. Many blockchain projects are doing amazing work on various governance models. A well-functioning identity system would also be an amazing resource to facilitate secure digital voting. Exciting voting models like liquid democracy and quadratic voting could perhaps be used.
Who pays for it? — Unlike the small, underfunded, too-short, and not ‘universal’ fiat UBI programs that have been tried before, no ‘one’ has to pay for a crypto-UBI program. It is not funded by coercive taxes. Just as central banks today print money, the crypto-UBI comes into existence at no cost. (Unlike the central banks, the new money production is formulaic, equitable, and consistent.) The only cost is that we the people need to believe it has value. As long as a growing group of us does believe it has value, then it indeed does.
Inflation — In the system I envision, every account receives a fixed and recurring allocation of tokens. Early on, when participation is low, the raw number of tokens will grow slowly while the inflation percentage is growing rapidly. Years from now, when participation is high (ideally every person on earth) the raw number of tokens will grow rapidly, but the percentage inflation will be modest. Who knows how participation will grow, but my long term modeling reflects eventual inflation below 3% and trending down once everyone has the tokens.
Closing Thoughts —
I believe we are at a unique moment in history. We have a choice in how we define money and how it comes into the world. We do not need to rely exclusively on the top-down model to which we have become accustomed.
We have an opportunity to create a fairer and better world for all. With the coming disruptions of artificial intelligence, automation and cryptocurrencies, the world is about to drastically change. We can embrace these transformations and make good and intentional choices about the future we want. If enough of us decide that we want to create a more equitable and inclusive financial system, we can. The technology is nearly ready. These new forms of universally accessible currency will soon exist. Once they do, all we have to do is give them a chance. If enough of us believe this can work, it can and it will.
This article was originally published on Medium.
