Price stability and basic income are two ideas that have been incredibly challenging to realize. Today I would like to present a hypothetical cryptocurrency that could have the potential of realizing both of these ideals. A successful cryptocurrency depends upon voluntary free-market acceptance which means that individuals will be motivated to participate on the basis of selfish self-interest rather than altruistic idealism.
Introducing the BIC token (Basic Income Currency)
To facilitate discussion I will introduce a hypothetical cryptocurrency token called BIC. This token would trade on a public ledger and be governed under a variation of DPOS similar to Steem and BitShares.
Defining Price Stability
All prices are exchange rates among goods and services. For the purpose of this hypothetical currency, we will assume the elected witnesses publish price feeds that document the average exchange rate between BIC and a basket of commodities consumed by an average household.
This initial value of a BIC will target one 2016 USD and will be adjusted automatically to track the basket of commodities. As the dollar devalues, the value of 1 BIC should increase. In other words, the expected dollar rate of return for holding 1 BIC should equal the inflation rate of the USD.
It should be obvious to any economist that no one can guarantee purchasing power of any token and that ultimately the purchasing power of 1 BIC will depend upon the price assigned by the free market.
By carefully controlling the issuance of BICs the network should be able to bootstrap a stable value over time.
Allocation of BICs
Like Steem, there will be a second unit of account known as a BIT (basic income token). Each unique individual will be granted exactly 1 BIT when they sign up and it will be revoked when they die (or become inactive). Any time the value of 1 BIC rises above its target new BICs are issued and distributed evenly among the holders of BIT. In other words, as the cryptocurrency grows in value holders of BIT earn a dividend.
In the event the value of 1 BIC falls below the target value, the dividend rate will fall toward 0. Once the dividend rate hits 0, the network will start offering interest to anyone willing to commit their BICs to a 1 year bond. This interest rate on the 1 year bond will rise until it hits a maximum value allowed by the protocol. The maximum rate should be around 30% APR.
Once the interest rate hits its maximum allowed rate, the size of the basket the BIC is pegged to will adjust downward until a peg is achieved. The downward adjustment in the BIC would remain as the new baseline. This is a one-way downward latch.
In the event the BIC rises in value (above the baseline), the interest rate on new 1 year bonds would fall toward 0. Once the interest rate on bonds hits 0 the BIT holders will once again start receiving a dividend until the value of 1 BIC reaches the baseline.
Funding Growth
This protocol aims to bootstrap an cryptocurrency economy by carefully controlling the issuance of its token and making sure that everyone in the world has an equal opportunity to own a share (BIT) in the economy. Careful issuance and limited supply is key to maintaining approximate purchasing power parity of 1 BIC with a basket of goods.
That said, the protocol requires a certain amount of tokens to be issued to compensate those who run servers, market, and otherwise advance the the cause of the currency. The network must produce enough value to cover its cost of operation before anyone can earn a dividend. Due to the desire to peg 1 BIC to a basket of commodities, the rate of pay earned by network operators will necessarily have to be below the rate that speculators buy into BIC.
Block producers will be paid in BICs and an on-chain decentralized governance system similar in nature to STEEMs content rewards would have control over the allocation and issuance of a small number of BICs. Assume a total operations budget of $100,000 worth of BIC per year or some small percentage of the BIC float, whichever is more. The budget percentage should shrink as the network grows.
Hypothesis
A carefully issued token that is fairly allocated to all of humanity through a decentralized identity uniqueness verification system may be able to bootstrap a currency that remains relatively price-stable while distributing the profits of its growth fairly among all of humanity.
If the currency becomes the reserve currency of the world, then everyone involved will profit. Those who get involved earlier will receive more BIC dividends and profit more from the growth than those who join later, but everyone will always enjoy an equal share of the dividends from economic growth of the platform. If the platform grows to be the currency of an economy similar to a small country, then it would support a basic income proportional to the economic growth of a small country divided by the number of citizens.
Those who lend the platform money during periods of economic slowdown (buying bonds) will also be rewarded with high interest rates on a relatively stable unit of account (BIC). These individuals are funding the growth of the economy by deferring consumption today (spending of BICs) in exchange for increased consumption tomorrow.
Future Work
For such a system to be viable a decentralized system of governance and uniqueness validation will be required. The exact algorithms for adjusting interest rates (and limits) as well as the basket of commodities would need to be defined. Care would have to be taken to ensure the monetary policy is not whip-lashed by short-term market volatility.
Another brilliant piece. Upvoted and shared on Twitter✔. Stephen
Disclaimer: I am just a bot trying to be helpful.
I have been thinking about basic income for a while in the past.
After first analysis i thought that is a silly idea that cannot work in our society. With cryptocurrencies i changed that perception, as i think basic income would be a great way to distribute currency and since in crypto we can just create currency out of thin air (wo debt) it would be easy to create. However we would also need to find a way to create demand for the currency in order for the system to make sense.
As you point out also the printing of money in economic slow down will be helpful to the economy while value will be kept stable when the economy grows. I think your approach would be much more effective of keeping the economy stable than our fiat and interest system.
I think implement something like this is possible with crypto, however we also need an application where such a currency is needed.
Furthermore it will only work with a functioning ID system. I think ID is in fact the biggest hurdle right now in crypto and software systems in general, as many useful social application would require them. Imagine how easy it would be to have decentralized mining if we had ID. I am currently working on a solution to the ID problem. Let me know if you are interested in such a thing.
The sakia wallet include a graphic representation of your network
https://github.com/duniter/sakia
with a web of trust
@knircky We are developing a Basic income project.I would happy to hear your ID solution.Cheers http://globalecommunity.weebly.com/
Hmm, @dantheman
There is a success-story from China where they made the Huaxi-Village by combining the interest of the communist-party with the interest of the people and made a successful compromise.
Steemit only need to enable revenue streams for the SP-Holders in order to become as successful as the Huaxi-project.
No matter how you turn or twist the ideas - outside - cold hard cash - in streams of revenue is always necessary to succeed.
For Steemit that would be:
People want and need something to do - we don´t need basic income which takes from the productive and give to the unproductive. That is the kind of policies that have crippled my country Norway where the "Norwegian Dream is to be on permanent welfare before the age of 36".
Happy Philosophizing :)
In all friendliness,
@fyrstikken & @fyrst-witness
This list of ideas will be of great benefit to all! (vote for @fyrst-witness !!)
Your concerns about basic income are valid, but there is an additional dimension to dan's idea that would very effectively mitigate the 'population of welfare bums' problem. You see, those people who get handouts, 'know' they are getting handouts - they know they are a drain on the system, and that the system is not designed to sustain them. This causes a psychological/motivational problem, where the individual begins to identify themselves as a worthless beggar, and their behavior follows accordingly.
Dan proposes fair distribution of the spoils of a successful economy, which would motivate people to participate, rather than causing them to identify as bloodsucking outsiders, which leads them to becoming exactly that.
It's very interesting!
It's a good start but like most coins, it would flash in the pan. It wouldn't work long term at least not as described.
Money is only worth what you can buy with it, you would need to offer some compelling reason for merchants to accept it and you would need to make it easy and seamless to go from BIC to fiat and back.
The limited success that bitcoin has had in the real world is precisely due to this fact.
It's really strange you mention this right now. I think we're on the same wavelength or maybe it's something in the air. Anyways, I've got a whitepaper I've had in the works detailing a similar system. I just finished it up this morning and got it to @ghostwriter for some editing. As soon as she's done I'll post it.
FYI you would have a much easier time turning steem into BIC, than trying to roll yet another coin. Bitshares would also be a good candidate and could really kick off the price if you did this. Price is low enough and you already have economic hegemony, so you can pretty much do what you want.
As you say, something in the air... please drop me a DM when the white paper is up... I'm keen to read it and sometimes I miss the really good stuff on steemit.
whitepaper out yet?
This is a fatal flaw. You're describing an inflationary currency, since over time it will end up having less and less purchasing power.
I don't think this is a very good idea.
Very interesting thoughts, Dan!
I'm not sure if I missed it, but seems like you get the BIT just once. But then there is the possibility of getting BICs regularly if the conditions are right, which you could sell or use to purchase what people generally need an income to buy. I like the idea of different tokens for different purposes and it seems to work here on Steemit.
Two Basic Income pieces of trivia!
First, did you all know that this past summer while we were discovering and diving into steemit, the Swiss were taking a vote on whether or not to give every citizen $2500 a month in Basic Income? All you had to do was sign up for it; it did not matter if you already had an income or what your current assets were. The Swiss voted this down, but other countries are also thinking about this concept. Reference: http://www.cnbc.com/2016/06/02/what-you-need-to-know-about-the-swiss-basic-income-vote.html
Second, there is already a Basic Income cryptocurrency which you can regularly receive just for the asking! The token is GrantCoin and it is issued quarterly to anyone who signs up. Their first distribution was on July 1st of this year and their second was on October 1st. I signed up in June and received both distributions. Only around 250 people got the first payment, but over 750 people in 69 countries got the second one. Now, almost 1300 people are signed up. The GrantCoin token has a pretty good price chart and you can buy and sell it on Bittrex although the volume is very low. Reference: http://www.grantcoin.org/
I look forward to seeing if others proceed with this kind of thing. There is already mention of work being done, here in the comments. I'll be watching!
The French senate is looking to a project to propose a basic income in euro to 25,000 people. But we have a presidential election in may 2017 and several candidates are thinking about including a basic income into their program. Far from the Trump's program !
Thanks for that information! I do feel this will happen in Europe before it happens here in the US, although we can participate through Grantcoin and any other cryptocurrency that might be created to follow @dantheman's plan.
Do you by chance have Referral Code for grantcoin?=)
I do have a code; thanks for asking! This is a cut and paste from the email I received when I signed up, back in June:
Important: This is your bonus referral code: d8nehnu84s
We encourage you to give this code to anyone you would like to invite to sign up for Grantcoin Basic Income -- your family, friends, coworkers, acquaintances, friends and followers on social media, etc. When they sign up, if they use your referral code, you'll receive 100% extra Grantcoin the first year for every person who signs up with your code! (Sign up 5 people, get 5 times the Grantcoin. Sign up 10 people, get 10 times, and so on).
This link will take people to the Grantcoin signup page with your referral code already pre-entered:
http://www.grantcoin.org/get-grantcoin/basic-income/?referral-code=d8nehnu84s
Thanks in advance to you and anyone else who may use my referral code!
This is a very good idea. Just how these tokens to distribute?
Well at least that is easy... 80% goes to BICit Inc,
.... the rest goes to the rest of the world !!!!
Here is my old concept (2014) of cryptocurrency with low volatility, fair distribution and high capitalization.
@dantheman Question bit out of topic. I have never seen your attitude to the fact that one day some sites in the dark (onion) web will take STEEM.
For those interested in supporting UBI now, there's Grantcoin.
Thanks - very interesting =) do you have Referral Code for it?=)
9v6w6wpmmy
Also, I recommend setting up a Grantcoin wallet first over at POSWallet (before the Dec 30 distribution) so that you're set up for receiving and staking your coins.
Thanks!
"I have no plans to implement such a currency at this time." Why? Third time’s the charm.
This is a great idea, but what about users who are already active?
as i understand peopel would have to move the tokens at least once a year or they become "dead" ?
lots of details missing from the proposal, but some kind of "proof of life" would be required to continue claiming your dividend.
I like that concept. It should prevent from those with large amounts from doing nothing and keeping the usage stable.
i read somewhere/spoke to somebody (cant remember) but the topic was - if in BTC the unused coins would die/go back into pool, we could estimate the real price of BTC better.
currently we do not know how many of the coins are lost/gone so the pricing might be too low due to this missing estimate
the estimate can be calculated by counting coins that have not moved in 3 years, and assume they will never move, and to make the estimate even better, the main developers can lie and tell everyone that coins not moved in three years will be destroyed in 6 months, and after 6 months.. they can say "sike, just kidding".. just to get a good estimate of how many coins are dead
All these parameters are set up in the Duniter project based on the relative theory of money
I think the key is going be designing a decentralized system that can verify uniqueness. If you could easily do this you could even design a proof of stake type coin that doubled the block reward if you gave it out to some other unique person’s address. I’ve thought about ideas like this for a ‘pay it forward’ type coin for rewarding people that make efforts to build value in a coin. I don’t see how to easily guaranty that a coin address is held by a unique individual though.
Nice post.
Neat hypothetical Dan.
I have a question about the stability of money.
I believe that using a basked or peg to any other currency has issues. Yes its the best we have, however it can always be gamed or manipulated.
Could we not find an intrinsic way to establish the stability of value by measuring how much money people have on average in combination with the velocity of money (how much people transact on average over a timeframe).
I wonder if a blockchain that would issue or destroy currency (i.e. in the way you describe) could not create ideal money as Nash outlined. If i understand Nash correctly ideal money is simply stable currency as its most important attribute followed by all the other important aspect (fungibility, transferability etc)
Like all Universal basic income concepts, the problem that needs solving is individuals creating more than one account ( AKA sybil attack) biometrics seem like the only solution unfortunately. I have reposted your post on https://www.reddit.com/r/CryptoUBI/
Also of interest, I own ubicoin.com if wan to do something with this idea.
Biometrics fails because you need to verify the person. Biometrics merely generate a number and that number can be easily faked.
https://www.fastcodesign.com/3065564/a-synthetic-fingertip-for-unlocking-your-phone-in-gloves
A better solution is to just make the person certify life to a licensed notary public once a year, and then just get a bunch of notaries on board to manage all that.
Within the Duniter software, you can choose how many certificates you need to enter the community (web of trust)
Web of trust does not work because you need a web to identify people, thus nobody can ever enter. And ID needs to always work even if you have no connections.
Very interesting idea.
If we all drank from the same water source, then theoretically we would all work together to protect such source of water. Which in this case would be BITs.
I have been thinking, there is one major problem with most crypto currencies when compared to other financial assets. That is, you loose all of your investment if you forget your log in. Sounds ridiculous but that its how most cryptocurrencies are created.
If I had a house or a bunch of cash that I wanted to leave to my family or friends when I died, I simply have to get a will.
That keeps the economy going as the money goes back into circulation. It would be interesting if the BITs/BICs had a crypto-will along with them. Instead of revoking BITS they could be passed on.
Actually steemit has a system that could work for that. The account recovery option where you give someone authority to change your keys after a waiting period. Just extend that process to relatives to the deceased upon the order of a probate judge and you're good to go.
I think you misunderstand the concept. These BIT need to be one to each individual and never transferable or you have the sellers starving down the road.
Valuable information sir @dantheman thank you very much for sharing.
Excellent post felcidades
Regarding uniqueness validation, proof of individuality is one attempt to achieve this through coordinated group video hangouts, relying on the fact that no one can be in two places at the same time. I'm not sure though how they address hiring someone to take part and then acquiring their token.
I think others use or propose piggybacking on government issued documents, forming webs of trust and/or verifying biometric data but I haven't been convinced that any of the solutions so far would be able to stand up against an incentive to counterfeit identity as large as an individual's living wage.
The key is bonding individual behavior so the cost of cheating is revoking any profit and the bond.
Yeah, I can see how that could help. Am I understanding correctly that you would require a deposit that is subject to forfeiture if caught cheating? But in that case, wouldn't there be a dilemma between pricing it too high for those who need it most and pricing it too low to deter cheating?
Maybe another piece of the puzzle that would help with my worry about hiring someone to participate would be ensuring that any participants are fully aware of the value of their proof of uniqueness.
Basic Income is a go!!!
I really like the idea, a question I have is how would you prevent price manipulation of the market by whales, to keep the currency stable?
brilliant!
meh
"decentralized identity uniqueness verification system" = biometrics scanning I guess.
"a viable decentralized system of governance required " not sure there is one yet, though Steem is a useful experiment in this regard with it's witness system.
"I have no plans to implement such a currency at this time" dang! :(
Now this is a cutting edge idea. Perhaps crypto currencies hit the mainstream just in time to solve the problem of technological unemployment? Wouldn't it be serendipitous if that were true.
My grandma gets a basic income in her retirement. It's called social security. She was FORCEd to pay into that fund.
My sister is a bum. She has been living "comfortably" on welfare for over 30 years already.
When the USD is replaced by the Phoenix, Amero, XDR/SDR or whatever, then the Witnesses just change the peg and crash the existing valuations?
A Bitshares Fee-Backed Asset (FBA) provides income. Can we discourage hoarding however which in turn could discourage hegemonic tendencies of its holders?
Identity needs to be solved first. ID theft is easy, even in a digitized biometrics schema. Reputation, consensus, biometrics.. Maybe Witnesses should operate at a local level as well. A newborn baby for instance needs "ID".
Will my daughters get free money upon account creation? Hmm, maybe I should have a few more kids. Heck, maybe I should adopt a few kids too.
Just a few things that came to mind.
@dantheman Can this be done on the bitshares blockchain or this for some reason needs to be a different chain? We want something like that in bitshares for quite some time now..Bond market, prediction market, insurance..
Why re invent the wheel?
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I like idea and want it to be realized asap, at least as experiment. =)
Main reason why world need Universal Basic Income (UBI) is future technological unemployment, when AI and robots will do most of the work and we need to find way to convert profits from robots to UBI.
I interested in basic income for last few years, and even created prototype token UBIC with system of unique user identification about year ago. This token auto-refill to 1000 UBIC each day (you can press button to refill it every 23 hours to be exact and unspent UBIC converts to UBIP with represent your voting power like SP) and so you can spend it between there refills. Though I experimenting with it in Russian online game. And I have Facebook page about UBIC too. We need many experiments in this field to find good solutions for future.
I'm thinking this is overly complicated. In my book Fluidity - the way to true demikratia I suggest a simple monetary flow siphon and flat payment which acts asba real time money supply regulator. Siphon × velocity payment fixed.