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Basic Income is an OpenResearch project
Our Plan
https://openresearchlab.org/basic-income/info/our-plan
The gold standard for understanding a new social policy is a randomized controlled trial (RCT). By comparing a group of people who receive a basic income to an otherwise identical group of people who do not, we can isolate and quantify the effects of a basic income. We plan to randomly select individuals across two US states to participate in the study. Roughly half will receive $1,000 a month for three years; the rest will serve as a control group for comparison.
We’re working with leading experts in economics, public health, and other fields and partnering with government agencies to collect precise administrative data. Measuring how individuals spend their time and money, indicators of mental and physical health, and effects on children and social networks will help us learn how this basic level of economic security helps people cope—and even thrive—in the midst of volatility and uncertainty.
We also plan to conduct regular in-depth interviews with a subset of participants to better understand how a basic income influences people’s lives. Documenting individuals’ experiences, their decision-making processes, and the constraints they face will help us create solutions, even apart from basic income, that may be more effective. At the study’s conclusion, we will be able to answer fundamental questions about basic income and advance the debate about social spending and the future of work.
Study OutcomesTime use
How does receiving a basic income affect the way people spend their time? Do people spend less time working and more time taking care of family members? Do people drop out of the workforce or work fewer hours and go to school or pursue additional training? Do they take a lower-paying job that they enjoy more? Using state-of-the-art passive data collection, validated with time use surveys, we will examine how recipients of basic income spend their time.
Critics of guaranteed income policies often point out that employment provides a sense of purpose and meaning for many people, as well as both short- and long-term structure for our lives. By reducing the immediate need for paid work, basic income could have negative consequences for individuals’ psychological well-being and productivity in other areas of life. If it is true that recipients spend fewer hours working for pay, exploring how they spend the additional time and how they experience those activities will help us document how any changes that result from basic income affect well-being.
Mental and physical health
How would your mental and physical health change if you had an extra $1,000 per month? Perhaps you’d be less stressed and anxious. Maybe you would use the extra cash to buy healthier food, purchase a gym membership, spend more time with your friends and family, or go to the doctor regularly for preventative care. Through mental health surveys developed by psychologists and physical health measures conducted at the study’s beginning and end, we’ll measure changes in mental and physical health.
Subjective well-being
How do people think they’re doing? Do people feel happier, healthier, more secure, or more hopeful about the future? Basic income could ease financial insecurity and have myriad effects on a participant’s self-perception. On the other hand, basic income could upset an existing dynamic and reduce well-being. We will measure these outcomes through subjective well-being surveys and in-person in-depth interviews.
Financial health
Basic income means people will have a minimum income guaranteed every month, but how does their financial health change overall? Are they more resilient and better able to handle unexpected expenses like medical bills, car repairs, or other financial emergencies? Do participants pursue behaviors that promote economic self-sufficiency? Do they track expenses and put aside money into savings? Using transaction level credit and debit data, credit bureau reports, and surveys about expenditures from consenting participants, we will obtain a comprehensive picture of their financial health. This level of detail is unprecedented in a study of basic income or negative income tax.
Decision making
Changes in financial, physical, and mental health could affect how you make decisions. A burgeoning literature on “scarcity” suggests that the condition of scarcity--having less when you need more--creates a distinct psychology that causes individuals to make suboptimal decisions. If you’re short on time, you’re more likely to mismanage it. If you’re short on cash, you’re more likely to make poor financial decisions. So far, most studies on scarcity have relied on short-term experimentally induced stressors on time or money. By measuring time and risk preferences throughout the course of our study, we will be able to see how long-term conditions affect decision-making.
Politics and social behaviors
Would you vote differently if you had more cash? Perhaps you would spend more time volunteering in your community or participating in civic, political, or religious groups. A basic income could lead to a more engaged civic life or prompt participants to be more trusting of other people and institutions.
Crime
Criminal activity produces large negative externalities for society and often negatively impacts offenders’ and victims’ lives and families forever. A basic income may reduce crime by reducing the incentive for offending, freeing individuals from harmful situations or relationships, or increasing the opportunity cost of incarceration.
Effect on children
A basic income could have large effects on children living in households who receive it. Parents may have more time to spend reading with their kids or helping them with homework. They may spend more on healthy food, daycare, or sports. These changes could lower children’s levels of stress and improve educational and health outcomes.
Read our full proposal (PDF)
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Circles API
An offchain API service to safely store and resolve Circles user data from public adresses and find transitive transfer paths to send tokens within the trust graph.
Requirements
NodeJS environment
PostgreSQL database
API
Find transitive transfer steps
Returns steps to transfer transitively through trust graph from one node to another.
Request:
POST /api/transfers
Parameters:
{ from: <string>, to: <string>, value: <number>, }
from: Sender address
to: Receiver address
value: Amount of Circles to send between sender and receiver
Response:
{ status: 'ok', data: { from: <string>, to: <string>, maxFlowValue: <number>, transferSteps: <array>, transferValue: <number>, statistics: <object> } }
Errors:
400 Parameters missing or malformed
422 Invalid transfer
Store transfer meta data
Stores meta data like payment note connected to a made transfer. This data is only readable for sender or receiver of that transaction.
Request:
PUT /api/transfers
Parameters:
{ address: <string>, signature: <string>, data: { from: <string>, to: <string>, transactionHash: <string>, paymentNote: <string> } }
address: Public address of user wallet
signature: Signed data payload of this request via the users keypair. The data contains: from + to + transactionHash
data/from: Public address of the sender
data/to: Public address of the receiver
data/transactionHash: Transaction hash of the actual ethereum transfer
data/paymentNote (optional): Personal payment note from the sender
Errors:
400 Parameters missing or malformed
403 Verification failed
409 Entry already exists
Read transfer meta data
Returns stored transfer meta data including the payment note. This data is only readable for sender or receiver of that transaction.
Request:
POST /api/transfers/<transactionHash>
Parameters:
{ address: <string>, signature: <string> }
address: Public address of user wallet
signature: Signed data payload of this request via the users keypair. The data contains: transactionHash
Errors:
400 Parameters missing or malformed
403 Verification failed or not allowed to read data
404 Transaction hash not found
Get entry by username
Get the users entry including its safeAddress.
Request:
GET /api/users/<username>
Response:
{ status: 'ok', data: { id: <int>, safeAddress: <string>, username: <string>, avatarUrl: <string> } }
Errors:
404 Not found
Search database by usernames
Find a user in the database.
Request:
GET /api/users?query=<string>
Response:
{ status: 'ok', data: [ { id: <int>, safeAddress: <string>, username: <string>, avatarUrl: <string> }, { [...] }, [...] ] }
Errors:
When no user was found an empty response will be returned.
Get multiple entries by username / address
Resolve multiple usernames (via username[]) and/or Safe addresses (via address[]) in a batch.
Request:
GET /api/users?address[]=<string>&username[]=<string>&...
Response:
{ status: 'ok', data: [ { id: <int>, safeAddress: <string>, username: <string>, avatarUrl: <string> }, { [...] }, [...] ] }
Errors:
Not found entries silently fail and simply do not get returned in the response.
Check user fields (dry run)
Request:
POST /api/users
Do a dry-run to check if email and username fields are valid before creating a user account. This is helpful for giving early user feedback in onboarding flows.
Parameters:
{ email: <string>, username: <string> }
email: E-Mail-Address of the to-be-created user
username: Username of the to-be-created user
Errors:
400 Parameters missing or malformed
409 Entry already exists
Create new entry
Request:
PUT /api/users
Create a new entry in the database, connecting a username with a safeAddress.
Parameters:
{ address: <string>, signature: <string>, nonce: <int> (optional), data: { safeAddress: <string>, email: <string>, username: <string>, avatarUrl: <string> } }
address: Public address of user wallet
signature: Signed data payload of this request via the users keypair. The data contains: address + nonce + safeAddress + username with nonce being 0 when not given
nonce: Optional nonce which is required to predict the Safe address
data/safeAddress: Public address of the owned Safe of the user
data/email: Private email address of the user (not unique)
data/username: Username which should be connected to the safeAddress
data/avatarUrl (optional): URL of avatar image
Verification steps:
Check if the signature can be verified successfully.
Check if nonce is given, if not, assume the Safe is already deployed.
When Safe is deployed: Check if address is owner of the given Safe. When safe is not deployed yet: Check if nonce and address generate the same safeAddress.
Errors:
400 Parameters missing or malformed
403 Verification failed
409 Entry already exists
Development
// Install dependencies npm install // Copy .env file for local development cp .env.example .env // Seed and migrate database npm run db:migrate npm run db:seed // Run tests npm run test npm run test:watch // Check code formatting npm run lint // Start local server and watch changes npm run serve // Build for production npm run build // Run production server npm start
License
GNU Affero General Public License v3.0 AGPL-3.0
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Offchain database and API service for Circles
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martin circles post from 2015
Introducing Circles – Universal Basic Income
JUNE 18, 2015
/
MARTIN KÖPPELMANN
“Circles” will be a currency created from basic incomes only. In the system outlined in the following, new money is constantly distributed to every account participating in the system. The money in every individual account are uniquely identifiable and only gain in value if the account connects to other accounts and joins groups. This incentivizes every user to limit themselves to one account.
Everyone can create a new account
An account will constantly generate an income (1000 units per week)
The rate at which the income is generated will increase by g=5% per year
A new account starts with the income that will be generated in the next 3 months
One month of income is for the account owner – the other two are reserved for people who trust this account, it is called the trustee reward.
Accounts can trust one another. This will allow both accounts holders to exchange their coins 1:1.
Trust can be revoked by both parties.
If an account trusts another account it is credited with half of the remaining trustee reward.
Arbitrary groups can be created.
Groups can verify accounts as members.
Groups can exclude accounts as members.
All members can convert their private money into group money (1:1 exchange rate). This exchange is irreversible.
Design rationale
The main purpose of this project is to establish a world wide basic income.
Requirements are:
a. Decentralization
A world wide basic income is something so powerful that no single entity in the world should have control over it in order to preclude manipulation. Particularly, there should be no central authority that decides which person can get a basic income and which person cannot.
b. Smooth growth
The solution should support a smooth growth. If the only two equilibria are “no one participates” or “all people participate” then it is nearly impossible to change to the “all” equilibrium, especially if no central entity is involved. In the approach presented here, groups can grow locally, even starting at a single family level. However, there are no constraints on subsystem growth. All subsystems can merge into a global system at any time.
c.
Resilience
The system can support something like a world currency. However – if this currency fails at some point, it is not the whole system that would collapse. Instead, the system would fall back on the group level underneath, for instance a country group. Even if the group currencies should fail at one point (because they accepted too many members that just consume their income and don’t provide any goods or services for their income) it can still fall back on the personal level where the value of a currency is closely related to the personal relationship with the other person.
d. Incentives for organic growth
The trust reward should help to give a strong incentive to bring new people to the system. Adding new accounts to your circle is to some degree a risk. To balance the incentives and enable growth we introduced the trust reward. It creates common incentives for both the newcomer and the people already established in the network: Through the acknowledgment of the trust relationship, the newcomer gains network credibility and the first people to place their trust in the newcomer benefit financially. The risk inherent to trusting a newcomer are only out-weight by the benefits if the newcomer is be-known to the people who place their trust in them. If the newcomer does not turn into a viable member of the network the trust placed in the newcomer was misguided and the trust results in a financial loss.
e. Universality
Some people argue that Bitcoin was a one time shot. A currency has to be scarce to some degree to function as such. A single digital currency can have features that ensures the scarcity of this currency – however, if other digital currencies become successful, scarcity as a characteristic of digital currencies overall becomes questionable. This is especially true for a basic income. We strongly believe that a basic income currency can only be successful if it is the only one that is commonly used. This is why we keep this proposal as general as possible. The only free parameter crucial to the system is the growth rate g and needs to be discussed carefully. The trust reward is not strictly necessary, however, it does not affect the long term equilibria of this approach.
Detailed discussion.
6:
Transitive Transactions
If A and B trust each other, and B and C trust each other, then A and C can pay each other as long as B is liquid. If A is a customer and C is a merchant, A could send money to C. The network will automatically send a-coins from A to B and b-coins in exchange for the a-coins from B to C.
3:
The growth rate g = 5%.
The growth rate g determines
the ratio between the total coin supply and the income per month. This number is subject to discussion. It should be chosen to maximize the value of the income.
Note that a high growth rate (inflation rate) destroys the capability of the currency as a store of value. Consequently, the potential dollar market cap is a function of the growth rate: market cap = f(g). (The market cap of the currency is a function of g that most likely will decrease sharply for bigger g like 10% – 15%). g should be chosen to maximize g*f(g).
The growth rate can be seen as a capital tax that finances the basic income. People with exactly the average wealth would pay the same amount of money in fees as they would get from their UBI.
9-12:
Groups
Groups are necessary to bring more stability into the system. Holding coins of a specific person always carries a certain risk. In some sense, the value of theses coins is always backed by the person. If the person dies or more broadly speaking the trust in this person sinks, these coins may become worthless. However, as long as a person is member of a group, the money can be converted irreversibly into group money. It is in the responsibility of the groups themselves to keep them tight on the one hand to not dilute the value, but on the other hand have a positive network effect. This makes it interesting for merchants to accept such group money.
FAQ:
Q: Can I create 100 fake accounts that all trust each other and abuse the system?
A: You can create them but this will not create value. As long as nobody else trusts these accounts they can only exchange money with each other, rendering all the money worthless.
Q: Why should I add someone else to my trust network?
A. Your trust network is what gives your personal currency value beyond what you are willing to provide for this currency. Lets say 100 people are in your trust network, that means that 100 people are accepting your currency. Even for those who do not accept your currency directly, may accept it indirectly since they know they can use it to get goods or services from 100 people. Accepting money is all about network effects.
However, on the other hand accepting a new person bears some risk. If this person turns out to be a fake account you will end up having his worthless money and the scammer can spend your money. To make the incentive higher to be among the first to accept an new account nevertheless, the trustee reward was introduced. However, accepting a completely new account will and should be backed by a personal relationship of the two participants that ensures that the new person participates honestly in the system. If they don’t the only person who loses money is the person who wrongly trusted them.
Q: What is the money of an account worth?
A: In theory it should be max(value(group1), value(group2), value(group3), … , value(connection1), value(connection2), …). Note that only connections to liquid people count. As long as the memberships in the groups and the connections are stable (or expected to be stable) there should be no incentive to convert money into group money.This concludes in the assumption that it is not necessary to convert your money into group money or to exchange money with one of your trusted connections. Just having the ability to do so makes your money at least as worthy. This could stabilize the system and allow user A to connect to user B despite the fact that user B’s coins are worth less. This connection could raise the value of user B’s coins without changing the value of A’s coins. However, this stops if B tries to abuse this connection, but in this case, A can cancel the trust relationship.
From time to time users could lose their connections because they create panic. This is the unlikelier the better the user is connected. This strengthens the incentive to concentrate all your social connections/ reputation into one account.
Q: How much of the group money is yours?
A: The amount that you’ve converted. Only difference is that now it’s no longer tied to you as an individual. This means that if you do something bad, the group cannot do anything to revoke your group money. However, they can kick you out of the group.
With groups exchanges are mono directional with individuals. Only individual => group, NOT group => individual. However, exchanges are is bi-directional between groups. So Berlin <=> SF is OK.
Implementation:
The easiest way to implement Circles would be as contracts on Ethereum. Latest technical discussion here. We started a new forum all about basic income and circles here. Your are more than welcome to join!
The contracts would look similar to this:
//data structure
Dictionary -> tuple
accounts[owner] = (time_created, money_spent, trustee_reward)
Dictionary -> Set
groups[owner] = [member1, member2 ,..]
Dictionary -> Set
trustees[account] = [account1, account2, …] // each relationship need only be saved once
Dictionary – > Dictionary -> int
balance[owner][foreign_account] = amount
Int
years = 0
//pseudo code
create_account():
trustee_reward = (1000*12) * 1.02 ** years
accounts[message.sender] = (block.time – 1month, 0, trustee_reward)
add_account(account1, account2):
//somehow check that both accounts signed the message
if int(account1) > int(acount2):
trustees[account1].append(account2)
else:
trustees[account2].append(account1)
//credit and update the trustee reward
balance[account1][account2] = accounts[account2][3] / 2
balance[account2][account1] = accounts[account1][3] / 2
accounts[account2][3] /= 2
accounts[account1][3] /= 2
revoke_trust(account):
if int(message.sender) > account:
trustees[message.sender].remove(account)
else:
trustees[account].remove(message.sender)
send_money(amount, currency, receiver):
if balance[message.sender][currency] >= amount:
balance[message.sender][currency] -= amount
balance[receiver][currency] += amount
send_new_income(receiver, amount):
//todo factor in 2% growth rate
income_generated = (block.time – accounts[message.sender][0])/ weeks * 1000
if income_generated – money_spent > amount:
money_spent += amount
balance[receiver][currency] += amount
exchange_money(account1, account2, amount)
if message.sender == account1 or message.sender == account2:
if account2 in trustees[account1]:
if balance[account1][account1] >= amount:
if balance[account2][account2] >= amount:
balance[account1][account1] -= amount
balance[account2][account2] -= amount
balance[account1][account2] += amount
balance[account2][account1] += amount
create_group()
groups[message.sender] = Set()
add_group_member(account)
groups[message.sender].add(account)
remove_groupt_member(account)
groups[message.sender].remove(account)
convert_into_group_money(group, amount)
if message.sender in groups[group]:
if amounts[message.sender][message.sender] >= amount:
amounts[message.sender][message.sender] -= amount
amounts[message.sender][group] += amount
19 thoughts on “Introducing Circles – Universal Basic Income”
arthurfallsJULY 26, 2015 AT 5:51 PMREPLY
Hendrik RichterNOVEMBER 20, 2015 AT 2:29 PMREPLY
ccerrato147FEBRUARY 5, 2016 AT 2:37 AMREPLY
GaluelMARCH 30, 2016 AT 12:36 PMREPLY
YvesMAY 9, 2016 AT 2:33 PMREPLY
YvesMAY 9, 2016 AT 2:42 PMREPLY
AlexJUNE 25, 2017 AT 1:58 AM
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This would work well in a closed economy with the prescribed best practices outlined above. Two independently established systems with identical rule sets could then choose to trust one another kind of like bubbles merging.
The 2% issuance rate mirrors the blanket 2% capital gains tax prescribed by Thomas Piketty in “Capital in the 21st Century” writ inflation. The 2% annual devaluation pressure incentives investment and enables a financial industry to exist – some might like this. The Nu Shares project chose a 2% annual issuance as well, the sale of which was credited to token holders in the form of Nubits. Just some interesting 2% occurrences.
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Hi guys fantastic project. Why is the Freigeld idea not included? It makes so much sense to implement it. Freicoin did it and now we are working on the Worldleadcurrency project. A Freicoin clone that is already paying the first Basic incomes. Greetings Rik
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Martin KöppelmannNOVEMBER 20, 2015 AT 5:16 PMREPLY
Hey Rik, always good to hear of similar projects. If they already pay a basic income, how do they tackle the sybil attack problem? Can you point me to some resources?
Liked by 1 person
Very interesting concept. I can see several potential use cases.
Good job!
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With a 5% / year rate, following Relative Theory of Money theorems, one new member will reach the average amount of money more than his own life later = 90 years later (life expectancy = 80 years in Europe). The rate to reach it in 80 years would be ln(80)/80 = 5,48% / year and to reach it in the 1/2 life = 40 years : ln(40)/40 = 9,22% / year
Liked by 1 person
It is really an intriguing idea! It addresses partly the issue of web of trust, but I have the feeling that it could be vulnerable, if not to a simple sybil attack, probably to some con scheme. For example, creating a large pool of sybils that appear to behave properly for a while to build trust, then vacuuming value suddenly at a later point (probably some kind of variant of a pigeon drop scheme). Still the idea sounds really interesting. Maybe a possibility is to use this concept on top of multiple cryptocurrencies, although the
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YvesMAY 9, 2016 AT 2:39 PMREPLY
1:1 exchange rate would not be feasible. It would be like a classical currency exchange, except that it would be fully automated so as to avoid the need for a party to play the role of the exchange (and thus charging for it). This would of course beg the question of what the price mechanism is to determine the exchange rate…
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Martin KöppelmannMAY 9, 2016 AT 2:46 PMREPLY
thanks for your comments! The best place to discuss circles deeper is out forum: aboutcircles.com A short comment to the 1:1 exchange rate: this terminology might be misleading. The goal would be to have ONE currency for all people – however – to limit the damage a big group of sybils would do to the network this underlying mechanism of individual currencies is necessary. However, for a regular user connected to other regular users it should “feel” like one currency and they should NOT negotiate a price with each other peers (at least not for the currencies). On top of this of course person A can charge 100 Circles per hour while person B only charges 80 per/h – like in todays currencies.
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I follow the reasoning of keeping the inflation rate not too high to protect the role of the currency as a store of value. Unfortunately, with a 5% inflation rate, the value redistributed as universal basic income is too low to be truly meaningful…
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Martin KöppelmannMAY 9, 2016 AT 2:48 PMREPLY
lets continue here: http://aboutcircles.com/t/monetary-supply-of-circles/86/5
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Pingback: Anti-sybil attack mechanisms – Global ecommunity
You do not need to add inflation because every account created automatically gets an amount therefore inflates the overall amount of circles. In the early adoption stages inflation will be low but as it becomes mainstream it will suddenly spike and after mainstream adaption it will slow itself down again until it balances itself. If you put a 2% inflation rate then you are constantly and systematically devaluing your currency. The idea of circles is very intriguing if you can somehow tie a rate to the amount of people within a group and set an exchange rate from that along with the social utility of that group in correlation to there value then you have made a believer out of me. Basically (amount of people divided by total currency in said group) later divided by output or total product sold(income) will give each group a multiplier for there coins exchange rate. So groups will be rewarded for there total social utility through the exchange of there goods and ideas along with the value of there coin. To take things one step further in order to integrate this in an existing economy a factor of (x) needs to be placed for late adopters depending on there current social standing and based on some inherent values and morals. Additionally do not forget about the value and social services that are given for free (our privileges in a society)
Great idea !!! P.S Wish you all the best of luck and yes the ethereum network and ether traded as a coin is a great platform to integrate. Can’t wait to open my UBI account.
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Circles Money System Overview
A decentralised Universal Basic Income platform based on personal currencies
https://joincircles.net
Abstract
We propose a new money system called Circles that is based on individualized cryptocurrencies and a social graph of trust between these currencies. This money system will be for the purposes of distributing money in a way which will, over time, lead to the equalization of wealth and function like a globally accessible Universal Basic Income. When new users join Circles, a new personal cryptocurrency is created for them on a smart contract-enabled blockchain. This currency is then regularly minted and added to their account, forming the basis of Circles' UBI properties. Users have the ability to trust the personal currencies of other users, which requires them to treat this personal currency as identical to any other Circles currencies that they hold. As the social graph becomes more interconnected, these personal currencies converge on one single global monetary system.
Introduction
Universal Basic Income is one of the most cross-culturally appealing political movements of the modern era. It has attracted the support of thinkers from every background including Thomas Paine, Martin Luther King Jr, Stephen Hawking, Guy Standing, Milton Friedman, and David Graeber. It is seen as a utopian project that could finally unlock the creative potential of all people, the culmination of centuries-old humanist ideals.
The topic of UBI has exploded in popularity in recent years, as wealth inequality grows and inflation-adjusted wages fall all across the world. Until now, the conversation has primarily been viewed through the lens of public policy and bureaucratic action. Public support for the idea of UBI has never been higher, but plans for implementation are progressing slowly and without cooperation at the international scale. It seems that UBI systems have received a "too big to implement" label at the highest levels of government, similar to climate change action, making development and rollout unlikely to happen any time soon.
The introduction of global blockchain networks changes the conversation about UBI significantly. Now for the first time in history, it is trivially easy to create financial applications that are universally accessible to anyone on the internet. Starting with Bitcoin and moving on to smart contract platforms like Ethereum, blockchain technology has achieved widespread popularity by routing around the gatekeepers and roadblocks that make innovation so difficult in the legacy financial system. Smart contracts and the blockchain create a very promising environment in which to implement a new UBI system.
Circles proposes to be the blockchain's native UBI money system. It has its own built-in resistance to Sybil attacks (i.e. fake accounts) and anyone can join the network at any time without asking permission from anyone. It has been designed with the expectation that it will be bootstrapped in a completely organic and grassroots fashion, but is extensible to allow any arbitrary governance systems to operate on top of the base protocol. Circles is an entirely new way of looking at the nature of money and what value exchange means in a post-UBI future.
Minting Currency
Circles is a money system that is made up of individual currencies. These currencies work together to form a unified “monetary fabric” that behaves like a Universal Basic Income.
When a new blockchain account joins Circles, the system creates and assigns them a unique currency via a smart contract. This is called a Personal Currency, and all personal currencies operate according to a shared set of rules.
Each personal currency continuously mints new coins and awards them to its associated person. Moreover, the amount of coins minted is inflating every year. This is the only way that new money is created in Circles and forms the basis of its UBI characteristics. All currencies mint new coins at the same rate, meaning that new money is co-produced and distributed equally to all members of the system at all times.
Alice joins the system, creating AliceCoin PersonalCoins are all minted at a rate of, for example, 1 per minute Five minutes later Alice has 5 AliceCoin and Bob joins the system, creating BobCoin Five minutes later Alice has 10 AliceCoin and Bob has 5 BobCoin
It’s important to note that new currency units are only awarded to the person associated with each personal currency:
Alice joins the system, creating AliceCoin PersonalCoins are all minted at a rate of 1 per minute Five minutes later Alice has 5 AliceCoin and Bob joins the system, creating BobCoin Alice transfers her 5 AliceCoin to Bob Alice has 0 PersonalCoins and Bob has 5 AliceCoin Five minutes later Alice has 5 AliceCoin while Bob has 5 AliceCoin and 5 BobCoin
Inflation
In order to disincentivize hoarding and to encourage economic activity, the system will introduce an annual inflation schedule. This is demurrage by other means, where all personal currencies will issue progressively larger amounts of tokens per year, paid out per second. New users will always start issuing at a rate that is consistent with all other personal currencies.
Alice joins the system, creating AliceCoin PersonalCoins are all minted at a rate of 1 per minute, and inflates 100% every five minutes Five minutes later Alice has 5 AliceCoin and Bob joins the system, creating BobCoin Alice transfers her 5 AliceCoin to Bob Alice has 0 PersonalCoins and Bob has 5 AliceCoin Five minutes later Alice has 5 AliceCoin while Bob has 5 AliceCoin and 5 BobCoin Alice has 5 coins total, and Bob has 10 coins total. The difference between their holdings is 5 and Alice has .5 (half) the amount of coins that Bob has. The issuance rate inflates 100% and is now 2 coins per minute. Five minutes later Alice has 15 AliceCoin while Bob has 5 AliceCoin and 15 BobCoin. Alice has 15 coins total and Bob has 20 coins total. The difference between their holdings is still 5, but now Alice has .75 (three quarters) the amount of coins that Bob has. The relative difference between their holdings is decreasing.
Trusting Currency
In order to create useful money, users trust each other’s currencies. Trust is what facilitates exchange in the system. When a user trusts a currency, they tell the system that it is equivalent to any other Circles currencies that they already have. This means that anyone with this trusted currency can automatically trade it for one of your Circles currencies at a one-to-one exchange rate.
Bob trusts AliceCoin Bob has 10 CarolCoin Dave has 10 AliceCoin Dave gives 5 AliceCoin to Bob and takes 5 CarolCoin from him
Another way of thinking about trust is that it is the user telling the system that they acknowledge specific currencies as “real money.” Since any blockchain accounts can join the system and start minting currency, a trivial attack is to create multiple accounts and register with each to get multiple basic incomes. This is called a Sybil attack in computer security terms. The existence of trust relationships is how users protect themselves from fake accounts by specifying which ones they know for a fact represent an individual human’s primary account, forming a native Sybil resistance in the system. At a community level, trust in the system means that there are resources one can claim for Circles.
Because of the danger of any account becoming a sybil at any time, trust can also always be revoked. When and if trust is revoked, the person who is revoking trust can still spend the coins of the person they are untrusting, but they will not receive any new coins from that user via transitive transactions.
Because trust is a way to protect from counterfeit currencies, it is a serious responsibility on the part of the user. Users will have to rely heavily on mutual connections when making direct peer-to-peer trust relationships, and new users with no trust connections will have to get their closest loved ones to be their initial connections. It is theoretically possible to increase fungibility and ease of use in Circles with professional services (validators) which can act as brokers for trust, or with pooled group currencies, which can enforce their own policies for joining, however, these possible extensions will not be present in the first iteration of the Circles system. Further research on this subject is invited.
Transitive Exchange
Trusting different currencies creates a useful form of money because of the transitive nature of social networks. Money is useful when it allows complete strangers to efficiently conduct business. When one stranger wants to send money to another in Circles, they automatically search for a transitive chain of trusted currencies between each other. The payer then trades along this chain of trusted currencies, one after the other, until they have one that the recipient accepts.
Bob trusts AliceCoin Alice trusts CarolCoin Alice has 10 AliceCoin Carol has 10 CarolCoin Carol wants to pay Bob 5 PersonalCoins Carol gives 5 CarolCoin to Alice and takes 5 AliceCoin from her Carol gives 5 AliceCoin to Bob
The transaction can be extended to include multi-hop chains of trust as well:
Bob trusts AliceCoin Alice trusts CarolCoin Carol trusts DaveCoin Alice has 10 AliceCoin Carol has 10 CarolCoin Dave has 10 DaveCoin Dave wants to pay Bob 5 PersonalCoins Dave gives 5 DaveCoin to Carol and takes 5 CarolCoin from her Dave gives 5 CarolCoin to Alice and takes 5 AliceCoin from her Dave gives 5 AliceCoin to Bob
With this system, the connectedness of the social network serves as a direct measure of users’ ability to transact with each other. A familiar way of thinking about this is the famous six degrees of separation phenomenon that suggests everyone on earth is connected to everyone else by a chain of six people. Circles uses these chains to transact through the system. If a user is well-integrated into the network, with many connections to other well-integrated users, they will find it easier to send and receive personal currency.
Limits to Trust
Because personal currencies are only able to travel through their networks of trust, the fungibility of a specific personal currency is a measure of how many other accounts trust it and the resources available in the network. This means that users who are new to the system and don’t have many trusted relationships have a less fungible currency than someone who is well-established in the network. It also means that the currency of new users gets more fungible over time as they create more trust relationships.
Since the system internally enforces a one-to-one exchange rate, and new users’ personal currencies are less fungible than established users personal currencies, a potential problem emerges:
25 people trust AliceCoin Bob is new, so only Alice trusts BobCoin Bob has 100 BobCoin Alice has 100 AliceCoin Bob gives 100 BobCoin to Alice and takes 100 AliceCoin from her Bob can now spend money with 25 people (and their friends, and friends of friends, etc) Alice can now only spend money with Bob
In the example above, Alice needs a way to acknowledge that BobCoin is real money, while limiting her exposure to it while Bob is still new. Circles achieves this with Trust Limits. When you create a trust relationship in Circles, you have the option to include the maximum amount of your total coins you are willing to hold in another user’s currency. A trust limit is expressed as a percentage.. With trust limits, Alice is able to help Bob integrate into the system in a more controlled way:
25 people trust AliceCoin Bob is new, so only Alice trusts BobCoin Alice puts a limit of 10 BobCoin per month on her trust Bob has 100 BobCoin Alice has 100 AliceCoin Bob gives 10 BobCoin to Alice and takes 10 AliceCoin from her Bob can now spend one tenth of his money with 25 people (and their friends, and friends of friends, etc) Alice sets aside her 10 BobCoins to spend once Bob has made more trust relationships Bob gets 10 people to trust BobCoin Alice raises her trust limit on BobCoin to 100 per month
Trust limits reduce the risk of trusting new accounts to the system, making it easier for them to build trust relationships.
Defending Against Fake Accounts
As we’ve shown, fake accounts are a primary consideration when designing protections into the system. Since money can be spent indirectly through transitive connections, let’s show how Circles defends against fake accounts that are connected to your friends:
Bob trusts AliceCoin Alice makes a fake account and trusts FakeCoin Alice has 10 AliceCoin FakeAlice has 10 FakeCoin Alice wants to buy something worth 10 PersonalCoins from Bob using FakeCoin FakeAlice gives 10 FakeCoin to Alice and takes 5 AliceCoin from her FakeAlice gives 10 AliceCoin to Bob
This example demonstrates that Bob can only ever receive money that he trusts, and Alice can only ever spend money that other users trust in turn. Even if Alice makes 100 fake accounts and has them all trust each other, she will never be able to spend more than the amount of AliceCoins she has, since that’s the only account that other users will trust. This is why it is crucial that users take direct peer-to-peer trust relationships seriously.
Complementary Currency
Circles is not meant to become the world's dominant currency, cryptographic or otherwise. Rather, it is a complementary currency, working in harmony alongside other stores of value and mediums of exchange, itself embedded in a diversity of currencies. In the future Circles could even serve as a foundational "hard currency" for a more flexible group currency built on top. It is ideal as a hard currency because the supply of specific individual currencies is perfectly predictable and the aggregate system is highly resilient due to its lack of reliance on a centralized identity provider. To determine group membership, this hypothetical group currency could function with an arbitrary business logic such as being part of a business barter network, or democratically via geographically bounded assemblies. The group could then one-way convert the personal currencies of its members into a fungible group currency at a dynamic exchange rate that meets the group's needs over time. This would allow Circles to act as a staging ground for many different experiments in consensus reality (and morality), while still providing individual users the freedom to revert back to personal currencies if any one group becomes corrupted or useless. The possibilities for new political forms are numerous, but the potential for layer 2 systems on top of the base protocol is by far the most speculative aspect of the project and remains a decidedly open question for further research.
Conclusion
The Circles Money System was designed to get started creating a UBI economy today. We believe that the combination of resilience and global accessibility afforded by blockchain technology is a key catalyst that makes a Universal Basic Income achievable within the next generation. Our system's native Sybil-attack resistance and inbuilt decentralized identity make it an ideal focus for grassroots action and community organization, which have been hallmarks of envisioned UBI economies over the years. We are actively researching the economic implications of Circles' various design tradeoffs with the intention of creating a money system that is as useful and stable as possible. Our roadmap is designed to get started with trial applications as soon as possible in order to see how this new form of value exchange behaves in real economic settings. We are very excited about the potential of this project and hope that it can serve as a critical foundation for a new economic paradigm in the decades to come.
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