Technologies Enabling Universal Basic Income, Today
Non-governmental approaches to enabling UBI
What is Universal Basic Income?
Universal Basic Income (UBI) has long been thought of as a solution to reduce poverty and improve standards of living.
UBI is a method of reducing poverty by giving a sum of money to a population in some frequency (e.g., $1000 per month) with no strings attached.
Whether it actually works is a bit controversial, as is anything tied to politics, but there have been many experiments tried across the globe.
UBI Has Been Effective
Many of the UBI experiments have actually worked and point to UBI leading to many positive outcomes. Finland, for example, has conducted a nation-wide randomized control trial of a basic income program.
The results? A much happier, healthier population.
The common theme among the results of other programs reinforced the benefits:
Increased trust in people and institutions
Greater feeling of motivated at work
Pursuit of greater education
Increased mental health
Increase in overall happiness
More entrepreneurial activity
And sometimes, an increase in employment
The basis for why UBI works can be directed back to Maslow’s Hierarchy of Needs - if we can satisfy people’s basic needs, it is more likely that they can focus on beneficial things to society.
Paying For UBI
The real debate isn’t as much about whether UBI works, but rather who is supposed to pay for it. This is where it can get really political, as you can imagine, since governments are seen as the most obvious provider of funding for UBI programs. Specifically, tax-payer money.
But what if we didn’t have to rely on governments? What if we could engineer UBI models using a combination of technology and innovative business models?
That’s just what is being tested by many startups and organizations across the globe. And it appears to have some early indications of success, albeit at a small scale so far.
New UBI Models
Within the last few years, we’ve quietly seen the introduction of a number of new UBI schemes, primarily due to the advent of web3 technology.
There’s been a few different types of experiments that have been running to try to figure out more decentralized sources of funding for UBI programs. UBI Research lists 16 projects and there are some others beyond this list that are experimenting with new UBI models, most of which are web3 based.
One basic concept that doesn’t necessarily need technology is a simple donation-based or crowdfunded UBI program. It’s as simple as it sounds, you ask people to voluntarily pool money together and then give it out to those that need it.
Voluntary UBI programs are pretty straightforward, and can work, but only if you’re able to raise enough money to be able to do it at scale. And that seems to be the issue, it’s hard to raise donor money for just about anything without the right incentives in place. And most people just don’t tend to see any incentive in giving money to other people for free.
So, how can we create models that either don’t rely on these voluntary incentives or attempt to create the incentives? This is where web3 UBI models have been developed to try to provide some answers.
Cryptocurrency Inflation Models
The basis for this model is that a cryptocurrency is created that is engineered to provide for communities and people in need. The mechanism for UBI is generally through inflation, meaning that a portion of the inflation is taken out to pay for a UBI program.
Example situation:
Imagine that a million people agree to buy this new currency, let’s just call it UBI Coin. 1 million coins are generated initially in this example scenario. Let’s just keep it simple and say that each person agrees to pay $1 each for the coins, so they are currently worth $1 and have a market capitalization of $1m.
Every year, 100,000 new coins are minted, representing an inflation rate (initially) of 10%. Of this, half of these are used to reward stakers, or in other words, people who hold and do not sell their coins. The other half goes to a UBI pool available to people based on some criteria.
In this way, we have just funded UBI through inflation of a currency that people use. However, that’s the key assumption, is that people will actually hold or use this currency and create demand for it. Otherwise, the coins given to the UBI pool could essentially be value-less.
However, with this model there is usually one big caveat. How do you determine who gets the UBI? You could do a few things:
The protocol could give everyone basic income payments, but this might be giving payments to people who don’t need them.
You could entrust a group of people to determine where the basic income goes, whether in a centralized fashion or some form of distributed committee or Decentralized Autonomous Organization (DAO).
You could have a set of criteria that someone needs to meet and verifiably prove this criteria somehow.
The second and third options, or a combination of both could be viable options.
However, one key thing is generally needed to make it work effectively, and that is some way to prove the identity of those who are receiving the payments. If you can’t prove identity then you could have what is referred to as a sybil attack, where one person pretends to be multiple people to get more payments. Or where bots are employed.
This is where decentralized identifiers come into play, a mechanism to verify someone’s identity digitally.
Building Self-Sovereign Identity For UBI
Other UBI models aim to combine cryptocurrency with a self-sovereign identity solution as a means to prove someone is a real person and cannot perform a sybil attack.
Proof of Humanity is one such project where it has created a registry of verified humans where people need to do some basic verification tasks, like submit a picture and recording, to tie it to an Ethereum (web3) wallet address.
The UBI Token was developed as a first application on top of this registry that rewards the verified humans with universal basic income in the form of these tokens over time.
There are currently over 19,000 profiles on this registry. However, despite what might look like early success, there are some problems…
Problems With Crypto UBI Models
It’s hard to access and use. While I didn’t do a full analysis on the registry, it seems as though most of the people on the registry probably don’t need UBI. Most seem like technologists and people in the web3 space who are probably doing OK financially. This makes sense when you figure who is most likely to find and be able to easily use products like this.
Low token value. The UBI token is currently only worth less than half a cent each and with 1 token being given per person every hour, this is less than $3 per month. The token also has very little liquidity at the moment, meaning that there isn’t a lot of real dollars to claim them for.
Lack of sufficient demand drivers. The problem with many of the crypto-based UBI programs, at least currently, is that they don’t really have sustainable drivers of demand for the tokens. Also, they tend to rely on inflation as a mechanism to distribute UBI rewards. There’s nothing inherently wrong with an inflationary model other than that if there is limited demand for the token, it’s a race to the bottom for the token as new supply continually pushes the price down with no new buyers.
How we establish a new token system for the purposes of UBI is still unknown and unproven, but if the demand side can be figured out, it could be a promising model.
DAO Incentivized Models
A model that ImpactMarkets uses is focused on trying to change the incentives for giving and provide a means for crowdfunding for communities in need. This model evades some of the main problems above.
While they also use a crypto token, it is not meant to be a currency or store of value, and thus does not rely on demand for a new token being used as such to maintain the value of the UBI payments.
The $PACT token is used as a medium of governance and incentivizes people who contribute (donate) to the treasury (i.e., pool of money controlled by token holders).
In layman's terms what this means is that the people who hold the tokens get to make key decisions about how the money is used, like which communities should be added to the platform and considered for basic income.
Example of DAO vs. Traditional Org structure
Since $PACT is given to those who donate, it is an added incentive for them to contribute. It is also a way to get the communities and their representatives actively involved in the process to make their voices heard.
ImpactMarkets has already had $3M in UBI payments claimed by over 41,000 beneficiaries, according to its website. It’s not a huge amount, but it could be the start of something much bigger.
Conclusion
While none of the new UBI models have reached nearly the scale of what’s required to provide basic income to the whole world, these experiments are proving that there are other ways than government-funded programs to make UBI a reality.
In the future, we can imagine hundreds of such programs existing that create incentives for people to participate in these programs and collectively help fund the populations in need of capital to meet their most basic needs.
Soon enough, we could be living in a world where everyone has access to some level of support on a permissionless and unconditional basis.
