Crypto can open up facets that have been only talked about in academic circles and more often than not dismissed for their far-fetch nature or the lack of large enough controlled environments. Some of these ideas have seen fast-tracked experimentation and mainstream chatter - UBI being on of them.
From the outside perspective, universal basic income (UBI) can be viewed as a socio-political fiscal transfer policy that seeks to provide individuals – living in a certain region – with seamless access to a legally stipulated stipend without any caveats involved. Such a scheme is applicable on many levels, i.e. nationally, regionally, or locally. The idea garnered a lot of interest from governments across the globe.
Yet, despite this growing interest, no countries have successfully implemented a UBI model for a considerable length of time, even though some governments have launched similar-themed programs to provide for the neediest sections of their respective societies.
For example, back in 2011, the middle-east nation of Iran rolled out an unconditional cash transfer scheme – worth approximately $45 – for its population to phase-out subsidies on bread, water, electricity, heating, and fuel. The amount was about 29% of the nation’s median household income. But, the program had to be dialled back as some Iranians believed it disincentivises people to work.
The world’s largest and longest-lasting UBI experiment is currently taking place in Kenya, where a charitable organisation called GiveDirectly has been doling out monetary handouts to a little over 20,000 people, spread out across 245 rural villages since 2016.
One of UBI’s key criticisms is that it often gives too much money to families that don’t need the assistance while providing little help to those who do.
Jack Dorsey’s Experiment
Jack Dorsey, the Twitter co-founder, is keen on exploring UBI opportunities. His idea is to create a universal basic income backed by Bitcoin.
Using the world’s leading cryptocurrency would make sense due to its transparent nature, code, and policy. Moreover, Dorsey is convinced fiat currency remains inefficient, whereas Bitcoin can facilitate more use cases.
Dorsey’s initiative now focuses on a closed-loop community of sellers and merchants who use Bitcoin. Eventually, the goal is to introduce the Bitcoin standard on a much broader scale.
One city has already put the idea of UBI into action. In 2019, Stockton, Calif., launched the United States' first mayor-led guaranteed-income demonstration, the Stockton Economic Empowerment Demonstration (SEED), in which 125 randomly selected recipients were given $500 a month for 24 months. The program launched in February 2019 and ended in January.
The SEED program met its goal of improving the quality of life of 125 residents struggling to make ends meet. To qualify for the pilot, residents had to live in a neighbourhood where the median household income was the same or lower than the city's overall, about $46,000.
A team of independent researchers report found that Stockton's program reduced unemployment among participants during its first year and helped many of them pay off debt.
The report studied the effects of the payments from February 2019 through February 2020. SEED participants also reported improved emotional well-being and decreased anxiety or depression.
Mayor Michael Tubbs launched Mayors for a Guaranteed Income, a coalition of mayors interested in starting similar basic-income pilots across the US. At least 40 mayors who joined the group also received $18 million in donations from Jack Dorsey.
The GoodDollar Concept
DeFi protocol GoodDollar is focused on delivering a sustainable crypto UBI claimable by anyone. The project has almost 300,000 members worldwide and recently underwent a crucial protocol upgrade. The universal basic income through the GoodDollar protocol provides a UBI in G$ token, governed by the GoodDAO.
Additionally, the protocol leverages liquidity mining rewards and yield farming to ensure capital keeps flowing toward GoodDollar to create a sustainable project. Members can stake in Compound or Aave to earn rewards and help fund the crypto UBI for all.
After acquiring the G$ token, holders can sell the asset in the GoodDollar Reserve. All minted G$ are used to reward stakers or distributed as universal basic income on the Fuse blockchain. An initial test by eToro – they staked $58,000 – confirmed the money flow, demand, and end-user wallet application were viable. Moreover, the recent v2 upgrade ensures liquidity supporters receive G$ rewards for staking, awards GOOD governance tokens, and introduces a Social APY.
Crypto, DeFi and UBI – The Larger Picture
There’s no denying the fact that the cryptocurrency industry – the decentralized finance (DeFi) market, in particular – has been able to accrue a lot of wealth for its early adopters, with many of these individuals now looking to give back to the underprivileged. In fact, just recently seasoned industry personnel such as Ryan Selkis, Dan Matuszewski, and Haseeb Qureshi, amongst others, promised to donate 1% of their wealth to charities through a project called The Giving Block.
The model is propagated by network participants who continue to deposit assets onto the platform and subsequently yield farm them using decentralized finance (DeFi) protocols including Compound or Aave. A majority of the accrued interest is returned to its supporters while the rest is used as collateral for new $G tokens which are then distributed on a daily basis.
It is worth mentioning that late last year popular digital asset investment platform eToro announced that it was going to be committing $1 million to the protocol, thereby supporting the nonprofit’s effort to help close the wealth parity that exists across the globe using DeFi and smart contract technology.
Other similar initiatives include Global Income Coin, a crypto non-profit that delivers a universal basic income of $1 a day to any person in need situated in any part of the planet.
As crypto-enabled technologies continue to gain an increasing amount of mainstream traction, it stands to reason that their use will continue to expand into realms previously thought to be unimaginable (such as various basic income schemes).
In this regard, as more and more corporations from the realm of traditional finance start to become more conscious, they can donate small sums of money to protocols such as GoodDollar and Global Income Coin to help those in need using blockchain technology. Thus, it will be interesting to see how the future of this financial niche plays out from here on end.