Everyone’s talking about universal basic income (UBI) these days. From Silicon Valley to the nation’s capital, the once unthinkable notion of giving people unconditional free money is gaining currency. UBI trial programs are up and running in Finland, Canada, California, and elsewhere. Barack Obama and Bernie Sanders have spoken positively of the concept, as have tech titans like Elon Musk and Mark Zuckerberg. One presidential candidate—Andrew Yang, a former entrepreneurship ambassador under Obama—is even basing his entire 2020 campaign around UBI. Yang’s “freedom dividend” would give every American adult a $1,000 monthly payment, funded by a national value-added tax falling mostly on large corporations.
“It’s simple, it’s fair, it’s equitable, it’s easy to understand, it benefits at least 80 percent of the population, and it will be necessary to maintain the fabric of society during the automation wave,” Yang writes in his recent book, The War On Normal People. “It will become increasingly popular and commonsense.” Like other such advocates, Yang sees automation and growing income inequality as the driving forces for UBI. He imagines a future where paid work may not be the all-around provider it has been in the past.
If the crypto industry can create hundreds of billions of dollars out of little but investor religion, then why can’t we do the same in the name of basic welfare?
While Yang sees higher taxes paying for UBI, most people consider money as a stumbling block for widespread adoption. Even if they agree with UBI in principle—why shouldn’t everyone have enough to eat and a roof over their heads?—they don’t want to pay for it (or even have their fellow taxpayers pay). If UBI is to become a reality enjoyed by more than a few people in a trial here and there, we may need ideas outside the traditional tax-and-spend formula. That’s where cryptocurrencies and blockchain potentially come in, according to some UBI activists. Potentially these technologies allow us to unlock value hidden in currently illiquid assets, they say, and perhaps create value where none existed before. After all, if the crypto industry can create hundreds of billions of dollars out of little but investor religion, then why can’t we do the same in the name of basic welfare? The rise of blockchain technology is providing a new arena for UBI plans, while positing the seemingly crazy idea of divorcing income from labor.
Experimenting with cryptocurrencies, unencumbered with any strong connection to one country’s fiat currency, allows for UBI advocates to envision plans that transcend national borders. “If you want to live up to the U in UBI,” says Love von Melen, founder of Circles, a blockchain-based UBI initiative that will undergo testing in Berlin later this year, “you recognize that the problem is how to get it to everyone without relying on governments.”
The People’s Currency Foundation has gone the farthest in implementing a working blockchain-enabled UBI scheme. The Virginia nonprofit’s Mannabase project dispenses weekly payments in the form of manna, its own cryptocurrency.
“We’re giving it away to anyone who can prove they’re a unique human being,” says CEO and founder Eric Stetson. By “unique,” he means individual, not special. If you are a homo sapien resident of planet Earth who has a cell phone number, there’s some manna with your name on it.
Since launching earlier this year, Mannabase has distributed crypto with an estimated total value of over one million dollars, to two hundred thousand of your friends and neighbors in the global village. That doesn’t add up to a lot per person. Stetson estimates that a year of receiving manna will likely net you no more than a few bucks (Mannabase offers bonuses for getting others to sign up). But still—free money! Like any cryptocurrency, you can save your manna in a digital wallet, spend it, gift it, or trade it on an exchange. Like its biblical namesake, manna may one day be a lifesaver.
“We’re the first cryptocurrency to be distributed as a universal basic income,” Stetson says. “Obviously, it’s not enough to meet people’s total economic needs, but it’s a start.” You don’t need citizenship to receive Manna—just a cell phone, an object that is nearly universal, with usage rates in even the poorest countries approaching or already equal to those in the richest.
Prior to Mannabase, Stetson helped found a blogging aggregator that never quite got off the ground, and also worked for nonprofits. In 2013, he discovered bitcoin, decided it had the potential to effect positive social change, and shifted careers, going to work for SolarCoin, an initiative that provides tokenized rewards for solar electricity generation. “My background was in the charity sector,” he explains. “I wanted to bring my values and experience into the world of blockchain and use it for charitable purposes.”
Mannabase is the first blockchain UBI plan to launch with its own cryptocurrency, something Stetson sees as key to the project’s future success, as it makes the project truly transnational and universal. The success of Mannabase will partially hinge on large groups of people seeing in manna the same promise Stetson saw in bitcoin. “Our model is based on getting ordinary people into crypto by giving them some,” he says. “We have an on-ramp. We can simply outgrow the other cryptocurrencies because our economic model is based on giving ours to other people.”
Circles’s approach is more cautious than Mannabase’s give-everybody-crypto-and-see-what-happens idea. Under its plan, individuals would be issued their own unique UBI currency, whose utility would evolve based on trust relationships (the circles). Two friends form a circle, each affirming the other is a real human being with crypto to spend and agreeing their individual currencies both have the same value. If one of the friends forms a circle with a third person, the other friend’s currency is also accepted by this third person. And so on, with interlinking circles steadily rippling out into the world. “Money is really a social thing that depends on the mechanisms of a community,” Von Melen says, referring to how all modern money is effectively a social technology, rather than a currency backed by anything tangible, like gold in a vault.
UBI has become a TED Talk topic only recently, but it has a long history, even in the United States, a country not known for its safety net. In 1795, Thomas Paine proposed a “National Fund” that would provide a regular payment to compensate every American for the “loss of his or her natural inheritance, by the introduction of the system of landed property.” More recently, UBI has achieved a bipartisan patina. From the standpoint of the left, it is a way to ensure that nobody falls below a certain poverty threshold, while conservatives have touted UBI as a way to streamline (and perhaps dismantle) the welfare state. (The Venn diagram of ideas championed by Martin Luther King, Jr., and Richard Nixon is small, but it includes UBI.)
Since 1982, residents of the red state of Alaska have benefitted from a program with the form, if not the scope, of a UBI plan, receiving a modest annual dividend–usually around $2,000 per person—from a pool funded by oil and mineral leases. These days, support for UBI is often linked to concerns about the effects of automation on the American workforce. An influential Oxford University study published last year estimated that nearly half of all jobs in the U.S. are at high risk of becoming automated over the next two decades. In a country where three people—Bill Gates, Warren Buffet, and Jeff Bezos—control as much wealth as the bottom 50 percent of all Americans, UBI now seems like a corrective that echos Paine’s “natural inheritance”—just substitute “automation” or “gross economic imbalance for “landed property.”
By simply giving away money, today blockchain UBI activists also underline something radical about the basic income concept that extends back to Paine. It’s the idea that human existence is itself a form of value. Jake Vartanian, founder of the consulting company Cryptodex, believes that in a perfect world we’d have some kind of blockchain-based UBI token system that would reward us for even the simplest acts of wealth-generation, such as recommending a product to a friend who then buys it. Yang has proposed a digital “social credit” scheme where acts of community kindness, where coaching Little League or volunteering at a homeless shelter is rewarded with cryptocurrency.
Though these concepts may be fanciful for now, the potential of blockchain to tokenize all aspects of life invites us to contemplate them. Moreover, it’s arguable whether a lot of economic activity is actually productive, in the sense of creating new value. More often than not, it relies on what economists call rent-seeking deriving by people occupying privileged positions in the value chain. In other words, it is common wealth extracted by certain individuals or groups that under different circumstances could be put towards the collective good.
The entrepreneur and UBI activist Peter Barnes argues that a huge chunk of our economy is taken up by “rent…income received not because of anything a person or business produces, but because of rights or powers a person possesses.” What the prevalence of rent obscures, Barnes maintains, is the existence of “common wealth,” which includes the bounties of nature, the wealth created by our ancestors, and—crucially—“the wealth of the whole—the value added by the scale and synergies of our economy itself.” Without all of us, these synergies don’t exist. “My contention,” Barnes writes, “is that the rich are rich not because they create a large amount of wealth, but because they capture a larger share of common wealth than they’re entitled to.”
To Barnes, UBI isn’t about redistributing wealth from the rich to the less-than-rich. It’s about paying dividends on commonly held wealth, much like Alaskans get an annual payment from the state’s oil fund. For example, we might see the electromagnetic spectrum as something we can all share in, rather than something available to communications and TV executives to make profits from. The airwaves add about 2.5 percent to the nation’s GDP every year, which Barnes calculates adds up to about $418 billion on an average year. A 20 percent value-added tax on the industries that profit from the spectrum would work out to $84 billion a year to be shared among Americans, perhaps in the form of tokens representing fractions of assets.
The apparent sleight-of-hand is arguably just a clever twist on the abstraction underlying any fiat currency.
A fund made up of these kinds of common-wealth generators could generate a decent UBI. And while there is no reason such a system would need to run on a blockchain, doing so could increase transparency and allow the wealth to be traded, like it was shares in a company. Also, tokenizing public assets might remove government as the distribution mechanism, increasing efficiency and placating citizens who recoil at its involvement as a matter of principle.
Vartanian says a blockchain-based UBI as moving us beyond work to something more dignified: valuing individuals for their inherent worth, not for their economic usefulness. “The way we’re conditioned, at least in the U.S., is that you need to get a job in order to be valuable,” he says. “And if you don’t do that, you wind up homeless—you’re not able to realize the value you’re still creating, even in the most devastating period of your life. You’re told you’re not valuable, when really a job might just not be how you create value in the world.” As Mannabase’s white paper puts it, “a person’s inherent worth is not nothing.”
The team behind Circles argues that “the concept of a UBI is not just compatible but the foundation of a fair money.” It’s worth unpacking what this means, especially as Mannabase begins pumping manna into the world. Mannabase is a grand experiment in creating a currency with a sort of double-life. It is designed to be given away for free—not “earned” or offered as a loan with the expectation that it will be repaid. So where does its value come from?
The apparent sleight-of-hand is arguably just a clever twist on the abstraction underlying any fiat currency. Most of the money circulating in the world today originates from private banks, not governments, in the form of loans. When a bank loans money, it doesn’t exactly open a safe and give the borrower a stack of cash. It is more accurate to say that the bank, through a standard practice called fractional-reserve banking, generates an electronic deposit that it places in the borrower’s account. In doing so, the bank receives both an asset (the loan) and a liability (the deposit, which, like all customer deposits, increases the bank’s overall debt). The bank has, in a sense, “created” money, operating on faith that the borrower will repay it.
“Money is a public good, but we’ve given private banks the ability to create our money supply out of debt,” says Scott Santens, a writer and leading UBI advocate. “Mannabase can change that dynamic. Instead of debt, you just create money and give it to people universally as their share of the money supply.”
Manna isn’t based on pure abstraction. Stetson says a large chunk of the monetary donations received by the People’s Currency Foundation are used to buy manna on exchanges, which helps to keep the price from dropping below a minimum floor. “We [need to] prove to the public that the currency can continue to hold value—and gain value—despite the fact that we’re giving it away for free,” Stetson says. “Then more money will flow in and that will make the amount people get more meaningful.”
Manna’s future worth will also depend on it becoming popular enough to be used and accepted around the world. Mannabase hopes that giving it away to anyone, anywhere, will effectively turn manna into a currency that will be used and accepted by everyone, everywhere. “Part of the value of money comes from the ability to use it,” Santens says. “If you could walk into a store and they said you could use Canadian dollars or U.S. dollars, or you can use manna because everyone’s receiving it, so they value and accept it, suddenly there’s a lot of utility to having manna. Maybe instead of just using the manna you get, you purchase more because it’s very useful. That will further raise the value of manna.”
UBI may be work better in the developing world where traditional currencies are less stable and any form of money becomes consequential more quickly.
Stetson acknowledges manna has a long way to go. The world’s extreme inequality, which makes basic income a moral imperative, also makes it difficult to implement. One society’s useful amount is another’s drop in the bucket. UBI may be work better in the developing world where traditional currencies are less stable and any form of money becomes consequential more quickly. “We won’t be to create a UBI in America with Manna, where people need at least a thousand bucks a month, at least not for years to come,” he says. “But what we maybe can do realistically is get to the point where we’re giving everyone in the world a few hundred dollars a year. In some poor countries, that would double the standard of living.”
There are many reasons to be skeptical of Mannabase’s model, starting with the project’s practice of propping up the price of manna. Some critics of Mannabase also question whether it can solve problems of exchange in these poor communities. “It doesn’t make any sense because there’s no inherent value in the Mannabase token,” Vartanian says. “I can make all kinds of arguments about what types of value are being created, but at the end of the day if I take my Mannabase token to someone in India and say ‘this is good money, trust me, they give it out for free,’ and there’s no sustainable economic system behind it, they’d say so no before you could explain anything. They don’t know what manna is and they have no way to actually understand what the value proposition is. Because there really isn’t one, besides goodwill.”
Others question whether the Mannabase system is truly decentralized in the manner of a bitcoin-type blockchain. Its reliance on a traditional model of insurance—distributing funds from a central pool—makes it vulnerable to the type of meddling and manipulation that cryptocurrency is supposed to avoid by distributing power to the network.
Economists at RMIT University in Melbourne and the University of Queensland, in Australia, have proposed a system that eliminates the need for centralized pooling: a personal equity swap. Under the proposal, college students are given free college tuition in exchange for donating part of their salary once they enter the workforce. In turn, that funds the education of successor students, creating a virtuous loop (or systematized alumni donation scheme).
“The ultimate issue with any UBI scheme is how to ensure there is a sufficient pool of money to sustain it,” says Mikayla Novak, a post-doctoral research fellow at the Blockchain Innovation Hub at RMIT. “One of the great challenges of a publicly financed UBI is the fiscal constraint, the available pool of finance that governments can acquire from taxpayers.”
A larger-scale personal equity swap could see all of us donate one percent of our paycheck to 20 friends, with each of those friends agreeing to do the same, and so on. You give away money but also receive money in return, ensuring money is always circulating among your group. If you lose your job, you can still count on some money coming in—a basic income of sorts.
The idea recalls the mutual aid associations, such as the Independent Order of Odd Fellows formed in 1819, that communities established before the advent of modern insurance plans. During the Great Depression, 50 percent of all adult men in the U.S. belonged to one of these societies. Even today, they are a popular way to establish safety-nets among immigrant communities. The Australian plan modernizes the idea by basing it on smart contracts that would live on a blockchain.
“You can readily imagine a process whereby the scheme propagates,” Novak says. “It might initially start out among local communities, especially special interest communities. But because of the trust-galvanizing properties of blockchain, and because blockchain is a technology of global coverage, it is conceivable that a blockchain-enabled UBI could have a widespread coverage across borders.”
This limitations of this kind of UBI project are the mirror-image of those in the Mannabase model. It would be hard to convince people making the kind of salary typical in the developed world to enter into a contract that includes participants who live on a few hundred dollars a year. But the flexibility of the blockchain allows for an unlimited number of participants. Perhaps in a future, more humane time, the entire world will agree to engage in an ongoing and infinitely recurring equity swap, floating all boats on a smooth flow of capital, rather than creating only winners and losers.