GoodDollar: A Distributed Basic Income
GoodDollar protocol enables a sustainable universal basic income model built atop decentralized finance infrastructure.
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White Paper | GoodDollar.org
Authors: Yoni Assia, Tomer Bariach, Tal Oron, Anna Stone
Contributors: Hadar Rottenberg, Ziv Keinan, Dr. Nir Yaacobi
The information shared in this whitepaper is not all-encompassing or comprehensive and is strictly for informational purposes only. The primary purpose of this whitepaper is to provide the reader with information about the GoodDollar vision and proposed scheme for global UBI powered by cryptocurrency. Certain statements, estimates and financial information featured in this whitepaper are forward-looking statements that are based on and take into consideration certain known and unknown contingencies and risks which in eventuality may cause the estimated results or may differ factually and substantially from the featured estimates or results extrapolated or expressed in such forward-looking statements herewith.
Note that GoodDollar is not performing an Initial coin offering (ICO); GoodDollar operational budget is sponsored entirely through direct donations and G$ tokens are distributed for free.
GoodDollar is a blockchain protocol that draws upon the unique capabilities of decentralized finance (DeFi hereafter) to sustainably mint a basic income token for distribution to a global user network. Governed by the GoodDAO, a decentralized autonomous organization made up of highly engaged members of the community, the protocol is open, scalable and dedicated to the twin goals of bringing hundreds of millions of financially underserved individuals into the digital economy and addressing systemic inequity in the global economy. [1]
The GoodDollar protocol presents a community-driven,distributed framework designed to generate, fund, and distribute global basic income via the GoodDollar token (hereafter “G$”). G$ is an ERC-20 digital asset built on the Ethereum blockchain that operates within the emerging ecosystem of decentralized and open finance. GoodDollar leverages new protocols and smart contracts across the ecosystem to deliver its basic income economy. GoodDollar functions as a wrapper of other protocols, and allows earnings generated in those protocols to be directed to fund the GoodDollar UBI ecosystem. Its flexible design enables it to wrap any DeFi protocol; enabling DeFi users to choose their preferred repository, and to direct their capital towards supporting UBI for all.
Inequality in wealth and income is arguably one of the greatest threats to the future of humanity and has been on the rise in nearly all nations since the 1980s. According to the 2022 World Inequality Report, the product of four years of exhaustive data mining by 100+ researchers across the globe, so-called “trickle-down” economics has proved a failure.[2] The wealthiest 10% of the globe’s population now earns 52% of its income, whereas the poorest 50% takes home just 8% of that total. The gap is even more pronounced when it comes to wealth. Of the world’s total assets, the poorest half of the population owns just 2%, while the top 10% hold three-quarters. This gulf has only widened in recent decades with the rise in the ranks of global billionaires. Since 1995, the share of global wealth in the hands of the world’s billionaires has tripled, from 1% to 3% -- a concentration of riches that increased during the COVID-19 pandemic. According to the report, the wealth of the world’s billionaires swelled by a record amount during 2020.
In recognition of the dangers wealth and income gaps pose to global peace and security [3], the United Nations has singled out the reduction of both poverty and inequality in its 17 Sustainable Development Goals: the first and tenth, respectively[4].
This crisis has triggered fresh enthusiasm to explore new approaches to capital and liquidity distribution. While not a new idea, the notion of a universal basic income (UBI) – a flow of unconditional payments to individuals regardless of means – has emerged as a key policy proposal in nearly two dozen nations over the past several years. This presents a ripe opportunity to explore distributed, bottom-up approaches to basic income, which we believe can advance at greater speed than implementation by governments, as outlined in this white paper.
The concept is straightforward and builds on market adoption of yield farming and liquidity mining to attract and incentivize capital. Every day, a quantity of G$ is minted and distributed as basic income to verified users. G$ token is an automated-market maker - it is backed by a monetary reserve of additional cryptocurrency(ies), and hence, has instant value. The value in the reserve backing G$ is generated by people who deposit capital to decentralized third-party protocols, and direct their earnings to support the GoodDollar ecosystem. As new value is added to the reserve, G$ coins are minted. These are used to: a) pay out liquidity mining rewards to supporters b) pay out G$ to those making daily basic income claims. There is no pre-minting of G$--G$ are minted relative to the value of capital in the reserve. Over time and as more G$ supply enters the market and is adopted, slowly the currency is leveraged and more G$ coins are minted relative to GoodDollar’s reserve. The system is built to accommodate scale, whereby the value and utility of G$ to its holders increases as more supporters, recipients and merchants join the GoodDollar network.
The GoodDollar protocol presents all members an opportunity to vote with their money for a social cause they believe in, and invest in equality. GoodDollar protocol delivers a sustainable flow of free cryptocurrency to people most in need of access to capital and an onramp to the digital economy. The protocol aims to offer incentives to all who hold G$, whether they choose to participate as supporters of basic income or to claim G$ as daily UBI. This fosters a “trickle-up” basic income economy that focuses on wealth creation rather than wealth redistribution. The model creates an economic framework that aligns financial incentives with an accessible distribution method. The goal is a protocol that can successfully incorporate hundreds of millions of financially underserved individuals into the emerging digital economy by giving them access to real digital assets. GoodDollar is able to scale and sustain such a system by leveraging the unique capital infrastructure of DeFi to design a global impact economy governed by its members.This paper sets out the components of the GoodDollar ecosystem and outlines the protocol’s governance structure, which centers on the GoodDAO, a decentralized autonomous organization managed by GoodDollar stakeholders.
Ultimately, the success of GoodDollar’s community-driven basic income economy relies on people and their conviction that the open finance infrastructure offers a viable pathway to a more equitable future. GoodDollar couples the innovative tools and infrastructure of decentralized finance and DAOs with a conviction that righting the balance of economic equality is the critical challenge of our time.
Introduction
Growing Clamour For Basic Income
Digital technology has empowered billions of people in the 21st century with vastly expanded access to knowledge and dramatically improved modes of communication. Yet, despite this information revolution and explosion of digital banking and commerce, a large portion of the world’s population remains financially excluded. In 2018, The World Bank calculated that 1.7 billion adults had no access to a traditional bank, even though one billion of these have a mobile phone and nearly 500 million have an internet connection [5].
Meanwhile, wealth inequality continues to grow. The richest 1% of people are on course to control as much as two-thirds of the world’s wealth by 2030 [6]. We are also facing mass unemployment resulting from automation. The McKinsey Global Institute projects that by 2030, developments in robotics and artificial intelligence will have pushed some 800 million people – or one-fifth of the global workforce – out of their jobs by 2030. [7]
Why Basic Income Is Increasingly Relevant
In simple terms, universal basic income is a model for providing every person with an unconditional sum of money, regardless of their employment status, income or resources. It is designed to enable a baseline standard of living and narrow the gap between rich and poor. The concept of basic income is not new; it has been theorized about, in one form or another, for at least five centuries, since it was introduced by London-born Renaissance humanist Sir Thomas More in his 1516 masterpiece Utopia.
The idea of a basic income has risen on the economic agenda in the past few decades, amid growing concerns about inequity in the global financial system. In 1969, the economist Milton Friedman coined the term “helicopter money”, suggesting this as a possible means for increasing aggregate demand [8]. Friedman proposed that central banks could make direct transfers to the private sector without the involvement of fiscal authorities to put more money in the hands of people, a solution former Federal Reserve Chairman Ben Bernanke famously advocated in 2002 as a preventative for deflation, when he was on the central bank’s board of governors [9]. In the wake of the 2008 financial crisis, Martin Wolf suggested that central banks make cash transfers directly to households financed with base money [10], while a growing number of economists and policy-makers have since 2012 made calls for “quantitative easing for the people”, arguing that conventional quantitative easing was adversely affecting wealth distribution.
Proposals such as these no longer seem radical. In recent years, indeed, they have entered mainstream political consciousness. Jeremy Corbyn, when leader of the United Kingdom’s Labour Party, promoted people’s quantitative easing as part of his 2015 manifesto [11]. Three years later, Corbyn’s Labour Party adopted a policy promoting basic income [12]. In the United States, 2020 Democratic presidential candidate Andrew Yang gained a small cult following running on a signature policy of US$1,000 for every American. Since dropping out of the presidential race, Yang has become a high-profile advocate of basic income, and his non-profit to support pilots and political candidates who promote basic income platforms has attracted media attention and millions of dollars in funding [13]. At the height of the pandemic, Spain became the first country to launch a nationwide basic income initiative that will stay in place when COVID-19 restrictions subside [14]. Many others – including Australia, Japan, New Zealand, Germany, Scotland and Brazil – have talked about deploying similar schemes. Basic income’s appeal has never been greater; a May 2020 survey by the University of Oxford revealed that 71% of Europeans now support the concept [15].
Whether motivated by a growing awareness of the need to combat poverty, concerns about job losses caused by technology, or an awareness of the need to redefine the meaning of work, basic income has moved from the fringes of political discourse to centre stage. And as the fallout from the coronavirus continues to re-shape economies around the world, it is more evident than ever that the time for a serious effort to implement a global basic income is now.
Basic Income in Practice
There have been approximately 30 basic income pilots in recent decades. Results from these demonstrate that, across impoverished and wealthy populations alike, basic income increases well-being and happiness, without resulting in reduced commitment to labour and income-producing work [16]. (For more information about the history of UBI and recent pilot projects, please consult our 2018 UBI positioning paper [17].)
Among other advantages it offers over other forms of stimulus, UBI:
- Is straightforward to understand and implement.
- Reduces compliance costs for individuals and operational costs for administrators.
- Is unconcerned with a receiver’s physical, personal, employment or relationship status.
- Empowers people, allowing recipients to make their own financial choices.
- Lifts more people out of the poverty trap and improves well-being.
- Does not necessarily rely on centralized sponsors/authorities.
Criticisms of UBI, on the other hand, have focused on the potential that regular payments could disincentivize recipients to seek work and reduce the labor supply. Critics also suggest that:
- The distribution of “free money” could encourage idleness.
- Since wealthy people still stand to receive funds, UBI is not equitable.
- UBI will be hard for most governments to finance through current systems.
- The value of UBI is hard to determine on a regional and national level.
Since governments and local authorities have funded most basic income pilots to date, affordability has been regarded as another of the main barriers to implementation. Estimates for the cost of a national basic income vary widely, ranging between 5-35% of a nation’s GDP [18]. However, among basic income advocates, cost is not seen as the primary inhibitor. To these groups, the greater barrier to a government-supported and implemented basic income program is political will, particularly given that any scheme would compete financially with existing social services and cash-transfer programs.
As to other concerns, pilots have so far shown that worries about basic income disincentivizing work are misplaced, while work related to economic measures such as the Gini Coefficient indicate that inequality is reduced even when wealthy people also receive a basic income [19].
There are additional challenges to using traditional organizations and structures to distribute a global basic income to all. These include:
- 1.How to determine an appropriate amount for global basic income, given differing economic levels and social norms between countries
- 2.How to develop a new payment mechanism that can reach all participating users directly
- 3.How to fairly manage and establish an entity that can act as a fund pool and entrusted to collect, store, and distribute basic income.
Perhaps most critically, no international governance or political-economic structures exist at the moment capable of delivering a worldwide basic income initiative.
Distributed digital asset technologies, however, allow us to envision a way forward.
Blockchain Advances Basic Income On a Global Scale
While national authorities grapple with the logistics of deploying basic income to their citizens, the emerging DeFi ecosystem offers a faster, more efficient route. The GoodDollar model for a distributed, people-powered global basic income complements government work while reaching beyond national boundaries. Our vision is to leverage nascent blockchain and decentralized technologies to forge a sustainable infrastructure, according to three core principles:
- 1.People-Powered Governance: Individuals and/or organizations can participate and collaborate in a distributive, decentralized governing body (the GoodDAO) that manages monetary tools controlling the GoodDollar economy through transparent token ownership.
- 2.Value Creation and Distribution: Smart contracts enable transparent value creation and transfer, powering a unified system that allows people to generate and receive basic income from various endpoints.
- 3.Open Innovation: The tools and protocols that already exist today in the emerging DeFi ecosystem mean there is no need to wait for governments to launch a sustainable framework for global basic income.
Ultimately, and with adequate support, we believe that the GoodDollar protocol can become the industry-standard basic income infrastructure. It is worth noting that while we promote a distributed framework for GoodDollar that leverages new tools across the decentralized finance ecosystem, we firmly believe that centralized and decentralized financial systems can co-exist and assist one another. We believe in working with any financial and technology partners that similarly strive to boost financial access and reduce inequality. Through GoodDollar, any individual or organization who believes in the power of basic income can contribute to the cause.
