Group Currency

by raldu • 11 years ago

128 59 11 years ago

jerf2• 11 years ago

Basic income as proposed at the societal scale is essentially a wealth redistribution scheme, which implies that there is some concrete actual value removed from somebody and given to somebody else. Using a cryptocurrency to provide basic income would manifest simply as the creation of currency, with no actual value being created to correspond to the new currency, so it's just going to be inflationary. I don't see any proposals on the linked page on how to overcome that, links welcome if there are, nor does anything leap to mind to solve this problem in a sensible way.

(This has nothing to do with whether basic income is a good idea or not; the point is that this does not appear to actually be basic income except at an extremely superficial level. Nor is my calling it a "wealth redistribution" scheme intended to be a criticism. I'll admit to being extremely skeptical about basic income, but that is what it is, just like EITC. Whether redistribution is a good idea is a separate discussion I'm not trying to have here.)

itistoday23• 11 years ago

Using a cryptocurrency to provide basic income would manifest simply as the creation of currency, with no actual value being created to correspond to the new currency, so it's just going to be inflationary.

CryptoUBIs/group currencies can be deflationary. Have a look at the first item in the FAQ [1]. If the value represented by AcademicCoin is increasing faster than the issuance of tokens, AcademicCoin becomes deflationary.

[1] http://groupcurrency.org/#FAQ

Disclaimer: I am a co-author of the document.

jasode• 11 years ago

Your FAQ says:

Provide others with a token that represents the group's value and potential as human beings. That is already non-zero (researchers are very valuable!).

If that's the logic, you can do that today without any cryptocurrency. Take a blank sheet of paper and write, "the bearer of this note acknowledges my value & potential as a human being."

Go and take that paper out on the street and see if you can trade it for other pieces of paper such as Euros, US Dollars, or real goods such as hamburgers. If your experiment works, everyone can have "basic income" just by writing affirmations on sheets of paper and trading them.

I'm not being flippant with my example. Warren Buffet can take a piece of paper and write, "the bearer of this note is entitled to a 1 hour lunch with me." Someone could take that note and sell it on ebay for over $1000. (A similar type of transaction happens everyday with celebrity autographs.)

There's a reason why Warren Buffet's piece of paper (scrip, IOU, whatever) is more valuable than your piece of paper or my piece of paper. Cryptocurrency doesn't solve that. Basic income is also not something that can be solved by cryptocurrency.

jerf2• 11 years ago

"If the value represented by AcademicCoin is increasing faster than the issuance of tokens, AcademicCoin becomes deflationary."

Yes, but that's tautological, simply the basic definition of "deflationary", not an argument.

If the act of issuing tokens is disconnected from the process of bringing value into the given ecosystem, then the act of issuing tokens is merely inflationary. If the act of issuing tokens is directly connected to bringing value ("Bob brought X units of value in, Bob gets X tokens"), then it's not really a basic income. You have to be able to remove value from some people and give it to others to create a basic income. In theory if the system were already bootstrapped inflation might be able to do it, but it would be an awfully blunt instrument, and might well still collapse the system in a standard inflationary spiral. Where basic income may be advantageous at a societal level, where the mechanisms of government can be used to force participation, you've got serious incentive problems in a voluntary system. Why wouldn't someone generating a lot of value simply opt back out of a system that deflates it away on them, when just by stepping away from it they can avoid the problem? Who's going to voluntarily sign up to be the one giving away value to others?

The libertarian skeptical about basic income (me) can't help but observe you really need government to make basic income work, if it's going to work at all. In fact, even with a government we can all observe in the real world that those with a lot of "value" (wealth) are often able to wiggle out from underneath their putative obligations even when it's not voluntary.

chipsy• 11 years ago

What this scheme does is create equitable inflation. That is, I concur, not identical to BI. However, inflation does come with redistributive effects.

In most macroeconomic models, the question of "who makes the money" is abstracted into "the banks make it and lend it to everyone." That means that money has to start in the investment sphere - the expected impact on individuals is to experience cheaper debt and higher wages and prices - a sort of "regression to the mean" in their financial status.

But in a situation like the post-GFC markets, investment tends to slosh around in financial instruments without reaching Main Street in any meaningful way - the money isn't turned into capex or wages. This is the kind of thing that is smoothed out when the inflation is reformulated as a benefit. Individuals still experience the regression to the mean, but it happens instantaneously, on a predictable schedule.

jsprogrammer2• 11 years ago

Most likely, it's just an impedance mismatch between current models and reality. Institutions and individuals with access to money taps will find ways to divert some of the flows towards their benefit while ignoring all of the downstream effects.

harperlee2• 11 years ago

Could we create a system where inflation would hit harder on the one that had the most money? That way, rich people would be enticed to move their money, and invest in risky plays. Some of them would grow very rich, others would lose a lot of money, but, on the end, they would end up reducing their income...

zkhalique• 11 years ago

What's wrong with wealth redistribution? Money is essentially a man-made concept anyway. We want to keep people alive, so this constraint is very well captured by giving a basic income to everyone, a social safety net.

Libertarian free market economics don't capture these constraints.

bduerst6• 11 years ago

Hypothetically, some form of wealth redistribution is necessary in a democratic society, otherwise the poor will vote to take the wealth for themselves.

icelancer• 11 years ago

"Whether redistribution is a good idea is a separate discussion I'm not trying to have here."

Then you immediately say:

"What's wrong with wealth redistribution?"

Come on.

logfromblammo3• 11 years ago

No basic income scheme is viable unless the economy that implements it already produces 100% of the basic living consumables required by the populace. It is not a wealth redistribution--more like a production capacity redistribution.

Naively attempting to do that using currency manipulation as your only tool seems doomed to failure, in my opinion.

I don't care to argue for or against basic income at the moment, but presuming that it is to be implemented, the task cannot be accomplished with an alternate currency. I think that ultimately, it will be necessary to threaten highly productive owners of capital with the use of force unless they meet some portion of the consumption requirements of non-working individuals.

The producers would be taxed, at a cruelly high rate, such that if they sold a product that is both appealing and affordable for the people on basic income, they would break even on a cashflow basis, only losing some use of their productive capacity. For some made-up, spewed-out numbers, Apple is taxed $1G on the sale of 4 million of its fully-featured iPhones, at $250 cost and $750 retail--effectively taxing 50% of the profits--and recoups $1G in revenue from selling 20 million "Nekhama iPhones" (Nekkhamma is a Buddhist term) that cost $25 to make, and sell at $75. Maybe it's just the same guts as an iPhone 1, using a smaller chip feature size. Or they could just tell that $1G to go piss off, and less prestigious manufacturers pick up the slack in the basic market. Obviously, sales in the basic market could not trigger the onerous taxes, or the scheme wouldn't work.

nosuchthing6• 11 years ago

Basic income could work as a segregated portion of the economy for basic essentials. Food, shelter, transportation, and hygienic items.

Some combination of a tax on luxury goods and services, low income housing, and regulation on food production might be one way to offset the resources required to sustain the basic income output.

The scenario of thousands of citizens living purely on basic income in free housing projects should also be considered. What is the minimum level of contribution we require from citizens in return for the minimum level of support that the State provides? In some countries, it's required to do a year or so of public service though the equivalent of peace corps. It seems fair to ask for a minimum level of work contributing back to society in exchange for society providing a minimum level of life support.

patcon• 11 years ago

No basic income scheme is viable unless the economy that implements it already produces 100% of the basic living consumables required by the populace.

Maybe my thinking is off, but isn't that the sort of capacity the "group fund" could go toward building?

jsprogrammer2• 11 years ago

Where does the 'redistribution' come from? From what I can tell the currency is created at an agreed on rate proportional to the pre-existing arbitrary community that is participating in the currency. There is no 'previous wealth' that you can bring into the scheme, so there is no redistribution going on.

The real fallacy is believing that wealth is a concrete entity.

olalonde2• 11 years ago

I'm a bit late to the topic but it seems to me that equitable inflation does result in some sort of "wealth redistribution". I know it's a little bit extreme but let's assume there are 3 people in the economy who respectively own 1, 1 and 100 units of currency. The person with 100 units is 50 times richer than the other two combined. However, if the inflation is set at 1000 units, after one cycle of inflation, the amounts are 1001, 1001 and 1100. The person who started out with 100 units is now poorer than the other two combined and only slightly richer than them individually.

madawan• 11 years ago

Inflation is usually a percentage though.

nosuchthing6• 11 years ago

Seems like the endgame of this current iteration would be a sharing economy where any outside work or production that gets input into the system is distributed amongst the shareholders of credits.

Whether that can sustain a "basic income" remains an issue not directly addressable by the scope of "Group Currency"

jessep• 11 years ago

I'm sure I don't understand most of the implications, but seems like it could be a cool mechanism for a lot of things. You could start a company and distribute a percentage of future revenue to owners of the currency based on # of tokens (or whatever) and you have something that ties reward to time spent working on project in a direct way. Not sure you need a cyrpto currency for this or things like this, but is a cool idea.

cheald2• 11 years ago

This is basically what stock options are. The mechanism of allocation is usually a bit different, but the basic concept is the same.

derefr• 11 years ago

So... I always thought one of the first things that would be implemented over cryptocurrency protocols would be a form of "closed-group socialism" where people's income is held in trust by a fund, which then allocates it (either through one-way transfers, or by issuing credit) according to people's current "scores" in the blockchain ledger, whatever those entail.

This system seems to want to do that... but without the part where people's actual money is being redistributed. I don't get it.

bduerst6• 11 years ago

How is supply controlled? Through the group funds? What is to keep rational actors in larger, competing group funds from sabotaging them?

Also, how do you address the problem of goods and services with income-elastic price points? A UBI scheme will cause prices to disproportionately inflate in lower-income markets, i.e. housing will be just as inaccessible as it was before because the income increase.

yungchin4• 11 years ago

How do you prevent members from only enjoying the upside?

Example: say we're a group of musicians, starting a MusicianCoin group. I happen to be a fairly shameless participant, so I enjoy the basic income while I'm still bootstrapping my career, but one day I hit it big, and now my concerts are all sold out for the next year (and of course, tickets are sold in exchange for MusicianCoins).

Do I give back to the group? If I want to do that, that's easy: I just sit on my newly earned pile of MusicianCoins, and wait for the steady rate of minting to dissipate the value away to other members of the group. But what if I just exit my position immediately? By trading my MusicianCoins for dollars (thereby putting downward pressure on the value of MusicianCoin), I'm avoiding giving back any of the value I created, I think?

I think this is what makes it fundamentally different than a tax-based basic income: you can't (legally) opt out of taxes.

itistoday23• 11 years ago

I'm not sure it's that simple. Think of it in terms of shares in a company. When Apple does well does any executive sell their shares? Maybe, maybe not.

Nothing is preventing this musician from selling their MusicianCoins. If there are enough coins and enough musicians it won't do much to the price if the market knows how to value the coin properly. The musician might simply end up losing out on a profit by this action. Depending on the situation, maybe they might end up annoying the group and getting kicked out, who knows. It shouldn't be an issue though, just as it's not an issue with company shares.

yungchin4• 11 years ago

But there's a difference: Apple shareholders don't see their shares redistributed at a steady pace - Apple shares don't have a built-in basic income.

The reason why I think even a single exit might do a lot to the price of MusicianCoins, is that financial success (not only in the music industry) seems to follow some sort of power law: a very small number of members amass a large part of the wealth [1].

Do people behave like this in real life (ie abandon their group when they strike success)? Well certainly not most people - men like Warren Buffett and Bill Gates haven't taken up citizenship in some tax haven to opt out of US taxes - but IIRC one of the Facebook founders did.

There are at least two reasons why it may be a bigger problem for MusicianCoin than it is for the USA: 1) the group size is bound to be smaller, so a single such event would cause a bigger shock, and 2) it's a much easier decision to sell your crypto-coins than it is to move country.

Of course this is all arm-chair economics on my part, and I actually hope you're right that in practice it's not such an issue - I love the idea and would love to see it work well.

[1]: see these sort of numbers, where the top 1% pay 23% of taxes: https://www.vox.com/2015/4/14/8406445/tax-state-local-distri... - and I reckon what would have been really interesting is if they had broken it down to how much of that 23% is carried by the top 0.1%

cheald2• 11 years ago

The members of a group currency all mint cryptographic tokens (coins, shares, what-have-you) at an equal rate.

So what you're saying is that I can get value that someone else has paid for with their hardware and electricity bills, without having to do anything except be on a list? Sign me up!

politician• 11 years ago

Would the IRS position on digital currencies as barter all but eliminate this use within the United States? Would the KYC requirement for protection against Sybil attacks facilitate governmental interference? Neat article, but I found the lack of discussion about the topic of taxation to be shockingly absent.

kang• 11 years ago

People really do not understand blockchain.

Since each member gets regular basic income and are verified with KYC (to prevent fake identities) this is just how money is handled among friends. Alice owes Bob a dollar and Bob owes Carol a dollar and Carol owes Alice so it all eventually settles. Just the friends in this 'group' keep a record of it.

Why do they need mining then? They don't. They just need a ledger of all the loans.

If a ledger can serve as a currency system then why do we even need mining? Because users could fake multiple identities, to receive the basic income. Mining is required to solve this 'money generation' problem.

In bitcoin, not everyone gets basic income but only the ones who do some work to maintain the ledger.

What group currency is, is called hawala.

bduerst6• 11 years ago

People tout the public ledger as a benefit of the block chain, but it's utterly useless as soon as someone converts to another currency and then back again (a.k.a. Tumbling).

You mention bitcoin, and tumbling is exactly how money launderers and tax evaders use bitcoin's "public ledger" today.

return0• 11 years ago

I couldn't locate the line where it provides people with food.

grondilu• 11 years ago

A town, city, state or country can provide its community with a basic income that is backed by the value created by that community.

It's not clear to me why the value created by people living inside those types of communities should be aggregated into a single monetary device. In a town, there are various groups of people working together to produce different products in different kinds of economic activity. Some make profit and thus can distribute the produced value, some don't make profit and can't distribute anything.

Those groups are usually called companies, corporations and so on. They already have a system of exchangeable tokens representing both ownership and decision rights regarding the activity of the group and the redistribution of its produced value. Those tokens are called shares or stocks. It's a nice system that does not work too bad, though I'd agree that a bit of decentralization would be welcome.

But fusing those tokens from different companies into a monetary tool that would represent the activities of a larger group controlled by political structures such as a "town, city, state or country", seems to be a gross loss of granularity that would probably result in dramatic economic inefficiencies.

Group Currency

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