I recently described a way for apps to identify unique humans while maintaining personal privacy. I briefly mentioned basic income as a potential application, and in this essay I’d like to make a strong case for why basic income is important, and why now is the time to build it.
Basic income is simple!
Basic income is a very simple idea—every person gets paid an equal amount of money every month, independent of whatever other income or social benefits they receive. That simplicity is important for two reasons:
First, simplicity is a key prerequisite to broad legitimacy. We see this in voting systems—simple systems like “first past the post” and “party list proportional representation” are by far the most common worldwide, despite evidence that more sophisticated voting systems satisfy voter preferences better. Simple voting systems are easier for everyone to understand, and therefore trust.
Like voting systems, social spending systems benefit from simplicity. Complex, opaque systems can hide hard-to-detect fraud and corruption, and even in the absence of corruption, complexity can lead to the perception of corruption by people who don’t understand how the system works. Infamously, the difficulty of understanding complex welfare programs in the USA led to many politically potent (if not well-founded) accusations that “welfare queens” were taking advantage of these programs.
Second, a very simple protocol is the only practical way to perform fair-ish global social spending. If you try to add “means testing,” individuals will misreport their assets, a kind of fraud that’s difficult to detect at scale (and widespread fraud again decreases legitimacy). And if you try to provide targeted non-financial help, you immediately run into impossible questions of how to best help every specific group of people. Anti-mosquito bed nets? Deworming pills? Free tuition at the local trade school? No single “best” answer exists, so it’s more practical to distribute generically useful money and let each individual decide how it can best improve their life.
Basic income is effective
Beyond its critical simplicity, basic income is surprisingly effective at alleviating poverty. The charity GiveDirectly has been distributing cash in low-income countries since 2013. Ongoing analysis has found that this form of giving provides greater welfare benefits than other kinds of development aid.
Many economists have also pointed out the economic efficiency of basic income, compared to other forms of social spending. Milton Friedman (not known for his advocacy of socialism in general!) was one prominent proponent. He observed that since basic income doesn’t decrease when your wages increase, it doesn’t discourage people from working like traditional welfare payments. And a basic income can help low-skilled workers even more than a minimum wage.
Crypto makes basic income possible
The arguments for a basic income have been well established for decades, but the recent development of cryptocurrencies has for the first time made a global basic income politically and technologically feasible.
The best cryptocurrencies aren’t controlled by any one organization or national government, so like basic income itself they’re also credibly neutral. This stands in stark contrast to a national currency like the US dollar, which is often used as a trade weapon. This means even nations at war can confidently adopt the same cryptocurrency without opening themselves up to outside influence.
Additionally, modern cryptocurrencies like Algorand, Avalanche and Solana, along with layer-two scaling solutions on top of Ethereum show that it’s possible to build a cryptocurrency scalable enough to process all electronic payments globally without sacrificing decentralization.
This means that for the first time ever, cryptocurrencies provide the necessary building blocks for a unified financial system that’s both inclusive of everyone and politically neutral. This previously insurmountable obstacle to a universal basic income has been made almost trivial by technological progress.
Basic income makes crypto better
Since Bitcoin was released in 2009, the cryptocurrency industry has overcome many barriers to widespread adoption. Major issues like scaling, energy usage and a bad user experience are either solved or have credible solutions nearing release.
But there’s another major barrier to moving all payments onto crypto rails. Currently, there are about 40 trillion dollars in cash and bank deposits worldwide. The most valuable cryptocurrency, Bitcoin, is worth less than $1 trillion, so to replace all existing cash its value would have to grow 40x. While that may excite Bitcoin holders, transferring that much value to Bitcoin OGs isn’t a reasonable economic policy for the world.
A new basic income coin, on the other hand, would solve the unfair distribution issue by starting everyone off on the same foot. Early adopters would still accumulate somewhat more than later users, but the induced wealth discrepancies would be smaller and continue decreasing over time. Instead of exacerbating wealth inequality in the world, distributing cryptocurrency as a basic income would decrease it.
But isn’t redistribution unpopular among crypto users?
It’s true that the crypto community believes strongly in the importance of property rights, individual sovereignty and “sound money.” Each year, however, billions of dollars worth of new Bitcoin and Ethereum are minted to pay miners for proof of work. The community accepts this because this distribution is credibly neutral; anyone can mine coins on a level playing field and there’s no organization to play favorites. For the same reason, many crypto users may be willing to accept and even welcome some level of social spending as long as it’s done fairly and transparently.
And explicit social spending is broadly popular—almost every rich government in the world performs a considerable amount of it. Because of this popularity, building a new currency around redistribution via social spending could actually vastly increase the number of people willing to use crypto in general.
Importantly, from a narrative perspective it’s absolutely critical that a basic income coin is only distributed as basic income. No extra coins should be issued to early investors or developers. Development of the protocol is of course important, but there’s an enormous amount of power, from a legitimacy perspective, in being able to show that every single coin was issued to an individual who signed up for the platform just like anyone else.
Ok, but who would pay for this?
Most social spending today is paid for by mandatory governmental taxes. Is this a necessary prerequisite? That remains to be seen, but there’s at least some evidence that it isn’t. A new cryptocurrency could pay for basic income by distributing a modest amount of inflation (2.3% a year in my proposal) equally among all its users. Individuals would still have to choose to use the currency to give it value, but Bitcoin itself is a powerful example of the way shared ideas can conjure up value apparently out of nothing, even without government backing.
Indeed, a currency issued through basic income could potentially be seen as more legitimate, and therefore accrue more usage and eventually value, than Bitcoin itself. This is because if properly implemented it solves the important societal problem of both initial and ongoing distribution that Bitcoin is silent on.
To humanity’s credit, caring about those less fortunate than ourselves seems to be hard-wired into our psyche, at least for those we consider part of our tribe. I’m hopeful that recent increases in connectivity and shared human culture will continue causing more people to consider themselves part of “team humanity,” and as an extension more of us will be more willing to adopt an economic system built to lift up the poorest humans, even if those humans happen to have been born in a different country.
Of course, not everyone will be on board with “team humanity.” But if a large enough subset of people are, that may be enough to bootstrap the system. To solve the free-rider problem, it would be possible for a coordinated bloc of crypto-native companies or a network state that philosophically supports universal basic income to essentially enact the equivalent of a “border carbon tax,” and require its their members, vendors and customers to contribute to a basic income proportionally or else pay higher prices.
Now is the time
We’re at a unique moment in history for universal basic income. Over just the last few years, the technical problem of implementing universal basic income has gone from completely impractical to almost trivially easy.
The social problem of convincing the world that basic income is a good idea remains, and is huge of course—a basic income coin won’t have value unless people believe in it! But I also believe this is a solvable issue. The prevalence of large existing national social spending programs show that most people are already in favor of (limited) redistribution. And more and more people are living their lives in a fully networked world where “team humanity” has a stronger moral pull than “team [wherever I happen to have been born].”
I don’t want to minimize the challenges involved here, but the prize is worth it—a worldwide economic system that is freer, more efficient and more equitable. I’d love to talk to anyone interested in exploring these ideas further—just let me know! This is an ambitious undertaking but one that could truly make the world a better place.