Wrong (and right) way to do basic income

It's all fun and games until someone loses an eyeball.

https://techcrunch.com/2023/07/24/worldcoin-launch-sam-altman/

This is a terrible idea, but we do need a new kind of money, so it is important to look at why this won’t work, and alternatively what could.

The two major problems with Worldcoin:

1. Obviously, a $20 cash reward for scanning an eyeball is going to lead to a lot of really bad behavior, to say the very least. Up to and including extracting eyeballs from unwilling participants. Plus the need to deputize like a million trusted ‘orbmasters’ all over the world. What could possibly go wrong?

2. Less obvious but still fatal is the problem that if you create a currency with a fixed supply and give out an exactly equal amount to every living person on the planet to start, free market trading will rapidly concentrate wealth in the hands of a few people. This is a well understood problem in economics. A well-written deeper dive is at https://www.scientificamerican.com/article/is-inequality-inevitable/

The right kind of currency

To create a version of money that people can use to fairly engage in trade (this is the vital purpose of money), you have to create a system that continuously redistributes currency equally to everyone as it is being used. On their best days, this is what well-managed central economies actually do… they collect taxes and redistribute them. A decentralized way to do this is with a transfer tax that funds a basic income. A specific example tied to government currency would be using a VAT tax to fund UBI, as described here: https://www.brookings.edu/articles/how-a-vat-could-tax-the-rich-and-pay-for-universal-basic-income/

To create a basic income in which everyone receives an initial and ongoing supply, you need a way to identify unique people. This is what Worldcoin is trying to do by scanning eyeballs, with potentially disastrous consequences. The right way to do identity is to allow groups of people to validate their members, and further then allow those groups to validate each other. This can be repeated recursively to create what is sometimes referred to as a ‘Web of Trust’.

The best part about group-based identity is that it is already working worldwide for millions of people, in the form of Village Savings and Loan groups. This pattern, which is rapidly spreading around the world, is described at sites like https://www.vsla.net/. The basic idea is that a group of people agree to put money in a lock box every week, and then have community meetings where the money is taken out either for emergency needs or to issue loans. Identity is important here both because everyone needs to put their fair share into the lockbox, and also because important decisions are made democratically with each person getting only one vote.

I’ve been working with friends on a prototype of such a system, called Fairshare. With Fairshare, people form groups which each have their own currency. Group members vote on both the transfer tax and basic income rate, and different groups can easily trade with each other by exchanging their currency in an automated fashion. We’re testing a prototype on Discord, and are about to build an app. No eyeballs are needed, since each group validates its members, and groups can refuse to make connections to other groups, meaning fake groups with fake members can’t connect to the network. Fairshare is one of several projects using tech for good at our new community lab in San Francisco called IRL415. If you’d like to help with Fairshare (or learn about our other projects), reach out to me in the usual ways.