How blockchain is reshaping our economic, environmental and social orders Pt III

Across the world we are facing an era of political populism, from Trump to Brexit and most recently the violent anti-government protests of the ‘yellow vest’ movement across Paris.

Bridgewater CEO Ray Dalio has long warned of the uncanny analogies between our economic and social situation now to that of the 1930s that drove populism to fever pitch and eventually to WWII. In his book ‘A template for understanding Big Debt Crises’, Dalio posits that growing populism is associated with a widening of the wealth inequality gap

"Wealth gaps increase during bubbles and they become particularly galling for the less privileged during hard times. As a general rule, if rich people share a budget with poor people and there is an economic downturn, there will be economic and political conflict. It is during such times that populism on both the left and the right tends to emerge." – Ray Dalio, A Template for understanding Big Debt Crises>

So it isn’t surprising that we’re seeing the first violent revolts against inequality in the country that overthrew its feudal system in revolution over 200 years ago as the same wealth and taxation inequality has been perpetuated by the industrial capitalist system that replaced it.

A generational shift

This sort of populist revolt isn’t totally unexpected. According to Strauss and Howe’s ‘Fourth Turning’ generational theory we are in the the final "crisis" stage, or the fourth turning, in an 80-year generational cycle. This is a decisive era of secular upheaval, when the values regime propels the replacement of the old civic order with a new one.

In their work The Fourth Turning Strauss and Howe analyzed each generation going back as far as the 15th century and found there are four generational archetypes – prophet, hero, artist, nomad – determined by how they were raised and what happened when they came of age. Their alignment (relative phases of life) results in societal moods, called turnings, that also follow a predictable sequence: "The High", "The Awakening", "The Unraveling" and "The Crisis".

Strauss and Howe identified the Age of Revolution, American and French revolutions, in the late 18th century and the American Civil War as triggers events for Fourth Turnings and the inference is that we may have already had our triggering events in the War on Terror and the global financial crisis.

Universal basic income and social dividends

We face a mass culling of many mechanical and middlemen jobs in the coming decades due to automation and we may be faced with a phase of secular deflation as the impact of technology and AI replaces the need for human labour and, therefore, wage inflation.

Despite its dirty connotations unemployment isn’t necessarily negative and is indeed needed to keep wages rising over time. Many low-paying jobs today are already obsolete but to save people from the stigma of unemployment. The only thing that is negative about unemployment is the stigma and the lack of a safety net for many people not being able to pursue more meaningful roles. However this could also be ameliorated with cryptocurrencies in the form of a universal basic income (UBI).

Universal Basic Income is a controversial but appealing concept that has attracted the support of thinkers from every background including Milton Friedman, Friedrich Hayek, Elon Musk, Martin Luther King Jr, Stephen Hawking, and Noam Chomsky. It is seen as a utopian project that could finally unlock the creative potential of all people, and free them from the job loop to pursue more meaningful and urgent work.

However, it is politically very sensitive and practically very difficulty to implement. But when creating digital currency becomes as easy as downloading an app, our ideals of what money and value is will change and the paradigm of referencing values back to fiat, (eg $1= €0.70) will shift to what one individual’s time (currency) can buy in terms of a community’s fresh produce.

"What we obtain too cheap, we esteem too lightly; it is dearness only that gives everything its value." – Thomas Paine >

The concept of Libre currency

It is fitting that the movement to create a digital currency for social dividend is gaining momentum in France. Inspired by the concept of Libre currency, or free currency which issuance is neither based on any goods nor on any production but co-issued by all individuals alive in a community.

Duniter is software for producing "libre" decentralized cryptocurrencies and is libre -under GPL license, meaning the project cannot be privatized (whereas open-source MIT projects can be) created by a French computer engineering Cedric Moreau. One of the currencies being built on the Duniter protocol is a "freedom-enabling" currency, ğ1, that is created equally by all participants in the system – there are no miners, no incentives to hoard, no reserves or central banks, everyone has an equal right to issue the currency.

The monetary design of Duniter and its consensus algorithms are based on four economic "freedoms":

1. Freedom of choice of currencies and accounting methodologies;
   

2. Freedom to access resources;
   

3. Freedom to produce;
   

4. Freedom to exchange and determine prices.
   

A money can only be called "libre" if it respects these 4 guiding principles, in the sense that its monetary code doesn’t infringe them. The euro for example is not a "libre" currency because it has legal tender and is therefore imposed to citizens by a positive order. Bitcoin and gold are not "libre" either because production is in the hands of miners only, rules 3,4 and 5 are not observed.

Universal income: Redistributing wealth or recreating it?

Duniter is not a redistribution of wealth, its dividend is a percentage of the total monetary mass and not a share of wealth ; it is a simply a co-issuance of a mean of exchange. In this system all citizens are an equal distance to the source of money issuance, unlike the current system, or to use an analogy of a garden sprinkler where water from the source is equally distributed as opposed to a tiered fountain where water is fed initially to a small top tier until it overflows and is distributed to the lower and bigger pools beneath.

Only individuals can co-create the currency and organizations can participate by buying and selling the currency but not in its creation. Like fiat there is no intrinsic value in the Libre currency and it is pegged to the production of any goods or backed by resources, it is simply created for people being alive. The distribution of currency is determined by age, average lifespan and the monetary mass of the currency at the time of issuance. The elderly and deceased will get less and eventually none. "Proof of life" of individuals will be basis for issuance.

Duniter will have validating nodes on its blockchain, but they will validate transactions and citizens identities only, there will be no mining done by the nodes so the hash rate and difficulty to verify transactions will be low enough to be done on a laptop or phone. Is is indeed the mere action of validating your peers’ real-life identities and of running nodes that are the source of the money creation.

OpenUDC is another software platform that allows users create their own free currency based on the Théorie Relative de la Monnaie (Relative Theory of Money) by French engineer Stephane Laborde which defines a money system where no human has privileges in money creation either in time or in space. OpenUDC allows each community that wants to use its own free money to define its own Universal Dividend set of rules.

Circles is another money system made up of individual currencies working together to create an economy that can support universal basic income. A Circles economy is a social graph in which individuals create their own coins (eg Bobcoin) and coins are minted in equal amount and at the same time to every individual. Trust in an individual is what creates value in their coin so the more accounts you have in your social graph that trust you the better.

Conclusion

If we assume that the structure, the very architecture of money influences our ways of behaving in our exchanges then society can be transformed through a new form of money.

This will be more transparent and symmetrical currency that generates more wealth, more productivity, more cooperation and more well-being. Today the official currencies have characteristics that lead us to competition, including scarcity, opacity and asymmetry and our debt levels are a reflection of that.

While a Libre currency or universal basic income is not going to bring median wealth in line with the rich, their primary benefit will be to free people from dependence on a monthly salary and peonage to an employer to pursue more meaningful work and create more value in the real economy.

"Never doubt that a small group of thoughtful, committed citizens can change the world; indeed, it’s the only thing that ever has."

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