Why should we care about UBI
I believe the question of why UBI is a meaningful and critical for the world at large needs no explanation: it provides a certain level of financial stability and therefore guarantees of a quality of life that every human being deserves.
Altruistic and humanitarian grounds aside for a moment, I would argue that introducing UBI makes economic sense for Nation3 and other (cloud) nations.
Providing a basic financial starting point allows citizens to have their essential needs covered, unleashing their mind space for creative purposes, and most importantly, opening doors for them to enter into economic activity.
Some of the best examples of returns on investment into human capital comes from Singapore. When Singapore broke free from Malaysia in 1965, it was a small, unimportant on international scale nation with a largely illiterate population facing an overwhelming levels of poverty, unemployment, and a housing crisis. Singaporeâs GDP per capita was just ~$500.
Fast forward a few decades, and as of 2021 its GPP per capita is ~$73,000 (!146x increase!). Arguably, some of the most important decisions and reforms that led to this were the educational reforms and major investment into local talent; housing reforms making sure >90% of the population became property owners (up from 29% in 1970!); and competitive compensation structures (first government ever to compensate public workers akin to private executives, with milestone-based approach linked to the nationâs economic performance). These are of course only some of the examples, but the emphasis on cultivating internal human capital is clear: if you elevate your citizens from illiteracy and poverty, they can become active participants in the economy and drive it forward. (1) (2)
I think UBI would be a worthwhile experiment for Nation3, and would add attractiveness to Nation3 citizenship.
Overtime, I would like to see UBI as the kind of national âThiel-Fellowship-as-a-public-goodâ. ****Grants like that of Peter Thiel are typically designed to allow extraordinary individuals to pursue their passions and creativity, with a hope that it would lead to viable businesses, inventions, and be valuable contributions to solving the worldâs problems. The majority of people feel pressured into the industrialised system (school â> university â> stable job as an employee) instead of taking risks and pursuing what they love or what could be meaningful for society, because of the risks of financial instability. You canât afford creative experiments when whether or not you will have a roof above your head and food on the table depends on your income that month.
I therefore view UBI as a way to ensure that basic necessities are covered for all individuals equally, allowing them the luxury of undertaking risks, unleashing creativity, and focus on building things that make the world better.
UBI for Nation3 Citizens
Iâve been thinking about ways we could implement UBI for Nation3 citizens, as I think financial security is one of the most fundamental services a nation state can provide.
There are two major problems when thinking about UBI:
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Sybil resistance, or in other words how to make sure an attacker cannot create thousands of accounts to drain UBI funds.
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How to create a sustainable pot from which UBI can be distributed.
Sybil Resistance
For almost any use-case in Web3, you have to achieve some level of sybil resistance, and have a way to link the user address to one physical person. For UBI itâs particularly crucial since otherwise you would essentially be offering free money âup for grabsâ for any attacker to cumulate at the expense of people who actually need the UBI.
Some of the most common ways to achieve sybil resistance include:
- The (much-hated) KYC that requires people to submit trad-states-issued identity documents and proof of physical address. This method is obviously the least desirable when it comes to cloud nations as you are relying on old-fashioned institutions to prove to you that youâre dealing with unique individual.
- Proof-of-stake, or locking up capital as a requirement for participation. This is probably the most common in current state of Web3, but when it comes to UBI itâs problematic, since it defeats the purpose: those who are most likely to need UBI are unlikely to have capital to stake in the first place.
- Web of Trust mechanisms and social vouching, combined with reverse Turing tests, like in the case of Proof of Humanity. In short, this requires individuals to register and dox themselves by providing photos and videos of themselves speaking, and existing community members need to vouch for them. If anyone doubts authenticity of a profile, it can be disputed using a Kleros court.
While I think itâs a fascinating way to build a human registry, it takes away the individualâs right for anonymity, and essentially makes it the price to pay for UBI access. But it is probably the best model so far when it comes to UBI, and might well be the most viable when it comes to creating sybil-proof lists of humans on the planet.
When it comes to sybil-proofing citizens of your nation, however, there might be a better way.
Within Nation3, weâve already been using SourceCred as a way to incentivise and reward involved citizens. SourceCred currently tracks user activity across GitHub, Discord, and Discourse. But what does that activity mean, if not proof that an individual in question cares about the ecosystem they are in?
To me, the below defines an involved citizen:
- participation in Forum discussions (already tracked by SourceCred)
- reactions and comments to news, proposals and announcements on Discord (already tracked by SourceCred)
- community involvement on Discord or joining social hangouts on Gather (partly tracked by SourceCred)
- active contributions on Github (already tracked by SourceCred)
- voting on things that matter to them on Snapshot (not yet tracked by SourceCred)
With the addition of a few more parameters, as per the above, and a thoughtfully-set threshold, this SourceCred-based proof-of-involvement might actually be enough to achieve the level of sybil resistance we need for UBI when it comes to citizens within a defined nation.
Sustainable UBI source
Now that there is a way to account for involved citizens, the next question is: where will the UBI come from?
This will likely require issuing a stablecoin backed in part by $NATION. Aside from UBI, this can come in handy for a number of usecases:
- using it for payments within the ecosystem, eg to pay contributors. This will allow us to effectively use the treasury capitalisation without having to sell $NATION.
- using it as a stake for entering Agreements in the upcoming Court (initially $NATION will be used as collateral for Agreements, but given price volatility, a stablecoin would do a much better job).
The âsustainabilityâ logic comes from the way the Nation3 treasury accrues value: the stablecoin reserves would be linked with the growth of the Nation3 citizen base, and the scope of economic activity:
- as more and more citizens join, more $NATION will be taken out of circulation, capitalising the treasury.
- the more citizens enter into Agreements with each other and use the court (and in the future other services), the more $NATION gets locked, also capitalising the treasury.
- the higher the value of $NATION, the more of a $NATION-backed stablecoin can be taken out, without having to sell $NATION.
Important to note that his is not by any means a proposal to issue a stablecoin - much more research and thought is needed, and Luis, 0xGallego and I are exploring routes for this - to be discussed in a separate post.
Conclusion
I think financial security is a fundamental service a nation state can provide, and one that can unleash creativity and boost economic activity, truly cultivating human capital.
Using the Source-Cred involved citizen model, and a stablecoin for UBI payouts feels like a good combination of maximum efficiency, minimum complexity, to achieve the outcome we want.
I would love to encourage a discussion on this, before making this a governance proposal and and forming a project around implementing this.