DappCon 2023: Introducing Circles 2.0 - an actually decentralized stable coin

Transcript

cool uh yeah let's do this last Talk of the day it will be a pretty big topic because it's a very uh ambitious um project it's about yeah a new form of money um so let's get started so what what is money actually uh and to me that quote from Bernard Le uh was very helpful insightful uh to understand that money um lives in the space of of agreements between people so kind of he says it lives in the same space as marriage or lease agreement uh and and I think the simple simplest way to think about it is that if you're alone on an island money is meaningless so kind of

money uh is in relationship to other people roughly roughly speaking you can say kind of if you hold money there is an implicit uh kind of uh relationship or agreement that other people are willing to do uh things um for for that money and it's quite complex kind of how we get um to those those points but it's important to understand that's what money really is agreements um so the talk was structured in a way to think about okay in the crypto industry we have all kind of experiments of of stable coins but do we really have something that has the ambition to become a new form of money

and I would say the first is uh like let's say if you if you by Design try to Peck your currency to the dollar you're obviously not doing something that has a potential to replace the dollar so that's kind of one first thing to think about when when someone introduces a new stable coin the second thing is if someone introduce a new stable coin you might ask who would benefit if that stable coin or that that thing kind sometimes it's also called Flat coin if it's not if that thing would become the global currency or a Global Currency who would benefit from that and I would say well at least I would say personally I would say it's only worse pursuing uh pursuing such a thing if well actually globally a lot of people benefit from it

and not just uh I don't know 40% are kind of a small investor group that invested early in in in in that thing so um another kind of important thing to think about whatever money you kind of look at uh it's important to get to the core and try to understand how is money coming into circulation who essentially controls the mechanisms who has the power to issue money and the answer in circles is we want to go the radical step and say everyone should have that power so in circles everyone individually has the right and the power

to issue their own money and now kind of the small sentence below of course uh to make that work we do it in a very formalized standardized way so that it's actually possible uh kind of to to deal with all those different forms of money because they are yeah constructed under very simple rules so circles again has the ambition to create a global alternative um form of money and it boils down to those three very Simple Rules number rule number one every person can issue their own currency their own form of circles at a rate of one unit per hour number two is a trust mechanism I can trust others and

essentially that means I'm willing to exchange their circles one to one I'm willing to accept uh do that without being actively involved and finally 7% demage at all time all money wherever it is all circles kind of lose 7% in value per per year and we will go into detail uh into those so rule number one again under the hood um in circles we have many different circles so here on the left side I see a screenshot from from well cir account of and you see TOS different circles in another interface I see kind of from whom I hold circles but ideally I still see just my total balance and I don't need to understand

um the details but under the hood it's important to to understand that exists so in an example person a b c a holds their own circles and and circles from person B because they trust B so they hold 300 a circles 100 B circles uh and they want to transect to person C but person C does not trust person a is not willing to accept a circles how does it work okay through transitive transfers so a can send 100 of their own circles to B and B essentially gets 100 circles more forwards 100 circles so B kind of in total they still have the same amount of circles but C can accept circles from a person they know and they trust um and

yeah that's how the transitive transfers work going to the third rule a 7% demage why is that important and just so again demarrage means all uh all balances all the time um uh are reduced and so we have essentially on a personal level two forces so on the one hand you constantly generate new circles at this one Circle per hour and on the other hand old circles are reduced and that's important to find this balance if you would only always introduce new circles uh to the system then eventually kind of the total supply of circles would be so large that kind of the newly generated circles

would be irrelevant compared to all the circles that are already in existence so we need those two forces uh to come to stability and if you do the simple mass then you can calculate that at 125,000 circles it's exactly uh kind of um evens out 7% reduction of that and new generation of that let's look at a few graphs so the that is actually the um the red line is actually uh the rate at which the US dollar has changed in Supply so you see kind of on the if you look at the very uh right end here so roughly he well he has 5% this line so 7% is is this line

so on average the US dollar is also growing at 7% per year Well crazy exception in the last years but uh so 7% is is in line with what the dollar is doing um here is the view of um you as an individual kind of again there are two forces so if you hold exactly those 125,000 you're kind or one way to look at it is there is 7% tax on all money so every money all the way is always taxed at 7% and that tax is used to redistribute it to everyone as yeah Ubi uh so that means if you hold this

125,000 circles the the tax you are kind of paying is exactly equal to the to your own issuance if you own more your tax rate will kind of as you own Infinity your tax rate will approach 7% if you own less of course you kind of pay negative text so you get more um than you pay uh finally another graph that would be just your your personal circles balance uh if you would live for 80 years so kind of uh your your in the beginning it would grow linearly you are just uh minting or you creating circles eventually kind of you reaches 125 5,000 so kind of the force of the 7% Decay uh

and and the new issuance kind of evens out well then let's say at 80 you die so you stop issuing and then essentially only the decay of 7% uh would kick in overall in the circuit system the total supply of circles always converges to this magic number 125 uh uh 125,000 uh times number of people in the system and I think that's super important to have uh that connection so money needs to con be connected to people because as uh on the very first slide money is an agreement between people so circuit is not a startup it's not a uh well it's not a startup uh it there is it's it's an idea it's yeah it

maybe um a dream quick uh introduction about history so yeah the the idea initially is is quite old even older than that 10 years ago described as the fork of Bitcoin because back then Bitcoin was the only thing uh presented then early in the ethereum community that was at def coin one in London many years ago where where ciret was also already presented and finally after kind of well eight years from the first blog post to um it launched in 2020 on back then XI today nosis chain um and went quite viral back then so that is how the trust uh trust graph

formed so here you see the first people two hours later it looked like that um a day later it looked like that and two three weeks later it looked like that with over 100,000 uh sorry with over 200,000 uh accounts building this um huge web of trust but at the same time uh we had this extremely successful launch um this is the number of signups then it had flattened out uh significantly that it's a mix of reasons kind of sometime sometimes technical stuff so some things were simply not ready yet didn't work and essentially now uh I'm going to tell you how we want to kind of uh get get circuits going

again um it doesn't look that bad so kind of you just saw the signups that were well in the beginning very very lot but then flatted out if we just look at transactions well we can actually see that we are already in the well actually are in in a place where we well start to see um transactions um again quickly just going over that uh few experiments that happened in the Years here in berin uh are various places where you can buy and sell with C sorry well buy stuff with circuits here um yeah Power direct you can whatever see what you can buy and here uh just the more detailed um well actual yeah kind of transitive

transfer graph in this case on the the left side that's me my account on the right side that was this vendor you just saw uh and this is how how well how complex such a transaction looks like small side uh side node um if you are interested in calculating such a graph and if you think you can or in such a pass this currently trying to hire because it's quite quite complex and we need to get better at that but yeah side note um there is an ongoing experiment in in or Ro out in Indonesia there was a talk well was or is already was a talk here at Decon uh you should watch if you want to learn more about what's going on in in in Bali and

Indonesia um so I want to continue to talk about uh something we call group currency and and the concept to um again simplify the uh yeah what the the concept of of of those many individual tokens so we absolutely believe that this uh to put that concept of individual tokens at its core is important to keep the system absolutely decentralized to keep the system resilient at the same time those many tokens yes make it harder to integrate things so very concrete example um or well I I go through it so a simple way to make it easier is to say

okay we have now let's say we have person a we have person B and we have person c um and essentially what I'm what I'm trying to express I will accept circles from all those three persons so again in the circle system I can do that I can trust those three people but to make it simpler we could create a shared token across them and that is what we call a group currency so in this case we create a group currency and we say um this group currency is one to one backed by those individual tokens so so essentially any one of those individuals can go and deposit their token into the contract and so they deposit 10 individual tokens they mint 10 group tokens um and that of course

then makes it much easier because then you just have this one token it's easy to put that on a DEX it's easy to put that in a wallet um again much easier to deal with is simple token so here again just a rules yeah you can have um various kind of groups you can have various forms of governance but in the end it boils down to um to the mechanism just described here just a screenshot to an interface how to manage those groups create new groups add members um examples for groups uh yeah it could be members of a DA it could be uh something calculated on the trust or on the on the web of trust you can calculate a score a trust score to People based on their Connection in the graph you can have

local groups you can have you can have things like number F five um you can have some form of verification process proof of humanity bride ID well theoretical maybe World ID whatever um yeah I I'll skip that one so just El Ostrum great econ Economist um talking about how Commons should be governed I think those principles should be applied um to the groups but uh let's go on uh let's talk about the concrete experiment we did here for Decon so at depcon we wanted to do exactly that we wanted to accept circles and we did uh so you

could uh you well had the option to buy the depcon ticket also with circle so we had to decide whom Circle should we accept and so we set this up this well very exp experimental thing so uh you could deposit one gno of liquidity against your own personal tokens and then you would be uh introduced into this group or added to this group and then um uh and then um yeah those were the circles that were accepted here was the interface and that means you you hadn't to be a member of the group yourself but you had to be connected to someone who um who was a member yeah again here humans of nosis uh and look let's look into it

into more detail and try to to understand the mechanics so let's say here the green ones are the members uh the members and depcon kind of well the organizational account they they trust uh all the members and let's try to understand the capacity so let's assume here each of those people has a thousand circles um and ticket would cost also a thousand circles then that means kind of Decon only accepts circles from those five people here so in total there are only 5,000 uh circles that are legible so kind of that means in total those guys can also buy a ticket because they have the trust connection

so this guy can send uh his circles to to her and and those those circles are accepted but in total once five tickets are are are sold then kind of all the circles that are legible are kind of sitting here in the Decon in the Decon account uh and no one can buy uh further tickets because again Decon has quite basically is is not accepting anyone's uh money anymore so what can happen is that this person or basically that those five buy a ticket and then even those have circles but they hold so this person let's say holds the circles from that person so they hold enough circuits but they still couldn't uh couldn't um

buy the ticket because again Decon only accepts their circuit so let's look at a slightly different configuration so here we still have the five people um that are trusted by by Decon but in this case this person only trusts uh people is only connected to people who are also kind of in this in this screen group so that means they can never uh they can never kind of end up in a situation where they hold circles that are not accepted so they can always um buy a ticket then kind of here out of that group any two can buy because so let's say those two uh can transitively kind of connect here and then then essentially those two circles are are paid so again out of this group um it's

two and out of that group it's only one so basically if this guy here buys a ticket then kind of moves their Circle there there there there there and so and then kind of this here becomes um the bottleneck things change of course as soon as like let's say kind of Decon initially kind of receives all those circuits but then they spend it again so let's say here's a caterer and they accept um those those uh those circles then well the circuits come kind of into circulation again and then they could um well be used to to buy more tickets um just giving an Outlook so as mentioned there are many forms to create uh group currencies proof of humanity is one uh of those it's a concept to yeah kind of

well you upload a video and kind of prove that you're a human um and again one can build a a group currency um based on that a quick kind of theoretical thought of what should be the value of an individual circles token and kind of it should be um it should be for for your individual circuits it should be kind of the maximum or the maximum value of all the things you are connected with so simple example if you are in five groups so you have the ability to create sorry to convert your individual tokens to group one to group two to group three to group five then your the value of your individual Circle should be as valuable at as the most valuable group you are in

because uh I mean like let's say the the the group one is wor I don't know 50 cents group two 60 cents and and so on then of course you would you would you could or you would create the most valuable one again so you're so and from the group perspective it's quite the opposite so from a group perspective the group money is uh works the same as the minimum of all the members there cannot be a member uh whose tokens are worth less um than the group money quick uh kind of Outlook saying um circles has use cases Beyond money because we create this uh huge web of trust and actually this web of trust um

has economic incentives behind this because if you trust someone you are kind of in a way taking risk because you're willing to accept their circles and that is to some extent a risk because again if they are uh if if that person is trusted by no one else you end up with circles you can't use and you can't spend and you lose your own valuable Circle so kind of this is an incentivized web of trust so it's quite robust um so of course that can be used to build uh rating system social recovery or just connected with other social graphs we have like poop lens uh yeah just the example kind of as you know we have those nice pups and they themselves kind of form a social graph so kind of I met P Patricio and 116 people also met Patricio and of course

those connections you can also use as a social graph and overlay it um with circles two kind of just um mentions right now everything in circles is public trust connections are public payment is public that is certainly concern um for privacy so just an Outlook we are working on it uh that's kind of a version of or like similar to how tornado used to work specifically for circles there's another uh project Rel related to circles or coming out of circles Circle entropy that tries to even so here payments are made private here the goal is to even Mak the trust connections um private um giving an Outlook

so there was a lot of complexity in this talk I guess um and really what our goal now is is we are still extremely convinced that the the concept at its core makes sense but we need to package or uh make make to pack yeah need to package it or provide it in such a way that it's super simple and I mean of course the analogy is every one of you is using the dollar every day and it's just very simple to use of course the dollar itself is extremely complex and kind of the processes of of everything that's that's be under the hood is quite complex but yeah it's completely abstracted away from you and our goal is to achieve um the same for uh for

circles few concrete initiatives we are building um a nois wallet with state-of-the-art account abstraction uh using the safe uh you don't have you won't need seat Ray and and all those things and circles will be a first class um citizen of that we want to establish yeah kind of head experimentally this humans of nosis probably adjusted nosis Circle so a liquid version of circles that is widely accepted at least within the nosis chain um ecosystem and uh many of you might have heard of of of nosis pay kind of this thing well with a card and through that we can integrate circles and maybe not not not start

something where you can pay the full amount in circles but something like if you use a card you can pay 2% 5% of the value um in circle so in that way kind of start the pass to making um circles globally acceptable so um thank you very much let's bring better money to the world that's actually decentralized and serves uh humans [Applause] first thanks so much I I I think I'm over time but as I am the last I think

we can still allow it's true indeed we have time for questions as long as everybody is not tired there and there yeah hello um if this gets adopted which I very much hope for um how will transaction fees be paid and computation costs be paid like is the idea maybe to have yeah nosis chain validators being part of the system so yeah I mean by default uh transaction fees uh would be paid in the same way as as any other transaction so So currently every well the the default fee payment token on no chain is is Xi so transaction fees are

paid in XI we are indeed looking into ways uh kind of with the humans of nosis or nosis circuit I already hinted at it that you have to uh or kind of in the way you did it was kind of you deposit gno and that would give a nice uh possibility that that gno is staked and those kind of become nose or circles validator and they might decide to active act so essentially it's up to the validator what they accept as as fee payment so absolutely having circles validators would be amazing and they those could accept kind of the circles uh NOS circles let's say uh Martin can you please uh uh give

more details about your vision for the integration between uh nosus pay and uh uh Circle Ubi right right so yeah I quickly hinted at it so I mean many many uh card programs have uh yeah some form of whatever cash back or or something like that and um and yeah there would be well we are exploring the possibilities to say okay if you pay something for $100 well maybe still 98% of that you need to pay in dollars in stable coin but small fraction let's say 2% uh you could um you could pay in in circles of course what would happen What would need

to happen under the hood is that something like this nosis circles uh exists and that's actually um yeah liquid and also can be um uh yeah exchanged for for for dollars or Euros that's at least I mean then it's immediately possible to to kind of I mean then in in reality the mer merch is still kind of just accepting dollars but from a user perspective you can partially use circuits of course ultimately the goal is to get the merchant also to accept circles in in in some form that's of course uh much more well complicated uh to get them to do that but shortterm we can offer those interesting uh yeah kind of almost like a like a um yeah cashback

program right up here at the front and then over there on the right after thank you super interesting um do you make a difference between um private and Company accounts and how could that be because as a private person I want to trust other private person but as a company I can't trust every of my customer right right right so yes absolutely we do I mean the biggest difference is or we call them organizational wallets so the biggest difference is organizational wallets don't get Ubi so an individual account always kind of is also in the business of issuing money in organizational

accounts uh can trust others and can decide to accept those circles but they can't be trust or kind of you cannot trust them because there is nothing to I mean they're they don't have their own token in a way um so you just need to trust the the they they hold balances of people and you trust those people not not the organization so that's different number one uh I then I agree like as a as a as a as a um as a shop or well even as as Decon who's selling tickets you should not trust all your customers that's not the point so the point is to trust um yeah people your I mean the point is you trust people you are close with and then kind of there's there's a transitive uh pass of course like for

for businesses it absolutely does make sense to create those in a way curated list and that's kind of the group current cency idea so you kind of Outsource this decision of whom to include to someone else and you just say okay I trust whoever is on that list or whoever is and again the lists could be this nosis circle we're trying to set up but of course also some uh verification mechanism or yeah basically as a business ideally you kind of just yeah accept circles that are accepted by others as well because that's also what you're most interested in if I receive those circles will I be able to uh spend those circles again uh thank you for your talk

uh money in the real world is based on productivity and what you can offer against it right so uh there are jobs that are going to be uh harder to do which uh a lot of people might give up on because they already have access to free money so why bother uh Universal basic income is only about helping people who really need it uh not about uh having everybody uh sort of equalize uh their income levels uh I can see how your system can still be used to be rich but I am concerned that being rich is not going to be uh anybody's motive

anymore because they can sort of have enough money for all of their needs so overall Society is going to get poorer and poorer in terms of productivity eventually uh okay maybe a few things so first of all it's absolutely possible so so Ubi should not be kind of uh uh um yeah misunderstood for everyone gets the same so everyone gets the same Ubi but of course on top of that you can absolutely become rich the difference in circles is the only way to become rich is to um well to get a lot of circles from a lot of people and that essentially means uh you are um you gave value to a lot of people because they

somehow you somehow offered something um you somehow offered something uh so that they will be willing to give their circles to you because yeah you you offered them something so in circles all money is kind of created bottom up so the only way to get rich is to yeah offer a lot of people services in our today's world money is kind of more created top down so it's it's absolutely possible to well just create M or kind of if you at the top it's actually much easier to create money and kind of the theory is well trickers down which often it does not um so yeah that that I would say the second thing I would say is um to your point about

productivity um in circles yeah where does the value come from in a way so in circuit it's kind of everyone in first it's your individual responsib possbility to uh well you you are issuing your own token you it's kind of kind of uh your responsibility to say what are you offering for it of course so so there in that sense it's extremely indiv individualistic uh of course as soon as you kind of create those trust connection or uh become a member of groups it becomes a collective thing then if if there is a big group it's kind of no longer only the respon responsibility of every indiv individual to kind of provide products and and productivity for for that money it's

kind of a collective thing uh for the whole group and I think that's of course extremely important because ultimately every form of Ubi uh or if if or if if Ubi allows some I mean Ubi is always kind of needs to be a mix of some people being net receiver and some people being net spender but every form of Ubi or if if you're a receiver in the Ubi it always needs to come from others so it needs to come uh from from a group so groups are crucial crucial piece here all right I think last I think this will be the last one okay sorry for being the last um how do you handle the multiple wallet per

person problem if you act if your game is actually to push one Circle per person per hour um mul you you mean that no like if if one person would hold like I don't know five different wallets and then he would receive five circuit right right right okay okay so yes so kind of this is a Cil attack problem so yes as as an individual you could um I could go right now and create 10,000 circuits accounts um I can just do that on the blockchain the point is um unless I get people to trust uh those accounts they are completely worthless so if I create an account right now and it's trusted by no one no one accepts

those tokens well then yeah they exist but who cares no one cares so uh so the point is um yes you could do two wallets or you could have five wallets or whatever but um you're your well the people I mean yeah the point is you you couldn't get get to your or the idea is that you can't go to your friends and say please trust me five times so the idea is um yeah you collect your trust connction in one account and there is kind of this yeah it's essentially um it's essentially this uh um yeah we are Outsourcing this problem kind of to the individuals uh to to determine who's

real and kind of also enforce this rule that everyone uh is only signing up once okay that's that's the end of the questions for today and something that hasn't yet been mentioned but very relevant to this talk is that there is a circles Marketplace tomorrow tomorrow afternoon so I I think I think kind of in the in the hall next to us there is a small kind of um well boo or where where where where things are can be well bought for circuits uh that's point one I think tomorrow in the evening after Decon there is a circle or kind of specifically the circle entropy this

kind of privacy Circle focused version of circle um yeah that that's is also happening good thank you very much and thank you all for sticking around