#DappCon22: Day 3 - Where To Next For CirclesUBI? Credit Vs Commodity Money, Julio Linares

Transcript

so first of all I want to say that circles is not an ID it's uh the web of trust around it is a sort of a side effect of the Ubi protocol but uh yeah hello everyone my name is Julio I am an economic Anthropologist currently serving as public Outreach for the basic income Earth Network and I'm also one of the co-founders of the circles competitive that runs on the circles system and I'm very happy I have to say to be here because this is the first time in like the five years I've been working on circles or more uh that the two worlds that I'm part of come together so the bien world the basic income world and the crypto web 3 space so it's a very

special moment personally for me and I hope also for you too um so yeah I wanted to uh first of all explain that circles is a basic income system for communities so the way it works is that well maybe you can just have a show of hands who here has a circles account all right that's pretty good so you probably know that when you enter circles you issue your own personal currency so you all have a erc20 token that gets issued or minted at the same rate so the idea is that by having this initial Baseline protocol you can have many things on top but I think what's

really interesting and also radical about the design of circles is that it provides people with the power to issue money which is today as you probably all know a power that is kept within central banks and private Banks so yeah one of the things I want to explore in this talk is what happens when people take the power from the states tuition money what becomes possible and within that I titled my talk credit versus commodity money so I want to make a bit of a practical and theoretical distinction between these two forms of money so that we can think how how could they be better interacting in the future so

first I want to maybe ignite a bit the imagination and talk a bit about how basic income is really about recovering our lost freedoms and for that I want to invoke the presence of my academic advisor and friend who recently passed David Graber he wrote two very important books that I think together with when thinking about basic income the last ones that don't have everything is basically a history of humanity of prehistory and of History so it's a revision it's history in the sense that it challenges the notion that human beings went from hunter-gatherers to

discovering Agriculture and then falling from Eden so to say by discovering private property eventually the Industrial Revolution and then the present so a challenge to that linear view of history that tell us of history is presenting in the book by showing how many different societies across the planet have had many social structures and political imaginations about how they want to and can organize themselves the book is also revisit to what the state actually is or how to think about the state in a new way so instead of thinking of the state simply as having the sort of Monopoly

over violence they do um basically uh run through all this history to say that the state as we know it today the nation state is actually a combination of three distinct different principles of um sovereignty uh politics and administration uh that come together uh as regimes of domination that in a way got us stuck in the social form that we're now on so the book is also in a way a challenge to our imagination to look also at the freedoms that we've had around history so one of them is the freedom to disobey or to say no which is

a freedom that basic income gives us access to as you heard from the previous stocks when people have a basic income they can decide whether or not to enter into forced labor they can decide what types of relationships they want to have with each other so maybe they want to say no to a boss to a family member or what or whoever another freedom and I think it's important to invoke it here um especially uh because we're dealing with this with systems that are Global in scope but also hyper local is the freedom to move away and be taken care of so if you're serious about making basic income uh into being uh imagine having a basic income here and Berlin and then

being able to go uh where you have a community of people and also have a basic income there today the borders of Europe and the borders of the world make it almost impossible for people to actually cross borders um and so in a way a basic income is also a plea to the anarchist idea of borderlessness so the freedom to move away and also lastly the freedom to transform our social relations fundamentally so Concepts that we have today such as the household or the divisions between the household the private sector and the public sector all these things would shift as the the relationship of the wage worker and the on the house worker would cease to exist as everyone would

then have the ability to say no to force wage labor so if we go a step forward and think about what would happen if we actually were to abolish wage labor what sort of societies could we create what are the social forms that are enabled uh and bringing it back to blockchain technology what are the infrastructures that are needed to make those values happen then the second the second book is an earlier book it's called that uh the first five thousand years you might have read it um and I wanna take this book a bit uh to explore the differences between uh what is normally called credit money and

commodity money um so in very simple terms you can think about credit money systems the systems that are based on promises or promissory systems so an IOU there's an i there is something that is owed there is a debt involved and there is a you so it's a two-sided relationship there is an asset and there's a liability and the value in credit money systems is coming from people directly from the actions that they take of course also the monetary um uh systems in in in credit money are not fixed there is not a limited supply of credit it can be expanded and contracted depending on need I think

that's an important uh design principle that we have to take into account um and of course examples of that are circles uh trust lines will have uh a friend here uh and that is talking about trust lines later and also the Asian Mutual Credit Traditions but also largely market economies that have existed on credit networks throughout history in the Middle East in the Americas uh in China credit networks where people would you know trust each other across many different places and settle debts to trade of many sorts so this is the type of um it's a very powerful it's a very powerful thing especially now with things like circles where you can

actually issue money into being from a peer-to-peer perspective and have more horizontal relationships with with each other now I want to contrast credit money to commodity money which is uh in the space that we're in what you will call a digital asset or a token so examples of that are gold or Bitcoin ether Etc but I think one of the fundamental things that make a commodity money a commodity is that it is one-sided right you you either have the asset or you don't have it and this asset has a price because it's sold in a market so the idea of commodity money is that the value of the money comes from the object

itself so the philosophy of money is very different than the credit one right in the credit money system the value comes from people whereas in the com in the commodity money system the value comes from the object there is a fetishization of an object that we give power to and then the object has power over us and also largely because of these Dynamics The Limited supply of it also creates this type of scarcity or scarcity that makes the price of it go up or down now uh if I had to take a long historical sweep uh in contrasting these two systems of course the the historical reality is quite messy you have always these two types of money systems overlapping and being in time with each other so

um one thing that is important to say is that today after the unpaying of the dollar from gold that happened in the 70s with the Nixon Administration in the U.S we entered a credit money era which is still what we're under or living in so it is very interesting to in that context situate the crypto space which is largely largely uh founded upon a commodity idea of of money right and so what happens if we take the tools from blockchain and apply a credit imagination now um so bringing history into the present I want to contextualize again uh and ask the question of what are the

stakes today uh we have live in the context of war imperialist wars climate change energy crisis especially here in Europe uh Rising economic inequality and the mass extinction of life um that's just the reality uh and So based on the reality what are the strategies and tactics that we can take to make basic income happen and maybe even abort some of these crisis in a in a meaningful way and one question that I is always in my mind when like trying to make basic income happen through through circles is uh something that I like to call the transformation problem um so today you hear a lot about how do we have a just transition how do

we transition into other systems and imaginations are degrowth post-growth green growth whatever you want but at the end of the day there's always this question of how do we actually transform the political economy into another you know for the purposes of of my work uh my question is how do I practice how do we practically move the economy that we have today to a basic income economy and one analogy that I like to to use in this is uh the Sun so you can think about monetary systems as creating gravity around them circulating objects circulating resources circulating relationships uh

you can think about the dollar as a type of huge gravitational pull things like Bitcoin ether as well but for me when I'm thinking about creating a basic income economy I'm thinking how can we harness the energy that is needed to actually transform uh the social relations the reality around us so that we can actually bring basic income into being so how do we actually transition there what are what are the steps that are needed to get there materially and symbolically so this is circles we have uh many uh plural instances of circles uh I think there is a strength in having plurality we have three different instances so far and hopefully more

coming soon we have the circus garden with the cope and the Beats process Collective who are here present I'm also part of we have circus land with Samuel and Daniel who will talk to you later about the project and we also have the Expedition gurund coming or circus pink it was called with Johannes for another and so yes I think there is a a power in creating different instances of the same system in the sense that every reality is different so the what we show people also has to be adapted to that local reality right like I don't expect that the front end that is used in one side of the world will adapt to another so there is a power in having this plural applications and blockchain allows for

that so here's just a picture of the marketplace you can join today if you're in in on circles just go to market circles.net you can also buy some things in the corner as you probably saw there are many things you can get from massages to locally grown food in Brandenburg and many many other things we run assemblies every month in Berlin so that we can get the community together to talk about you know the different partners how do we want to organize distribution what is the problems of food in Germany etc etc so that we can think about a concrete steps into uh changing those Supply chains and changing those sorts of Productions with circles so we try to open a space to have it more democratic

through the pandemic we have to do them online but we also do them in person and so yeah it's a very it's a very organic community and it's really nice how it's slowly developing alongside also the technology now here's a picture of what uh an economy could look like on the left side you have uh the the credit Network the economic Network and a few notes uh concentrated on it on the right side you have the web of trust so when you trust people in circles um you know you're in a way sharing the power to issue money and so um this I mean as a researcher for me is interesting because you can analyze the types of cyclical relationships that go

on in an economy uh almost organically economies also you know have to remember are fundamentally human economies the economies are not about the objects that we exchange but about the people that make them and so in that sense um as trust gets built and as interrelations happen things emerge and people start to trade with each other you start to create linkages across the supply chains and things slowly become stronger um so just to give you a bit of an overview about the circle's open pilot I colored an open pilot because I don't I I would like to move to a point where we don't think as Pilots is something

that eventually end but something that we can move into politics or into policy so it's open-ended because circles is an open system so we have to take tools make tools and methodologies that adapt to that uh to the messiness of reality so in the Pilot in Berlin we have about a thousand people uh over 120 000 accounts open worldwide the way we run the model for the for the pilot is that you have a subsidy model where the businesses that we onboard into the network get a promise from the cope that they will receive Euros for the circles that they accept so that they bear less risk and so in building that economy the idea is that over time the exchange rate

that the businesses do lowers so that they can trade circles with each other um as I said before uh the model of monetary issuance is based on a peer-to-peer model so there is this peer-to-peer issuance of money or a bottom-up monetary creation process and it's of course powered by trust when I trust someone it means that I'm willing to accept your promises for the stuff that I'm giving right that's what trust means in the circle system and it is self-organized by the competitive and the community and today you receive one Circle every hour or about 720 circles a month um so this is how we're running the pilot uh you can ask me questions about it later but we took this idea model

from also the the gyongy system in South Korea that we mentioned earlier um but I wanna I wanna take um uh closer look into this transformation problem that I mentioned before um and and these contradictions right so at the beginning when you have a system that is based on promises the fungibility of the system is quite low because not everyone will accept your funny money for stuff that they produce right so there is a a process that has to go through where you actually build enough trust and you have enough resources available in the in the credit Network so that it can actually be useful for the people that that use Circle so the state money promises that

we give to Merchants from the cop helps us build a stronger uh Merchant Circle or a business to business sector and also increases the fungibility so we we have seen that we have seen how we are effectively growing um but in general there is the the sort of uh big elephant in the room if you want that is that businesses always need access to Capital Beyond whatever credit Network that they have either to expand their production or to move to another place or to uh do whatever it is that their business uh demands them to do so uh in that sense I you know thinking back to this idea of

credit versus commodity money we have effectively accredited money system running in the city um and now my question uh and I saw a question for you uh thinking within the space that we're in uh with the power that digital assets have what is the proper role of commodity money in the context of Ubi uh you've seen also proof of humanity speak before that is an example of a commodity money system but also as it happened in Kenya where them where sometimes the funds were not there what happens no when you are dependent on a system whose value is constantly fluctuating right so that's a different approach to to what we're doing but at the same time there is a power with on

that because if there are funds if there are enough digital assets with enough value on them you can eventually turn that into State money so how how do we actually embed the economy uh with things like circles so that we can actually transition to a basic income economy um I'll skip this um so our answer so far in circles is to make what we call group currencies or Community currencies so how to move Beyond uh peer-to-peer credit Network to what we call these cryp currencies that could be backed by die or stablecoin or any other digital asset so that you can have an elegant separation between the credit Network

and the commodity uh token so to say um this is something we're exploring we have I think Alex in the room who wrote the code for the group currency contracts but essentially this could be a way where we can Leverage The Power of digital assets uh with credit networks such as circles and then actually embed the economy within Supply chains from Distribution food care work and anything else that you can imagine so I'll stop there with the last rumination that I have um as you saw before the web of trust that I showed you is essentially public we

think this is a problem uh mainly because uh as we were saying before these are you know people's money these are people's transactions and if you're serious about creating a system that is unconditional uh we have to ensure that no one can nudge the system that people can spend as freely as they do with cash and in that I'm very grateful because Berlin is a very cash friendly city as you all know there is a warrant cash going on in the world at the moment not just in Europe also in places like India Latin America and so on so how could we bring about uh a privacy preserving monetary system an anonymous monetary system on the digital Realm that can also coexist with cash

but that has the same properties of cash that is private privacy preserving and you cannot basically nudge people so that is my last rumination uh thank you very much and I'm happy to hear your questions certainly a very aspirational structure if we have questions we do all right uh the previous presentation was about proof of humanity and build resistance um I know this is based on recommendations but it basically uh helps the system against an attack from a single person and assumes everybody

else is honest but um if you need say three recommendations then if three people collude they can build the system so we'll attack it do you use something like proof of humanity or do you plan to use something like proof of amente think so Andrei I mean what I know I'm not familiar so much with the politics inside profimati but I don't know that um Clement and the people from proven Humanity want to use a group currency in circles so that they can have the similar mechanism like the drip used to work so we're definitely in content thinking about how to integrate these

things together you know like as I was saying we need to bridge this Gap in the crypto space between the hegemonic commodity assets digital assets and these credit networks that are also very powerful but don't get as much attention as they should so I'm definitely open for collaborations we definitely are but is the question of how do you design those systems so that they can serve the community as well I also have another question about the intrinsic value like that the price itself you mentioned stable coins those um have very complex mechanisms that themselves have not yet been proven uh

we've seen a lot of try and fail but they they're all kind of architected to be picked to Fiat or certain complex rebasing mechanisms and so what is the it looks like there is a token we're minting it and we're Distributing it to people and we just decide to ascribe value to it but like where does the value come from like are we trying to replace Fiat um it went

I mean I think um fundamentally like credit money systems are because they're based on promises they're social agreements they are yeah social relations that we decide upon so um in circles right now in in Berlin uh uh the 70 the 720 circles people get is equivalent to 72 Euros but that can change and that can be agreed upon and changed upon now and that perhaps like a governance question uh but in general the question here is fundamentally different it's just a unit to exchange to settle debts it is not they said something has intrinsic value in it that's commodity money you know it's a

different so just a philosophy money but also a different design of money right so yeah I do I work on circles and I just wanted to clarify that uh being Free People you cannot actually create an attack on the system you can create an account if you are verified by free people but um for Ubi that will be issued on your accounts can't be used unless you have like valuable trusted connections so you cannot use your Ubi outside your trust Network so if you're just a trustner Twitter

free or whatever you can't use them outside that Network if that helps yeah there's like a if you want like um intrinsic self-defense mechanism in the system so if you trust someone who's making a fake account you are the only one that gets affected because those tokens Can Only circulate as long as they are trusted right so that that's in itself the web of trust provides that security so it's not uh entirely fungible like it did like there are circles

within circles like uh not all circles are equal is that is that what you're saying I mean all circles are equal but the trust relations that people have are fundamentally different right like the web of trust is just a reflection on people's social relations which are with other people and everyone is a different person so everyone has a different series of relationships you know the system is just meant to express that uh credit that's let's say that the belief credit comes from the word for Credo which means uh belief so you know there is a belief that these tokens uh can be exchanged for but I promise to give for them right so it's a fundamentally different system than a digital asset where the value of it comes from up the price that it has in the market in a

specific point in time right and yeah the point of my presentation is what is a good way to balance these two types of monies together but my scenario is like um there is another question I've had kind of a continuation to his question okay so let's uh create four accounts right and then one of those accounts is my legit account and the other three are civil accounts uh and then my literary account has connections to you for example right can uh are all circles equal in the sense that like once my other three accounts feed uh the legit account and it has a connection to you I can now pay you with my circles which you trust only the ones only the legit

ones so there's still a differentiation between everybody's circles are like different circles like my circles would have like my account ID on them yeah every every person uh every person's circles are different so every account has its own unique erc20 token so that's why I only accept the circles of people who I trust directly once I get to you they're still labeled with those people's names yeah with their public key yes like they're okay so for example in my in my case I have the circles of 136 people foreign they only accept Circles of the people

they trust so there is a Rippling effect so uh the Chris is going to talk about this later but there is a there is a good analogy to think about this is the Six Degrees of Separation I think in the circle's network is actually five but you can basically get to anyone else in the network say I want to pay the Pope uh Because he believes in basic income and I want to give him a tribute or whatever I can pay him because I know joy and I trust joy and I trust me and enjoyth knows the Pope and I can pay the Pope so it's uh you can also call it a Rippling credit Network because the the token sort of gets swapped around or

rippled around depending on the trust relations yes a very valid algorithmic question because the title of the presentation was civil attacks and civil attacks are characterized by a certain amount of swarm of insects attacking like 51 attacks so I get that three people would not but um that's a valid school of thought in that I only have to put in the work to authenticate my one legit self and then I can have five or six fake accounts and then all my fake accounts can validate my legit Plus fake accounts and if that can be automated via an Mev bot or front run in some way

then you can civil attack the system right but I guess that's also this is like it's like a schroding his cat like it's not something you can the thing is um uh well the first is the question of what for but I think you can do that it happened to us actually like uh we had a lot of uh like fake accounts coming uh from China and other places at some point like the accounts uh like like the safes that were deployed just went like like this and we're like hmm what's going on uh but it doesn't affect the people in other communities around the world as long as they don't trust those those uh those accounts right so there is this inherent like a boundary that is

made uh through the trust connections I guess there's also an inherent naivet in Universal basic income and you when you want to believe that people are nice because that's how you prep for a civil attack like you've prepped the system by having lots and lots and lots of fake accounts before you get to your like maybe you just want to earn an extra income at the side or whatever but there's I think there's a lot of trust like you said with the word cred also yeah it's a system based on trust no like it's a promissory system yeah right promises only count if you trust that the other person is going to give you what they said they're gonna do right you have some questions over there in the back so

okay so I understand this idea of trust and I understand in a small scale small real world physical scale so I'm gonna trust you because I know you you're producing Tomatoes or whatever that's the example on the on the website and you're gonna trust me but what about the the marketplace the online part so let's say I have one two three fake accounts I'm gonna buy this lovely little mugs with a fake account how the seller uh uh could refuse the seller would only get the tokens of people that they Trust

okay okay but then you cannot go on a global online way I have it modular so for example you can have marketplaces that are just instances of the same thing at a regional levels so that people can trade locally we have this issue right now we're in the marketplace that I showed you we have people ordering from the Philippines and they want to buy the nice mugs and the food and stuff but unfortunately the businesses here don't chip internationally but eventually we're going to move to a system that is more Regional based because there's a thing like trust and communities are not just geographically bound they can be internationally bound and circles is hyper local but it's also Global it's

that's the way it's designed and so you can have local credit networks whatever but you can go anywhere in the world where there are people using the same thing exchanging things and also participate in the interest of time we will segue from all those trust words into trust lines protocol with Andreas Fletcher thank you so much Julio thank you