Martin Köppelmann: Circles – Creating Universal Basic Income Economies for Everyone #365

Transcript

this is epicenter episode 365 with guest Martin [Music] copelan hi I'm Sebastian qu and you're listening to epicenter the podcast where we interview crypto Founders Builders and thought leaders on this show we dive deep to learn how things work at a technical level and we fly high to understand Visionary Concepts and long-term trends if you like epicenter the best way to support us is to leave a review on Apple podcasts if you're on a Mac or iOS device the easiest way to do that is to go to epicenter.bg go to talk about DX da well

he's back on today to talk about another project on which he's working and that is cir C Ubi now you may have heard of cires Ubi I believe it's one of the most serious attempts in the space to create Universal basic income-based economies on on a blockchain and there's a couple of really unique things about it first it's fully decentralized so it doesn't leverage kyc or any form of identity to prevent against Cil attacks and they built in this really interesting and robust trust mechanism where you essenti kind of create webs of trust within the circle gbi ecosystem the other interesting thing about it is that it's

built on the POA Network which is an ethereum side chain and there's several benefits to doing this one well the transaction fees are very low they're nearly zero and transactions settle very fast and it leverages xdi which is one to one peg of die on POA to achieve stability lastly what I like about this project is the way it's positioned it doesn't Market itself specifically to anyone in crypto but rather it tries to position itself as an ecosystem and a protocol that can help anyone create and promote a local economy within their community

and I think this is very powerful and especially in the current context of covid where lots of local businesses are hurting and and depending on you know their neighbors and people in their Community to shop and consume in in their business and so having this available as a tool at our disposal at society's disposal is really powerful you know in France there are several local currencies that exist all across the country in different communities there's one here in the Paris area but a lot of times I don't think these are very attractive for people to use because they're paper based mostly very few of them have digital payments and I think for a lot of people there probably

isn't very much of an incentive to use them save for perhaps a discount at local businesses but you have to buy these currencies well here with the circles Ubi there's a huge incentive to use it because you essentially get this currency aird dropped to your account at a fixed interval so I'm really glad we finally got Martin on to talk about this and I hope you'll enjoy it before we go to the interview I'd like to tell you about the webinar that aland is hosting next week it's on Tuesday November 17th and here you'll learn all the basics of building your own defi application on algorand what's great about algorand is that they've built a lot of The Primitives that you need to build sophisticated defi apps right into the protocol so I'll tell you a little bit

more about that later on during the interview but if you'd like to sign up go to alan.com epicenter and sign up for the webinar next week and with that here's Brian and sunny interviewing Martin copelan hi and welcome we're here today with Martin kopelman who is on the show I think for the third time he's of course the founder of gnosis the prediction markets company that we've also had on the podcast before you know he's worked on some other things like DX down some trading the centralized exchange Technologies with gnosis they've worked on the safe so really quite a lot of different stuff and he's been you know part of the ethereum

community for a long time I know him from the Bitcoin meetups back in Berlin in 2013 when we started those and so today we are going to speak about another project that Martin has been working on for a long time I remember talking with Martin about this I don't know probably three years ago or something so a long time ago H and this is idea circles and circles is the idea for having a decentralized basic income project and yeah so it's something he's been working on for a long time I remember working here at full node with some people small team that had been working on that like two years ago maybe so it's it's been germinating for a long

time but now uh circuit is kind of launched and it's getting you know some traction some usage and so yeah we wanted to have Martin non to dive into Ubi and you know circles in particular and how to Pro project aims to you know create a new economic system so thanks so much for coming on Martin yeah thanks for having me looking forward to the conversation so let's start at the beginning like why do you find this idea of basic income interesting there are really really many reasons yeah many reasons why you uh can find basic income uh interesting um it's enabling human potential I guess making

the world a better place making the world safer Place making the world a more technologically advanced Place making the world a more cultural Rich place so yeah the idea is uh if people don't have to worry about um their very basic needs uh and are not trapped in kind of being afraid to yeah not being able to pay their food and their rent that people can uh yeah unleash their potential and the Ubi just seems the best way uh and the most efficient way um to do that just sets this basic floor where everyone can can stand on and can can Thrive above that uh yeah you can have um you can have competitive economy

or you can have market-based economy but but yeah there's this this basic floor uh where no one can fall uh below that floor that's roughly the idea of Ubi so could you exp like what is a Ubi in the first place like how is this different than you know welfare system that we already have today in most countries yeah now I think I think um Universal basic income Ubi uh the core ideas the core idea is that simply everyone uh gets it and it's independent of uh of your personal situation so it's not that makes it also very simple to

implement it because because you don't need any bureaucracy to decide is this person legible you don't have weird rules that sometimes create perverse incentives uh so if you have some some welfare sometimes it's it's a problem to start earning money or start working because that at the same time will kind of cut your welfare and it's actually then potentially not even worth it uh so and ubii is just a very very simple concept of saying uh every one gets um a specific amount probably a month or a week that doesn't really matter but um it's simply continuously paid out to

every yeah usually citizen as long as as they are alive I feel the way you've described like the need for Ubi comes off as like a very sort of utopian vision for it I I say this in like comparison to you know I I think UBI has become quite a you know everyday term now thanks to like you know um the US presidential candidate Andrew Yang kind of like bringing it into the common place at least here in the US but his approach is his seems almost like a more dystopian like or like we need Ubi because like this automation is taking our jobs and like we need this to like survive as a society well you seem to

take a much more like POS like okay even if this automation wasn't an issue like even in today's world where there is a abundance of jobs like you still think that the Ubi is like a positive force and so what what is the can you tell talk a little bit about this for sure I mean I I see the the automation as a wonderful thing so I mean it basically means that people are free to do something else uh it's to me absurd that we that creating jobs is a goal I mean like our goal should be to get rid of jobs to get rid of work I mean like uh there is I I mean like the idea that we need to find something that people can

work that that seems absurd to me we need to find uh we need to make sure that that we can produce stuff and that we that we get things done that we need to get done but the explicit goal to say well we need that a human has something that they can spend their time on that that seems absurd to me of course I understand I understand where where it's coming from it's coming from well if people don't have a easy or kind of straightforward way to get the income and and so on so I I understand that logic but if you zoom a little bit out it seems really I mean crazy to say we need to make sure that there is stuff to do if we can organize society that less

people need to work and everyone gets what they want that's that should be great yeah so I saw this video by Bruce Fenton like the other day on Twitter where he he talked about Ubi and he thought it was like such an absurd idea because you know it would mean giving money to like lazy people or people who are not talented and it struck me such a like where is this coming from because it seems like a strange idea to me on some way but I think if you're you know if you see it as maybe there's more this like zero sum game and there's a limited amount and you know you give it to the wrong people then you kind of end up in this bad situation then I kind of

understand how this makes sense but if you if you think of the world more one where there is this like abundance and there is actually enough then it just seems like it would be such a great thing if you can have this basic level sort of distributed to everyone so yeah I think it's it's such a great vision I I mean also also one way to look at it is what what I mean if you if you say well you shouldn't give it uh you shouldn't give it to those people so what is the consequence I mean like let's be radical here in in our thoughts at least and say what should be the consequence should those people die then I mean of course no one should die and no one should uh they they will not no

one will disappear no one no one should die no one should not have enough to eat so somehow and and this is by true already so everyone or Bas almost everyone living in in in the US living in Europe somehow has an income so so it is already whatever the source is but but people are usually not uh starving and are usually not dying because they can't get an income so they they um they get an income so the difference is it's of course not unconditional so uh right now to get this income you need to do things you need to to work and basically what a basic income is doing is it's not even uh changing the fact that that that

everyone gets at least this this yeah basic income it just changes the fact that they get it everyone gets it unconditional so yes you are indeed taking away power from people who have money um so they have obviously everyone who has money has now less power over people who have no money because now everyone has some money and basically the basic income gives you the option to say no uh so it gives you the option to yeah if if if a job is offered to to negotiate uh you have better better bargaining position but yeah again the the people have incomes already one of the like very interesting things about

Ubi is it it it seems to have as like a political goal is it seems to have pretty wide support from like all different s like spectrums of the political Spectrum like you know Libertarians see it as like this way of like simplifying the welfare system I feel like a lot of free market people see this as a way of like encouraging entrepreneurship so I think it's a very interesting like thing that kind of breaks past the traditional like socialism capitalism divide that we normally see in like political debates and what's with Ubi of course often right when like you know often people think of it in the context of like a nation state right and where it's going

to be funded through taxation you know like what do you think are the pros and cons of that versus you know this uh more circles approach of trying to build something that's you know Global and decentralized and where you're kind of like printing this new coin yeah exactly so uh I have definitely no issues with the nation Nation issued Ubi and of course I would encourage that and luckily uh several states are yeah I mean softly moving in this direction or at least talking about it so it's it's not not anymore something that's Unthinkable but at the same time yeah I mean it's exciting that well we have now technology to

coordinate humans and uh yeah do things without nation states so one way to look at circles is simply to say well we can get there quicker um we can just do it ourselves in a way uh but another way to look at it is also yeah I do have uh my skepticism towards nation states so kind of at least my in my personal experience the way my life Works States play only probably a weird role because kind of my connections are definitely not along nation borders so uh the way I the people I interact with are definitely not the kind of only people in Germany or something like that so it does make

sense to me um to also organize to organize something like Ubi across those personal connections that exist instead of those artificial nation borders alaran is running a free webinar to teach developers how they can use the platform to build sophisticated applications for use cases like crowdfunding asset tokenization Supply Chain management and even gaming applications you'll learn how to get started with the command line tools and use the SDK and rest apis you also learned about the alaran foundation's grant program and additional funding opportunities that the alaran ecosystem has to offer so if you're building on a blockchain protocol that has unfeasibly high transaction fees and doesn't provide the speed you need or if you

work for a large Enterprise or financial institution and are interested in learning how to build applications that could integrate in your current technology stack or if you have no blockchain experience at all and just are looking to take that first step into something new well this webinar could be for you this visit alan.com epicenter to sign up once again it's free and it's happening on November 17th but if you're listening to this after that date no worries you can still go to that page and watch the replay we'd like to thank aland for their support of the podcast so maybe before we go into like understanding circles a little bit and you know the the circles idea you know what you hope will be the on on

the on kind of like the broadest that you can think like and if circles like fully succeeds what do you hope the impact on the world will be well the hope of of of Ubi uh or the hopes of Ubi are uh well get rid of poverty again have um technological advant advancements because more people can uh can kind of take risks uh be entrepreneurs so yeah I think the the picture you could paint is is is pretty it's my view pretty amazing what what could come out of Ubi yeah cool okay well then let's let's dive into Circle so like how I mean the idea of course is to reach uh many people here and so many

of course also means many like non- crypto people and blockchain systems are often hard to understand for non-crypto people so like in your efforts to like onboard people on to circles like how do you explain the system yeah I mean that is indeed something uh that varies very much from uh from uh who you are talking to but one way is to describe circles as a tool to give uh communities or groups of people yeah this tool to give each other uh Ubi to organize uh yeah within a group Ubi that's one way to describe it another way to describe it is to say

let's look at money and um let's say we can take an existing money system yeah the dollar the Euro whatever um and build a Ubi on top so we could have a state yeah the state organizes and builds the Ubi on top or uh if we want this Ubi anyhow we could already bake it into the money system so we could yeah just have a money that has the Ubi uh yeah directly implemented and that and then the third narrative is from probably those who come yeah more from from the Bitcoin world for example or that at least know Bitcoin here the story goes well Bitcoin showed it is possible to um yeah to to design money I guess or Bitcoin showed to the world

that money in itself is not a neutral thing instead money is something with choices and kind of or well there's an agreement about how it works and and that is not neutral so the money system contains specific values or potentially prefers some people over others and that is the third way to look at circles to say just we want the money but we want to design it fair we want to design the money that uh no one is specifically preferred and I think Bitcoin did that already to a large degree uh in the sense that uh it took away a lot of or almost all political power from from the money system so no one in Bitcoin has political power over Bitcoin but you can

argue in a specific sense it was not very fair it heavily heavily favored uh early adoption so uh like if you if you look globally at Bitcoin or if you would see well let's let's imagine there's an island and there are 100 people on this island and they kind of somehow agree to what money should we use and let's say two people on this island have an asset and only they have it and they say okay look everyone um there's only limited Supply and no one controls it let let's use this asset as the money and they try to convince the other 99 this is it um I mean that's basically how the situation today globally is on bitcoin so there's are those two people like on the global

scale basically the one those who hold Bitcoin today and they are trying to convince the other 98 yeah that's that's what we all by the way we already hold 90% of the tokens but well still me you had your chance you you could have uh joined earlier so in a way circles that's again the third way to look at circles is to say well we want this Fair money but we want to make it also fair in yeah in in in more Dimensions so process of minting new money is first of all yeah everyone benefits from that and not even just like in in space so kind of across like across the whole world and not just in one area uh but also in

time so also kind of the Next Generation or people are born tomorrow um they are also uh yeah kind of benefiting from from this money creation process or the yeah money minting in a way yeah that's another way to look at circles how do you drive adoption here like you know I without naming names you know I kind of asked one of my friends like hey have you checked out circles yet a couple weeks ago and he's like H you know can I make a lot of money off of this not really so I'm not really you know I'm not really going to bother and so the the money-making opportunity for like early adopters of cryptocurrencies was a large part of its like rapid

adoption and so how do you do that here in circles without that sort of property yeah I mean um I mean there there are two sides to circles uh so the one side is somewhat fairly easy to say well I also want free tokens or free money so that doesn't require a big uh a big um kind of yeah convincing people but of course that's not it uh the second step is absolutely um required uh that there are people who give or offer something for circuits and um and basically in a way take on risk with circles by like if if you give out stuff and you kind of accept then this

currency of course or this whatever you call it of course you then have the risk well is this anything worse can I uh can I get something back in return and here the idea is that you yourself have to some extent very very clear interest to signal that your personal currency and we will I guess we will come into this but not every circle is equal but that at least yours is worth something uh and that because if if that is not the case you will have issues um that that that people will trust your money and um and that will also mean that you cannot um spent your money so you need to be to some extent credible in the or other people would

need to think that you are also willing to uh potentially give something for the money otherwise they will not trust your money and not accept it okay so I think maybe to understand this better we need to start to dive deep into the technical of how circles work so can you explain to this you know you mentioned this uh personal money and stuff could you talk us through how this works right so exactly so circles is um yeah we we calling the whole system circles but there is no such thing as one Circle coin or kind of token or uh but instead uh everyone individually um yeah kind of issues

their own um personal personal tokens so as soon as you um join the system you can immediately start issuing your yeah your own personal tokens let's call mine margin circles and you are uh constrained in like how fast you can issue them so that is the same for everyone so globally uh the issuance rate is fixed uh on a on a specific schedule right but but but then they are um everyone has their own to but then for the user or um we largely abstract away from that so uh kind of if you are not super if you don't want to

understand it fully circles will look like in in many cases that that they are um you don't need to think about those differences and that comes from uh the trust networks so what does it mean so people can trust each other and if they trust each other they yeah in a way verify each other or kind of agree with each other that they are both yeah using circles and on a technical level trusting someone means you're willing to exchange their circles for your circle one to one and um really technical so trust is is directional so it doesn't need to go both ways but in the normal

case it would go both ways so if I trust Brian it means again I accept uh his circles in exchange or I'm always willing to exchange mine and that is also how the system can scale so or first of all in general the idea is that you only accept circles from people you trust talking later this is also how we address the Cil attack problem but yeah you only accept circles from people you trust but it doesn't mean you can only interact with people or I mean that that would be a shitty money system if if you can only like buy a coffee uh from someone where there is already a trust

connection so what those trust connections allow now are um transitive connections so yeah if I trust Brian and or we we trust each other and then Brian trusts again someone and against someone and and then this someone is running a coffee shop and I go there and want to buy the coffee the idea is well I pay them with circles and they would not accept mine because they don't know me they don't trust me they don't accept my circles but again there is this pass so I can or under the hood again this is all abstracted from the user can be abstracted I send my circles to Brian can exchange them for Brian circles Brian is forwarding or without his

interaction because he already generally agreed to this um trust connection is is forward forwarding his tokens and again is forwarding his token so as long as there is a trust connection um and this connection needs to be liquid that's um small detail that's important then I can pay uh yeah whomever and this whomever is then receiving circles from someone they directly know or they directly uh trust an analogy here you know maybe to for people to understand it's similar to lightning Network in that sense like this like trust Network where but in on on Lightning it's every channel has the same token which is Bitcoin here it's

every channel is about a personal token essentially exactly but but yeah the concept is the same or uh for for people who are even longer around origin the original concept of of Ripple was also very very similar I'm not sure kind of how much Ripple today has but yeah interledger sort of is I I think the uh uh continuation of that original Ripple net idea also there's a project trust lines in the ethereum space exactly I I think what's an interesting another way to think of it in the Ripple or trust lines context is interledger Ripple it was about taking debt in in Ledger it's basically we keep this channel open

between us where we say hey I owe you uh 0.1 Bitcoin I owe you 0 2 Bitcoin I owe you.3 Bitcoin and then we can settle up at some point in the future here it's almost like everyone gets the right like as a human being you get the right to issue a certain amount of unbacked debt per time period for the the rest of your life life exactly so so I mean there are also voices um to say circuit is a Mutual Credit system and it is like it is it would be a different way uh to look at it so if I have um 100 circles um or let let's say that's purely my my Ubi that

was issued to me so my as you called it my right to produce debt I could also say this is actually zero so everyone is at zero in the beginning but everyone has a specific credit limit uh and let's say that's that's 100 units so everyone would be at zero and as soon as well but but I can go up to minus 100 so I can also or one way to look at it is I have 100 units at this moment that I can spend and well now I spent uh those 100 units now I'm at minus 100 and you might be at plus and it's just in a way a different view on the same data to say everyone is at 100 and and now I'm at zero and you are at 200 what's of course

the difference is how to what extent is there the expectation from me if I'm at either zero or minus 100 to uh to pay it back and if if I'm at minus 100 that the minus already expresses this expectation that eventually I should go go back to zero uh with circles that expectation is to a lesser degree there uh and that's really also about yeah the the the social contract um of Ubi so in general Ubi says yeah you can it's unconditional so or Universal so you don't have to do anything but of course the whole system

can only work if enough people well do something or or give value into the system the question is just does it help to um yeah to kind of have in the traditional Financial system to have um the obligation to to pay back the debt and and kind of worst case you need to go to jail or stuff like that or is there enough intrinsic motivation from people to well later produce just out of their intrinsic motivation value and and do do things and of course then uh offers those things um um to circuits also for for for circuits or for money in general one question that kind of

came up with for me thinking in this like uh trust context so if if Ubi one if the ideas of Ubi is also that you you know like everyone has access to it right and in this case you have this requirement that you actually have existing people trusting you first so do you think this discriminates or is this like a problem for people who are like like more marginalized or is it just that okay you have to cross this low threshold but you know once it's crossed it's sort of people are kind of equal yeah I mean that's that that is a good point and that is a fair criticism we are uh sometimes facing and it really depends on um yeah I guess the social

consensus of how this play out so indeed it could play out that uh people only trust each other or kind of um in a way enter this agreement where you can see circles as some form of of agreement and you could imagine a world where people only do that I only trust people where I know okay they are I don't know wealthy and they they will very likely produce something um yeah something valuable um but there is also um this element if the social consensus shifts towards more Ubi so the the Ubi narrative prevails or kind of yeah wins and it becomes just the default Behavior if you say yeah um

they are human and they are in my network and I trust them or that's why I trust them and others do this as well then the tokens the individual tokens become much more fungible because if if many people uh or at least within an within a um yeah kind of within a specific area or within yeah kind of locally bound but if many people like just have together the default Behavior they trust everyone who is also part of this social network or part of this place or group then yeah again that the tokens become much more fungible because now I suddenly have some uh some tokens let's say like just go the example from

this whatever poor person that I never expect to to provide anything useful uh but since everyone else in my group is also trusting them those circles are not only backed by this person individually but by its Network so uh so if everyone kind of agree to this scheme in a way well yeah that that is money uh and I can spend it within this network um then I don't care too much uh what this specific person might offer or not offer it's it's really then the network that uh yeah kind of um carries uh people along within their Network can you uh talk a little bit

about how Cil accounts are dealt with or handled in this system yeah exactly so that is again another another perspective to look at circles is there are actually Plenty or at least five to 10 blockchain Ubi projects that all have that that that shared goal uh let's just issue tokens and and give it out um per person and as you're hinting your question is hinting to the big problem each of those projects face is Cil attack or kind of who decides who can who can join the network and how do you prevent someone from just creating 100 accounts uh and some or the other

some of the other project then tried to come up with yeah you need to kind of upload your photo or do do some some kyc or whatever uh but circles tried to stay yeah completely um decentralized so have no no Central Authority whatsoever that kind of decides uh who can join but again relies on on this trust Network so again how is it solved or how does it address the Cil problem it boils down really to the social consensus that you only should trust a person once so if I kind of somehow uh well potentially go on Twitter but or Ju Just in my network

to people I know the social the strong social consensus needs to be I can create a circuit account but only one and and as soon as someone would um yeah would would misbehave uh people should not trust uh that person or at the very least uh well kind of only only um one of those accounts what happens if someone does that so or let's say uh I'm trying to cheat so you guys are trusting me with with with my real account and and and that's all fine but then now I cheat an addition so I create 100 uh 100 circles accounts and I trust all of them and kind of those 100 they trust all

each other and so on the important thing now to understand is as long as no real person is trusting those those 100 fake accounts those 100 fake accounts can spend a small amount with in the real Network let's say with with sunny because they are connected to me and I'm connected to Sun so this fake person can take their fake tokens send them to me and I send the real tokens my real tokens to you and you are happy accepting them but that only works until I run out of uh real margin tokens because then the fake tokens yeah I mean

there there is no so no no no liquid trust connection anymore so all I got was that I now have the the fake token from from my own fake account accounts and they are not worth anything so I didn't got any advantage uh by by doing that and again the system boils down to as long as people don't uh trust fake accounts they are not affected by fake accounts right right so basically you have almost if you think of in this terms in this network topology right like let's say you're a real account and then you're connected with other real accounts and you're connected with like some fake accounts that then you know maybe there's a big swamp of lots of

fake accounts the thing when they kind of they can only go through you exactly and sort of like steal money through through this you know this one channel there is and that has this throughput limit right which is kind of the circles you have so exactly yeah that makes a lot of sense right and I think that's it's a very elegant yeah it's an elegant solution how do I detect that there are like someone has a civil account so let's say I have like you know multiple groups of friends that are somewhat you know isolated I go with my you know football friends and you know I make an account with them get them all to trust me and then I go with my like crypto friends and have them make an

account and all trust me how would these two groups even be able to realize that there I have a duplicate account yeah I mean I I think uh I would I wouldn't make the claim that that is impossible specifically if you indeed would have kind of two completely distinct or like yeah completely non-overlapping networks but I would claim a most people kind of the the networks are somewhat overlapping they're not kind of clearly separated that's point a and point B most people don't screw or don't want to screw kind of their people they have a personal and direct relationship or kind of kind of their friends so uh yeah I

mean c does assume uh some form of honest Behavior within friends but that being said the the damage that like if if one out of 100 people or one out of thousand people uh does that anyhow and kind of might even succeed with that uh the damage to the whole system is is or I mean that wouldn't be a problem that's basically like uh like maybe half a percent of all money is um counterfeit would it be helpful though to do something like if let's say my address on the Chain was like the hash of my yeah legal name plus my birthday or something so

that way when you know Brian comes along and says like hey here's this new I just made a new account I can take his name and his birthday hash them and see hey why is there already an account here that is something we left open to a large degree because we think those are social norms that will evolve and we don't exactly predict how they evolve So currently we we see really different behaviors so one is obviously like your Twitter account is like if you tweet it publicly then it's well then it's already harder for you to if you use your normal normal like face and normal name on Twitter then it's already pretty hard to say uh to to kind of deny that or to to then create second account that

that's one way but another way is uh again there are those much more local and much more non-blockchain or very specifically in Berlin we have we have groups where people just meet in person and and uh and it's it's much more personal and and yeah there there is this community where people know each other and uh again I I think um the likelihood that someone tries to fraud that or fraud really the people they are directly interacting with seems reasonably low regarding this throughput notion I mentioned before so is it the case that basically you know this throughput limit that each user has then

also grows proportionally because they get you know every day they get more circles and do you think that's a significant factor or yeah I mean the this the throughput limit I mean there again different ways to look at it you can say the well total amount of circles you get or as Sunny mentioned earlier the total amount of debt you are allowed to create yeah of course the idea is that that continuously increases over time one thing to note is trust connections or if again looking at this this um attack uh scenario well you can cancel trust con trust connections so well if if you feel like you are kind

kind of drained or the the circles are just always drained immediately uh as as the throughput or kind of as as new circuits are issued for some reason you always end up with those Circ and you can never spend them anywhere um then it might happen that you kind of talk to the person well why can't I spend them any anywhere is why is no one else trusting you uh why are you not offering anything you know in earlier version of the paper I remember there was like this concept of validators and it it's very different then like not it's not like the same thing as like Pro stake validators it's a very but then I noticed it was actually remov in the latest version of the paper so could you

tell us a little about what that was and why that was removed yeah so uh so those are things so there were two concept of validators and groups um those were just two things that are possible uh to build on top and we just decided okay let's let's have the pure the purest uh kind of basic version and and uh if needed or if wanted uh we can build those things uh on top top and those are ideas uh to make it more practical um for businesses to yeah uh to some in some form accept circles so if we look at at a business uh it's not obvious like even if they want to accept circles then let's put

for for a moment aside where would they want and so on but if they want to accept circles then the question is what circles do they actually um uh accept so they could say yeah only the circles of the business owner well I mean that that would be problematic because there are only so and so many circles so kind of the total the total amount of circles they could even potentially receive is is limited so somehow they need to decide what circles they they accept so maybe even in other words whom's depth they are willing to to accept and and here yeah there is the the concept or there can be a concept of of validators or you could even call it like lists or

something like that so somehow there is a process to to get onto a specific list and the list or one list could be maintained by well you need to show your real address you need to live in a specific country or in a specific area and you need to to show your ID or whatever and if you do that you are on this list and then um kind of a business could subscribe to such a list or validator and say well everyone everyone who is who's part of this list uh all of those circles I accept and again as the next step that wouldn't mean that only people who are on those on this list can can buy uh or can spend their circles uh but at least you need

to be connected you you need again to have this liquid connection to someone who who is on this list so yeah I do actually uh imagine that um yeah that those those concept will or that that will happen another way to think of these lists would be would they kind of be like these giant uh curve Finance style pools like you know here's a list of all these people who are approved and you know it's this any you can just swap in any of them for any of them that can kind of like massively increase the ability to pay for anyone who's on that list right wasn't that cool I I mean in a way the trust network is already this um kind of

um well gives you already the ability to exchange uh across um a pool or in a graph so circles should or kind of in a densely connected in a densely connected Network all circuit are basically equal because you can exchange or you find a pass from any circles uh to every other circles but but if there are kind of more those those local groups that are not uh and and the graph is is is more Loosely connected yeah then then some connections might dry out of uh dry out of liquidity but to from from the business perspective it's not yeah really about it's not really about uh being able to exchange those but it's just a question which are they willing

to hold so which uh what in a way again Dept or what what risk or to some extent you can say holding money is a risk the risk of will you ever get something in return uh for it I mean this is also it's it's amazing how much trust we have uh today in our dollars or or Euros so we we don't even think about that that way that if if we are selling something we are already taking the risk because we are already giving away the good and we just received this this paper or maybe not even paper in the hope that uh that we will eventually uh get something for it of course we have so much trust uh in in in money that we don't perceive

it as a risk uh to sell something and to receive money but yeah uh in in principle it is risk to accept money you know kind of like speaking of amm like so far we've been kind of assuming that anyone who's like on a trust path is willing to do a swap like one to one like you know I'll take Martin token and send Brian some Sunny token one to one like so far there's been this assumption that trust is like a very binary thing in the real world I feel it's not always as binary like you know if there's one token that I'm accepting you know maybe that's okay but then if I'm expected to extend $10,000 then you know there's a higher default

risk and stuff and so does it make sense to like have some sort of fees people who are along the payment path they take fees and like using some sort of like bonding curves or amm kind of stuff to like account for this increased default risk as the amounts go up yeah so that can make sense um you can one one way to look at it is is also to say if there are like three or four different passes you should choose the short the shortest and um and currently there is not really or I mean currently it wouldn't matter even a long pass uh doesn't really cost you anything um so there are arguments clearly um for such a system but there

is at least one point where I would yeah argue against or or at least that's not my idea of circles is one way to interpret circles could be yeah it's really this personal personal tokens and that's that's almost like equity in that person so so you say kind of well how much will this person probably kind of produce or do in the future and kind of depending on and how educated or what whatever kind of uh that that could be one one way to look at circles but it's definitely not the way I yeah look at circles or I I would like to see circles so I would definitely like to see see more this perspective of UI uh and in that sense trust is fairly binary

because you can fairly binary say is that a real person or not there's not too much room in between here's a little bit of a weird question which is so far we've talked you know we we've determined that this system is good in like fair over time because that's people are born you know they can join the system what happens when people die if I tomorrow sunny tokens are already all throughout the network and more Sunny tokens are keeping minted because my account is still existing on chain so how do we deal with this yeah yeah know good question so there can be different social social consensus around um how to deal with that but the idea I would

strongly advocate for is first of all of course your minting should stop and we have already implemented that to some extent in circles because there's simply this this stman switch or kind of this this concept that if you don't poke your account at least every 3 months then it will stop or then you will not be able to any uh yeah you would basically need to create a new account after that so that problem is to some extent solved that means like I have this circle account you know I'm accumulating my circle I have this like trust Network then I'm going 6 months on I don't know backpacking around the world and then my account is is

gone uh right now yes so right now it means like if you if you for three months don't do don't do anything yeah again your account is not gone but it can't issue issue any any more circles so what you would need to do is you would need to create a new account and basically tell all your friends sorry uh you can see here's my old old account it's frozen so uh you can now securely trust the new account and no I I you can still trust the old account and you should because um those brind circles should still be valid but uh they would then also need to trust the new account if if they want to give you well yeah accept you going forward okay so so I

would still have the coins the old coins I would but I would need to create a new account to like start printing again or minting yeah I I mean like like Tech technically speaking account is well smart contract wallet and uh it's just also safe actually but so so that that you still have access access to and and all the all the tokens that are in there you still have access to but uh again the the um yeah the the minting contract will simply not allow any minting in the future more anymore why not just let people kind of like reactivate the account to some extent IT addresses Sunny's question about like what what is with people die but to some extent it also Al uh deals with the problem what

if I lost my account so um if I if I just lost my key uh I mean kind of any form of reactivation is of course problematic because I mean who who who is allowed to do that and and so on so if you lost the key uh and there is no Central Authority well it's General a problem but in circuit the simple answer would be well you should create a new account and now but you now you need to go to to the people that previously trusted you and say please now trust my new account and to do that it's kind of a necessary or it it's almost a necessary yeah condition that they can be assured that your previous account

cannot be they like suddenly suddenly mint tokens again and now you you get it twice so for you to kind of Clearly say see it's safe this old one is is deactivated please do the new one uh it's yeah so one of the uh things about like the economics of circles is that the you know we have this sort of I forgot what the exact rate was but I'm getting like you know maybe 200 circles a month or something as there's more circles being printed this is sort of causing this inflation and that means like the real value of the Ubi over time is actually decreasing because if there's only 200 circles being printed per month how do we make sure the Ubi keep keeps up to

Pace with like inflation yeah so exactly so there is so if the uh if the issuance rate would be fixed uh and currently it starts at eight circles um a day uh so yeah 2 40 roughly a month uh and if that would be fixed uh then indeed as you said kind of the total amount of money in circulation giving a constant population would yeah continuously increase over time but you could then argue the relative amount that's kind of newly minted um or given out as Ubi would relative to the total amount actually converge over a long time towards zero uh so in a way you

could argue the inflation would go towards zero that could potentially mean that the Ubi also the value of the Ubi goes towards zero at least over a long long time time scale and it would also raise again this this this fairness point so like future Generations would say well why would I kind of accept all those old circles uh compared to me getting getting getting very little so I mean like taken to the extreme let's say in 200 years why should I kind of be it relevant that that 200 years ago someone lived and and and issued circles and why should I uh kind of Honor that in a way so circles addresses this and um and

there there's a nice concept behind it from another project called donator relative theory of money circles addresses that by yeah simply increasing the the Ubi by 7% uh by 7% a year so in year one it's eight units per day in year two it's uh 8 units plus 7% uh and so on and so on so that means that the rate of new Ubi uh will actually stabilize compared to the existing total yeah money mass given a given a fixed population at by the way more or less exactly those uh those uh

7% that number is actually not too far away from from money we are very used to uh and that is the US dollar so if you simply look at uh at the monetary Mass M1 and you look at the last 50 years uh I think the the uh the increase of of monetary mass or to to Total dollars in circulation increased roughly by that 7% I think it's slightly less six 6% per year cool well question that kind of relates to this topic of you know how much is this money worth and maybe how does it relate to like you know different people in in different times

and contexts so a lot of of these graphs right are kind of going to be local I mean at least it seems like that from the way you envision it it could turn out that way at the same time there's this idea that you know like one Circle they all have the same value so how do you see that like playing out if you're going to have you know like some circles you know Network that you know trusting each other in um in some maybe poor place in Kenya versus you know in Berlin some communities you know will those circles have do you think they will have different values in their local

contexts yeah so that really depends on how strongly um yeah two graphs or yeah two two graphs are connected if there are 100 people in in one like let's say in bin and everyone is connected with everyone there uh it's clear that all those circles are basically fungible and and will will have the same value now in another place again another 100 people are all connected with each other um within this context within this place all those circles are will have the same value now let's assume just one or just out of out of those two groups there's one one trust connection so kind of out of this one group and out of group two

uh those two people uh trust each other so now for a very very limited capacity there is the capacity uh to flow for for Value to flow one to one but then of course it could happen that this flow kind of dries out and that would be simply if anyone out of this group make makes a purchase or kind of uh in in in in the other group then yeah money flows out of this group to the other group but then this connection is um yeah dried out or any more money cannot flow and with which effectively means that the two groups are basically disconnected at this point so and if they are disconnected of course then

then value or or then then of course they would have effectively um different values if the groups are like more and more then somehow somehow connected and and more and more people connect with each other again the value would also then uh equal one question I'm curious about you know you've worked a lot on dolls and you know the some of the these ideas of dolls so you know enable like Mass collaboration with like many many people now of course this in a way is about creating this web community of people all with you know crypto keys so do you

see circles turning into like some kind of Dow and like how what what potential outcomes there I would not necessar say circles itself would turn into a dow but clearly we are already working on yeah basically a circles Dow basically a dow that has the goal to to yeah bring bring circuits forward but I would be very very uh cautious or simply that's the direction I would not want to give that Dow in some form power over circles so it's a core element of circles that it is uh that there is no no governance so so you see that's like it's a protocol that's like defined and

that's not going to change well I mean I mean there is a lot of going to change in at the edges so basically in the kind of all all the part that is part of the social consensus of should I form a trust connection or not that is largely undefined and that is that is part in a way where where governance happens the very core rules are really minimal probably the only parameter um that is that is something that is uh yeah kind of worse discussing H is the or that could be um a thing where people might have different opinions about this this is 7% other than that for example

whether the issuance rate is eight or or 100 that that doesn't really matter because uh I mean you can if if you say the issuance rate should be one will just create an interface and and call it one or basically just create an alternative interface where you where you um say kind of this is one unit you get um per day it's just a different view on the on the same graph yeah I think that's really cool one more comment um it is indeed a nice side effect of circles uh also to towards your Dow question it is a NE a nice side effect of circles that you suddenly create so this Public public peer-to-peer

graph where everyone has a private key uh that alone is uh is is something useful yeah that's powerful yeah exactly exactly so there are plenty of applications uh that can benefit or that that could kind of use this trust graph yeah kind of as a basis to get started so you could imagine a rating system so anyone can uh kind of add a rating to the system but of course then you have the Civil attack problem and I think that is a real problem today in today's world uh with with comments with ratings whatever they get spammed by by Bots but if you if you filter it through this trust graph and say basically um yeah

just just I I follow the edges from from I have this local view or this um relative view from from my own perspective and I kind of wait ratings comments whatever it is based on this graph uh yeah that that is a powerful powerful tool in itself yeah this is um really cool cuz so I actually going to ask just about that next and how I actually first Came Upon circles two years ago was exactly that I wrote a ring system for open Bazaar that uh used like a web of trust reputation system and on on ethereum and then one of the problems was how do we get how do we incentivize people to actually like make the trust connections I couldn't see any

reason why people would be incentivized to do that in the first place but what's cool then I came up on circles and I'm like oh wait this is so cool cuz this has this is basically incentivization for building up a social graph and then I can my system can like bootstrap off of that social graph and so that's what that kind of got me super excited and like you know these kind of trust graphs can be used for like pgp like all sorts of cool things that like I'm a big fan of like reputation systems and web of trust as like probably one of the most secure civil resistant mechanism probably even more so than like proof of stake so yeah I'm pretty excited about this kind of stuff so the next question though is like taking it to like the

real world side is how do we like Drive demand for this and when when we say this is a Ubi this is meant to be this like sort of parallel economy we're not going to see like hyper circularization or anything if I'm a merchant how do I even know how to start accepting circles and how to price my things in circles the best route will be and and that is what we are currently preparing is have local groups it does for sure make make uh make most sense um in in a local context so have a group of of people in the same physical place that together want to start circles and by the way we already have we are starting this this

list and we I think we have 80 or 90 people or places that said yeah I want to start circles in Venezuela I want to start circles in Bonos Iris in shenzen and whatever really really all all all over the world so that's the way to go to kind of organize uh locally our slogan is also kind of build your uh local economy one really nice story I already have or we already have uh was someone who said yeah I'm I'm a small landlord in kadis in Spain uh and I have here few shops uh in my building and because of Corona they are struggling uh to pay the rent so what I did is I said okay you can pay part of uh of the rent

in circles under the condition that you then in your shop uh accept circuits and of course those are kind of the perfect yeah kind of stories or ways how we how we could imagine circles getting bootstrapped and we're trying to develop this Playbook of um yeah how to locally get uh yeah Community going that again in a way is giving each other this basic income because that's what what circuits is so the basic income will of course not come from kind of out of nowhere it will come from the people that are using uh using circuits and in a way if someone is receiving a basic income of course they are receiving it from their

network from their Community what is your takeaways from like the you know it's about what 3 or four weeks in now uh about the initial social graph for bootstrapping is it a healthy like natural graph or is it like Martin and his friends right now well it's definitely well beyond uh uh my friends I think it's currently 40,000 uh 40,000 accounts there there were two parallel fairly disconnected graphs so uh we actually started it at a local event here in bin we had a we had a meeting or a Meetup or and that was already a

process of months before that we like talked to very different entities here and there was there was um an event with with with 50 50 people and that was really kind of the at the moment Circle Network the contract was deployed techn technically speaking uh the circle launch and those are people that are really not on on crypto Twitter and kind of not really at all in into crypto uh and then at the same time or a few like maybe 12 hours later of course or it went somewhat viral uh on Twitter and there uh yeah I mean there the graph was formed in a quite different way so uh there the graph formed still I think largely Still Still across people that

know each other but of course knowing each other from from Twitter is I mean that was a much more International graph or kind of a graph where people that were physically in the same place so yeah that will be interesting uh how how that will play out and kind of how meaningful those connections those I I guess Twitter connections can be for the the things that can be sold yeah traded or exchanged uh digitally uh I mean there is of course things and one uh experiment I will will do soon is selling an nft or or like digital art or whatever for circuit so of course there

are things you can also that's also a route for for circles to go but we are definitely very much also into the uh very local very concrete very down to earth uh like stuff like Urban gardening or farming or yeah that world one of the most common things that has been said about like you know circles after the launch was the ux issues right now currently like you have to like sort of like write down this seed phrase and stuff and it feels like using crypto from like 2016 again what was the reason for not like integrating with like you know Common web 3 wallets and things like that yeah I mean I think I think it really depends uh uh from

what perspective uh you're looking so for someone who is already in crypto it was weird that we would not uh have whatever metamask support uh and so on but the reasons not to do that was exactly because we were targeting primarily the non- crypto users so what we were what we what our goal was that in a user that hasn't heard about crypto and has a phone can pay their coffee with circles with with their phone so it was absolutely not an option to kind of require them to I don't know have metamask then to send some XI or I mean actually like fund your account so that you that you uh I don't know pay your

gas costs and so on so on on this node circles is running on xdi it's basically an ethereum clone or it's basically the same as ethereum uh but with a yeah simpler proof of authority consensus algorithm who's paying the fees right now yeah so the fees are actually paid we have a relay uh relay Network so transactions are relayed and yeah kind of the circle circles wallet is is paying those those gas fees in xile uh but are actually refunded uh in circles so so the user is paying the some circles some tiny amount of circles

to the relay service and the relay service is paying uh the fees xday luckily fees on xday are basically close to zero uh so it's not not really a concern but again talking about ux perspective yeah I mean you can I mean I of course we got the the messages from from the crypto world that they would prefer kind of the metamask route but again I would argue zux uh in a way is uh or made made made quite quite some steps so because we are again abstracting all this uh signing of transactions we are basically using this this burner burner style wallet so your private key is um yeah in your browser uh so you can just press regular buttons

uh uh in in the in the in the app basically to send transactions without any yeah popups metam pop-ups or stuff like that one last question for my side is how does this work on like layer 2 system so Circle system is like existing on X die you know it's funny usually we think of ethereum as the layer one and then like XD would be like a layer two but let's say I wanted to move some of the circles onto ethereum how do I make a payment if all the like social graph Pathways and everything were still stuck on the XI chain uh so how do I do that or like how would I do this on like payment channels like have you thought much about layer

two systems yeah so in general I would say circles can scale quite well because you don't uh need that Global State you only uh care about your local state so there are indeed scalability Solutions like uh lightning or yeah equivalent would be Raiden that would somewhat Naturally Fit uh fit for circles the question of yeah whether you can move your your your circles to to other blockchains well I think that is not fundamentally different from any other token so yeah you can like wrap it or lock it on one blockchain and then issue it on the other blockchain of course potentially it does make it more complicated that

you have so many different uh different circuits and indeed the circles are of course much more helpful if you if you have if you can exchange them if you can do them along the trust connection but it's of course not Unthinkable that that uh you have some I mean even even from from a user perspective that they have some tooling to just take all their trust connections and and kind of copy them to another system and say yeah uh I don't care if I exchange the circuits one to one here on this system or on that other system cool well well thanks so much for coming on Martin uh maybe a final thing if people want to get involved they want

to like help out they love this vision and you know want to want to bring it to reality what are the best ways to get involved oh yeah that that uh is is super important because also uh for people to know circles is to this point uh has a very small core team so it's a project that kind of was described already I think the first the oldest description is seven years old but so so there is I guess a wider community of people who somehow followed it and and somehow are like I guess like it but the core team was actually is actually very very small or people who are working full-time so it's just uh five people and doesn't have any funding and also

doesn't have the interest to kind of go a venture funded route uh so yeah circles will very much depend on uh more people um getting involved the are numerous so of course uh everyone who is a developer is very welcome we are or there is already the process starting to started to to uh create alternative wallets uh probably also wallets that are more crypto um kind of more towards the the crypto users so of course it's principle of course possible to use circuit with with metamask uh or with other wallets yeah that's number one number two is again we are there is a process of of finding local communities

uh and ideally there will be local meet meetup groups that yeah explore um the option to start a local circles uh economy so that that will be uh number two number three is we for sure are or will start launching circles Dow just as another yeah entity uh to follow and support and kind of yeah basically take place and shaping um shaping a development around um circles and then of course there is there's plenty of things uh yeah kind of social norms that need to be developed or kind of yeah basically just discussion around what is

The Right Use uh and and number yeah number five just just be experimental so there are uh there are people that said okay let's start the round of poker with with circles I remember in the old um in the old kind of Bitcoin days you had those people who did this experiment I want to live one week uh only on bitcoin eventually it was then a month and eventually it was a whole year traveling around the world uh kind of those things happened and of course then this element of is there anything I can offer for circles so what we already saw is just telegram groups where people similar to Craigslist or uh or eBay would would

sell their used Pro probably some used stuff uh what I could very well imagine is an Airbnb uh alternative that you say yeah I I rent out my apartment over the weekend uh for circles and by the way here also this kind of idea of of the trust line uh might be uh interesting because um at least there is the connection that if a person comes you can kind of through the circle payment see how how you are it can to some extent establish a in some form of initial trust if you have those okay I I know them over them over them but but yeah so basically just find creative ways to to use um circles cool well thanks so much for

coming on Martin and I'm excited to see how the Project's going to develop I've also like signed up today and actually just now finally there I think some of these trust authentications were like stuck for a while but finally that's true now so I'm excited to like try it out and play around with it cool yeah thanks for having me thank you for joining us on this week's episode we release new episodes every week you can find And subscribe to the show on iTunes Spotify YouTube SoundCloud or wherever you listen to podcasts and if you have a Google home or Alexa device you can tell it to listen to the latest episode of the epicenter podcast go to epicenter.com episodes in your inbox as

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