WTF is Circles?

Transcript

I already did the introduction a little bit. Oh, that's That's a great light. But, I also chatted with Paul a little bit, and he actually allowed me to introduce with the question of what the [ __ ] is Circles? Please welcome Paul Brigner. >> Hi guys. Can you hear me all right? Very good. So, it's my absolute pleasure to be speaking to you about what the [ __ ] is Circles.

Uh the inspiration for the title comes from January when we were in the Circles team preparing a couple of uh explainer videos, and I went to uh Tommy and Manuel, who are the Discord mods and the Telegram mods. Uh the unsung heroes uh of the fortress that is Nosis, and um I asked them, "What are the most common questions? What should we do these videos about?" And the summary is that basically, they're all asking, "What the [ __ ] is Circles?" So, that's what I'm going to be trying to answer today.

Uh I also cherry-picked another example by a poor fellow called Zanti. Uh he says, "I read the white paper," which is like 60-70 pages long, "all the FAQs. He's a backer, which is a special status in Circles, which means you're really invested in the protocol. He's trusted by other backers. He has a solid trust network, and still confusion of the highest order." I also checked on Discord, uh you know, how many how many posts we have that start with confush, and there's 276 results, which is like many more than, of course, we'd like to have.

So, the agenda for this talk is basically what is Circles? Who's Circles for? Why should they care? How does it work? And how to get going? And so, the The audience for this talk is primarily people who already know kind of what like who've been given an introduction to Circles before. Um who I may maybe uh on it. So, can I have a quick show of hands who here has an account on Circles? So, that's most of you. And then who still feels some level of confusion around Circles?

Great. So, you're in the right room, I hope. Uh at least I'm talking to the right people. So, what is Circles? I'd say Circles is a different approach to money. So, it solves it's it's uh it's a technology that tries to solve the same problem that money as we know it solves, but just in a different way. It's a peer-to-peer protocol that allows people, strangers or friends, to transact with each other without requiring bank or state-issued money. It's that simple. Why would you want that? Why would you want to have a protocol that allows you to transact with people in the same way you do on a daily basis, but without involving euros or dollars?

There are several different reasons why you might want that. And if any one of them applies to you, that's good enough. You might believe that the game is rigged. You might believe that the money uh the way it currently works, or fiat like state-issued money's uh they they how they would currently work uh structurally structurally not working in everybody's favor the same way. Um you might think that top-down money, which is what a central bank and and commercial bank uh money essentially is, that that kind of money leads to unrealized economic potential, maybe because these banks have to make decisions in aggregate, and they don't know they don't have enough information about the needs of pockets of local communities to do uh kind of um

appropriate monetary policy. It might uh be because you feel like holding stables, holding euros, holding dollars makes you essentially complicit in politics that you don't support. So, you might feel like you almost have sort of blood on your hands, and you don't want that. It might be because you feel that today's money fails to adequately capture the value people really generate and contribute. So, you know, you feel like it brings you down to a single number, and that number you think is, you know, usually not always well what what it should be.

And sort of essentially pointing a number value to to people and the work they do, etc. And finally, there might be more of a libertarian argument here that you say that how you transact with your friends should be between you and them only. So, what's the justification for states or banks to come in and implicitly participate in that transaction? So, all kinds of reasons, very different ones, for you to be interested in organizing your economic transactions with others without needing bank issued money. And I mean, many of us hold some of these beliefs but this is not a this is not a fringe phenomenon. These are very very common beliefs, these some of them. So, I mean,

I could support all all these bullets. I'm just cherry-picking here some numbers, and I'm not going to read through all the statistics, but there is a a well-established and well-documented crisis of the institutions of the belief in the institutions behind, liberal democracy. So, you know, a majority of people believe governments and businesses don't represent their interests and structurally favor the rich. Um there's a well-documented frustration about social inequality. And in fact, lots of people feel that the political influence influence of rich is one of the main causes for social inequality and wealth inequality.

And there's a well-established call for change. In most countries, the majority of people think their country's economic system needs major changes or complete reform. So, I think this is not about whether all of these beliefs are factually grounded. Are they equally grounded in fact? I think some of them totally are, some of them might, you know, sort of just be people complaining. Uh but the fact is that there is such a belief that there's a strong conviction way outside of this community that I'm talking to right now. And um you know, how could you I What you What could you do about this?

I kind of picked this one quote from an anthropologist called Keith Hart. Uh and he says that's kind of a prediction. Like what what happens when people have are in that crisis, when they fail to believe in the institutions that, you know, more or less have been kind of doing politics for us and making decisions for us over the last couple of centuries. You go back to the people that you know, the people that you can trust in. So, there's sort of a shrinking of the of the of the radius of relying on others. Um and so he makes the following prediction. He says, "People will voluntarily enter circuits of exchange based on special currencies. It will be a world whose plurality of association, even fragmentation, will resemble

feudalism more than the Roman Empire, than this one big global empire with this one global currency to kind of rule them all. In such a world, one currency cannot possibly meet all the needs of a diversified region's inhabitants." So, um Circles is a technology that is motivated by addressing these issues through allowing people and communities to issue their own currency in a scalable and fair way. Now um you know, people is uh sorry, Circles is fundamentally a peer-to-peer protocol for humans, but we found in talking um you know,

kind of trying to look for use cases, pilots, that often it's best to think about introducing communities at the level of individual communities, existing communities. So, I'm going to present Circles to you as a way as a technology for allowing um, communities to introduce their own currency. And not every cur- and not every community is equally suited for like trying out Circles. We receive although I kind of most fruitful discussions that we have around Circles are with communities that are highly social, not necessarily everybody knowing everybody else, but maybe sort of two, three hops away, people bumping into each other, local communities, gamers communities online, those kinds of things.

Also, communities that are highly political uh, and that seek monetary sovereignty for obvious reasons, right? Because that's one of the problems we address. Communities that have a strong sense of identity. They might have existed for a long time. They might feel like the the members feel like this, you know, if I tell people who am I, listing my membership in this community is one of the things I'd say. And also uh, for um, obvious reasons, people uh, communities that suffer from lack of resources. They just don't have a lot of euros or dollars, you know, dangling around in their accounts are interested in ways of realizing economic transac- transactions without needing that kind of money.

And what's what's in it for these communities? Why would a community be interested? Of course, there's this political ideological reason that I think hopefully is already kind of clear from from what I how I talked about this, but we also think that there's down-to-earth like also hands-down advantages of value propositions for running your own community currency with Circles. And I'm going to list three here. I don't think that's the exhaustive list. It's boost their resilience, support local commerce, and get more done. So, I'm I'm to walk you through these three by way of example.

So, let's look at Magda. Uh she chairs a tenants union in Berlin of around 800 members. So, as you might know, um you know, Berlin has been catching up like Berlin real estate since the '90s with the other bigger uh capitals in Europe. And so, we've seen massive gentrification, massive rise in the in the cost of of of rent uh uh in in rents, not in the cost of rent. And um so, Magda's uh group, which might organize itself on Signal or Telegram, is people that support each other through evictions. They try to kind of with with, you know, kind of fight for their right to live in these apartments that they've been living in for for decades potentially.

And they also uh support each other financially. They they they uh chip in for legal fees, etc. And they used to use PayPal for that, but PayPal froze the account twice last year. Um so, you know, banks started asking questions. They say it's against what they're doing is against the T's uh terms and services of of PayPal. So, by introducing Circles, they can keep doing what they were want to do and not give a [ __ ] about what PayPal thinks they should be doing. Support local commerce. Um we have Hugo who chairs a community foundation in a town of 12,000 people.

And, you know, uh it's almost like a a meme, but we have the economic life leaking out. People start just buying at Amazon and with uh with the shopping centers uh on the periphery of town. So, one of the classic value propositions of introducing a currency, a community currency, is to kind of strengthen the remaining shops in town. And I mean, you know, I'm not a somebody to uh I I I use Amazon as well every now and then. I see the benefits of it, but I also see the benefits of having shops remaining in the in the center of town and the value they they provide to the community. And so, by using Circles, you can kind of support them and and keep try to keep the value within that community.

Um for example, by introducing a a loyalty program or a reward system. Uh that should be Ooh, maybe it's rendering my skipped slides. So, I might might have to skip some slides. Another value proposition is get more done. So, what does that mean? Maria runs a co-working space in Lisbon. 15 freelancers share a building. Um they have a podcast studio, but it always sits around idle. There's very few times that actually somebody uses it. And so, they have this idea that they offer this space for people in the community to do ad hoc podcast recordings in.

And they wouldn't want to charge in euros. That would be kind of awkward. And also, the people, you know, they don't care about it so much that they'd actually kind of pay for it. But what they get is they have a little point system, which they do um or run run using circles. And the effect of making that studio available is to get discounts at local shops. So, here, what does it mean to get more done? It's just, you know, kind of doing things that wouldn't have happened otherwise if there wasn't this currency around. So, you know, I told you what circles is. Um who's it for? Who's the target audience for us? Let me give you a quick overview of, you know, the history of the protocol. So, uh circles was conceived by Martin, uh the co-founder of Gnosis, around 2012

when he first published this about it. So, that's prior to, you know, Gnosis. So, this this idea is earlier than Gnosis. Um it was launched in 2020, um went pretty viral, pretty successful launch. Um and there were two bigger pilots uh in Berlin and Bali. In 2024, the protocol relaunched, um uh now stewarded by Gnosis. So, circles is currently funded by Gnosis. Uh in 2025, Metry, the the circles wallet, uh was launched pretty much a year ago. And currently, we're in what I would call a validation phase.

Um where we're piloting different use cases. In terms of numbers, we're looking at roughly 16,000 accounts registered humans, 7,000 active users, people that are creating their circles, um you know, um every day. Um 300,000 trust connections. So, I didn't talk about trusting yet, but that's kind of the peer-to-peer network that this operates on. And 500 communities. Now, of course, not actively using it in in in in this, but this is just how many communities have registered on the protocol.

So, let me briefly recap what I've told you so far. So, I've told you that Circles is a peer-to-peer credit protocol, and it gives communities access to what I would kind of summarize as increased economic agency by using community currencies. And people in the communities can resort to this currency for organizing their transactions instead uh or as a substitute for using euros or dollars or other national currencies. So, let me talk to you about how it works.

And you'll note that I won't be talking about 1 CSC per hour, about trusting, about the the things you already know by about about how Circles works. I mean, she's going to try to explain Circles in a way that to me makes it easier to kind of intuitively understand what what is what is it for, not how it works, not what's the mechanism, but what is, you know, what's the point. So, I would say the basic idea is that within these communities, people or members of these communities can get free access to goods and services against interest-free credit.

So, it's just a way for you to within certain contexts get stuff for free, but the community keeps track of that kind of resulting debt, and it regulates the access based on the user's current state, like how much debt they currently have, and also what they observe about this, you know, how whether this person gets back, whether they keep kind of keep free riding the system or not. So, let's take a toy model of this, and let's think of this as a kind of a ledger. So, there's a big book, and every page in this book corresponds to one of these communities.

In every community, you have one row per community member, and two columns. And the one is the credit column, and the other is the limit column. And the limit column says, you know, like for example, up here, this is work. Up here, we have Alice, and Alice currently has a limit for 200 units. This might be expressed in circles. This might be expressed in euros. Doesn't really matter for the sake of the example. So, she she has up to 200 units of credit she can get. And so, she can go to participating shops or other people in the community, and she might get stuff in advance for the value of up to 200.

And 150 for Bob. And the credit column tells us how what what is the actual how much of that limit are they actually using right now. So, in Alice's example, she's not actually owing the community anything. She's on the having side. She's on the She's a net creditor to this. So, it's minus 50. The community owes her. Whereas, Bob is hitting the limit. He has gotten as as much stuff for free as he could hope to. Um and that's basically it. It's I mean, basically, you know, if you think about circles, think about this book with one of these pages per per group, and the limit and the credit. And when you try

to send circles to people or buy something at the shop, we're basically asking, "What's left for you in terms of this limit?" And communities can now also uh um adapt these limits. That's a important part of this. And I should say like for those of you that are concerned about privacy, yes, Circles is currently very poor with respect to privacy. Um and no, even uh in theory like you don't need to have this all public. You know, you could do this with a zero-knowledge proof where you still just proving facts about people's behavior that inform the limit. It's not like the whole history and everybody every purchase of every person needs to be needs to be public.

But going back to my main point, the community can community might observe uh what people are doing and they might adjust the limits. So Alice here, because she's kind of an accredited and because she just keeps giving more to the community than she takes out, the community might decide, "Well, she seems pretty reliable. We're just going to up increase the limit for her, right?" Whereas Bob, who keeps kind of maxing out his his his free access to stuff and not paying it back, they might actually decrease it. They say like this is not how it works. It's about giving and giving back, taking and giving back, right? That's That's the only way that this can sort of work out in the end. So they might reduce it.

Uh and of course this so far has nothing to do with how the the app looks like, how we talk about Circles. So what's the connection with the Circles you know? It's that we are basically tokenizing this ledger, right? So in the app, here for example, you'll see oh here's the number of Circles you currently hold, these are the kind of personal Circles you hold, and this is what you can do, and this is the send limit, and so on and so on. But um it all is equivalently translatable into this ledger picture at all times. So for example, the one CSC per hour and the demurrage, I think of as a formula for raising that limit over time for you as a person.

So, that one CSC you can create every hour, that's basically, for example, the Gnosis community telling you over time that you can kind of have access to more and more goods. And trusting is a limit gate. So, if I, you know, if if if a community doesn't trust me, if I'm not a member of the community, it just means I have zero limit with respect to that grade. I think I need to hurry up. So, you know, the main point of this talk almost is that, you know, if it helps you, you can now always think that this Circles balance that I see in the app, I can always translate into who can have how much access to which kinds of goods in which community at what time.

And that's what it's all about. So, what Circles effectively does, it it gives people access to a peer-to-peer credit market, and the implication of this is that if we kind of think of the space of possible economic arrangements of communities, like what people can do together, then we have one area, which is the things they can do by only have working with euros and dollars, and then we have a strictly larger space that encompasses everything they could do with their current euros, but now much more than that, right? Based on giving each other this regulated, controlled, free form of access to goods and services.

And of course, optimizing over a strictly larger space can lead to better solutions, which is um the root source of the of these different value propositions. Giving communities a tool to get more done, right? To unlock economic potential, uh to boost resilience, etc. Right. So, I hope this doesn't confuse you even more. Uh it's meant to simplify uh Circles, I hope. I'm going to check on Discord whether there's more or less uh you know, Discord questions around points about confusion.

Anyway, so, quick history historical sketch. Of course, we're not the first to have this idea. So, this is actually very old. You might even argue that we're mimicking the way that, you know, kind of bands and clicks and communities have been operating forever already, right? We're just learning from uh smaller groups and trying to see how we can we scale this mode of operating uh up to thousands and millions of people. But more concretely, we could think of uh the early anarchists uh Pierre-Joseph Proudhon, I think, who came up with this concept of mutualism and a bank uh in France in the 18 uh 40s that was going to organize peer-to-peer credit without interest and without

intermediary. There's uh the diplomat uh Mitchell Innes who's coined the term credit theory of money. Um and his description is A's money is B's debt to him and when B pays his debt, A's money disappears, which is of course kind of mimics uh what what I described. There's uh another engineer actually, Douglas, who proposed the idea of social credit as a mechanism. And of course, we have since the 1930s several uh different schemes of mutual credit systems that um have been operating. So, the WIR is the most notorious example.

60,000 and more SMBs in Switzerland are part of it. And the last number I could found is 1 and 1/2 billion uh Swiss franc in volume um in in turnover. Uh purely a mutual credit system based on these on these um I mean, it's a B2B protocol, but basically operating like I described you above. So, so much for theory, how to get going. The easiest answer is via the Gnosis app. So, if you want to participate in that, if you want to use Circles, download Gnosis app uh and um you know, create an account and join communities. So, what you can do in the Gnosis app is you can do exactly what I just described. There's a reputation

mechanism. Um so, you try to bring up your reputation and of course reputation is going to be linked to how many people vouch for you and how you behave with with the community money that is G- called GCS. It's the Gnosis CSC. And the higher your reputation, the more of these you can create. And then you can spend them on shops on office within the shop. You can even spend them with Gnosis um Gnosis Pay, the card product. And on top you can join all kinds of communities that all accept the Gnosis CSC.

If you're a community and, you know, you dig Gnosis app, it's great, but there's a use case that you want to realize that, you know, requires a functionality you don't have in the Gnosis app, well, we got your back because we uh have extensive documentation and technical support to allow different communities to build their own interfaces around Circles that integrate with the Gnosis app. So, you kind of have the best of both worlds. You can give the members of the community the Gnosis app as the day-to-day wallet or I shouldn't say wallet. It's a day-to-day money app um to do spendings, but they kind of integrate with the community that you're in, which I think is really cool. We have a current hackathon going on and here's some examples of community

contributions. Um if you're interested, here's uh world.gnosis.io. It's kind of like a starting point. Um so, it dis- it contains descriptions for how to build a mini app, how to create a community currency, and some other things that we're doing. And yeah, that's it. So, for those of you that don't have an account yet on Circles, um please create it there, find us at the Gnosis Garden, or at the Gnosis booth. And if there's any questions, I'm happy to answer them.

>> Thank you, Paul. We have a 5-second a 5 minutes for questions. Please, go ahead. >> 5 seconds? >> 5 seconds. You have 5 seconds. >> I have this problem when in my mind to visualize when I pay for ice cream with circles. Am I overpaying or underpaying? Am I on the right on price? How how to solve this in my mind? >> Um all right, let me make sure I answer the question I get the question. Are you talking from the point of view of these limits?

Or or you know, I I >> How how much does it does it cost one ice cream in circles? >> see. So, this is simple because you paid in no Cicles in this community currency that you're creating. Yeah. And this has a price of 1 euro cent per GCSE right now. So, you paid 25, I think, or 20 10 cents for your ice cream. So, you're totally underpaying. >> I'm underpaying. >> Yes. We We It's It's a gift. >> But but how how So, I need to convert to euro again to to just to to figure out the price.

Is there a way that in my mind I can not go through euro? >> This is Yeah, I I mean, that's a good question. So, I mean, Cicles there's a reason why Cicles isn't conceived as with a sort of hard-coded pegging mechanism to some currency, right? So, Cicles is a language uh for people to write their own community currencies. And these communities can decide to just not create liquid- liquidity for this token and to make it fully self-contained. And then the question, we know how much how much euros did I just pay by sending this community currency is is

ill-defined. There is just no price for that community currency. But of course other communities might decide like we did at gnosis to create liquidity for that token and that gives it a price and that's because I can that's why I can answer your question. So you paid the euro equivalent of 10 cents buying this ice cream. But we that's just because they there's this liquidity. Right? So different communities can decide what do they want? Do they want to go you know, the ambitious route of saying this has nothing to do with euros or dollars or anything. It's just our own internal accounting tool for this credit thing and that's totally possible and fine.

And you can go I mean sort of the slightly less ambitious route and have this liquidity. Why would I say it's less ambitious? It's because it helps a lot for people to you know, think about what just happened. What's the value of this? It's just something that people are more used to. To ask to be able to ask the question. So Circles is open for both routes. Um and you know, every community has to decide how they want to do it. There's another one. Somebody's coming.

>> Yeah, just to follow up this. So if I'm part of two groups with two different circles. One is valued about a euro, the other is a cent. Uh I have I I can't uh exchange my circles one to the other or how is it managed internally? >> Yeah, there is an I mean there's an implicit sort of arbitrage opportunity if people are parts of communities with very different prices. So in fact um I mean yeah, so that I mean I didn't talk about the the the full mechanics of Circles.

But in certain situation there's an arbitrage window. So for example, um if uh you know for example, if if even individuals circles can have a price. So that's what I called I talked about backing at the beginning, right? So by being a backer I actually can create a pool for my own personal circles against dollars or GNO. And then there are intuitive rules such as if if somebody trusts me which I mean so if if lots of people vouch for me, that can never mean that my equilibrium price goes down. Can only go up. And so there are kind of like constraints on the equilibrium prices between different people's circles that

depend on this trust network. So you're totally right, a situation like that wouldn't be very stable. >> Yes, we have time for one more question and 5 seconds reply. >> Thank you. I got a question about the social credit score. Reminds me of an episode of Black Mirror that I watched and of China that everyone's kind of terrified about. Why why should this be any different? We talk about people or you talk about people, you know, objectively measuring each other, but that's not how people work. People follow each other. Some people shout about how great they are when they're not. Other people are great but they don't talk about it at all.

How can this really work in in reality and and on and on any any degree of scale as well? >> Yeah, so I mean I think I mean I totally hear you and you're not the first one to bring up Black Mirror. Um but I think what we're trying to do is we're trying to explore a spectrum here where I think we money as it is today it sits on one end of the spectrum. And on the other end of the spectrum is sort of how I operate with my family, right? Which is like very multi-dimensional, goes over years, and you know you kind of roughly keep track, some things you forget. And every community in theory can I mean this whole formula I mean in my picture of limits, every community every person in fact can have their own implicit formula for updating. So, yes,

Gnosis we're kind of like exploit like we're conquering the spectrum starting you know, we're trying to make it somewhat more sophisticated than just this one number by because the the the the social score is more more multifaceted than just your balance, right? There's already kind of a two step process here. You have a balance and then you create some of these CSC. But of course, a if there are other communities that are more tightly knit, they could totally introduce a formula that is um even more multifaceted and doesn't even use um any single score.

Sorry, I don't feel like it's a very good answer, but um yeah um I hear your point. We have to navigate this sort of uh simplicity from of the user interface with kind of the ambition of the protocol in the end and we went with this one score. I think it's a step up from just having your your Euro balance, but um it also depends on, you know, how's the score calculated, what's public information about it, um and it's the best answer I can I can give you right now. >> Okay. Thank you, Paul. Thanks. I think you can continue the conversation in