ETA: There have been some small changes made to this article since first published- typos fixed, a sentence or two rewritten to be more articulate, and some information about Mannabase added.
There’s been several articles and news bits out there about different cryptocurrency organizations offering a “Universal Basic Income” if you sign up with them. And while the idea of cryptocurrency certainly has a future as a functional currency, and that functional currency could be used for a UBI, we aren’t there yet. There’s a few key reasons why:
Cryptocurrency isn’t legal tender.
For something to be a truly effective universal basic income, you have to be able pay for basic things with it; like your rent, or utilities or food. Right now, there’s no cryptocurrency that does that. Yes, there’s a few specialized companies (usually technology-based) that accept Bitcoin or other cryptocurrency, but they are few, and none of them provide the fundamentals of living, which is what a UBI is supposed to cover.
Now, the counter argument to that is that you can convert your crypto into legal tender, but that doesn’t support it being a UBI, either. You can’t go to any bank or ATM and access your money- you have to go through specific gateways (always online) and go through a detailed process to get your bits and bytes converted into actual money you can use.
As an example, I have had a premium Second Life account for years. As a reward, Linden Labs gives me a weekly stipend of 300 Lindens- the Second Life currency. These Lindens were one of the original digital currencies; one of the progenitors of Bitcon and the rest. I can buy things within the system and I can spend real world dollars to buy more Lindens, or I can sell my Lindens on the Linden Exchange for real world dollars. Lindens only ever exist as a virtual thing; I can never walk around with a pocket full of Lindens.
But here’s the deal; the value of the Lindens (just like other cryptocurrencies) is based on the amount of trading that is happening on the LindX. One day my hoard of Lindens might be worth $100, the next it might only be worth $75, the next it might be $140. To get the best value out of my Lindens, I have to pay attention to the market. Which brings me to the second issue with crypto as UBI…
Cryptocurrency isn’t stable.
When someone hands me $100 US dollars, and I tuck it into my bank account or under my mattress or into a jar…when I open up that jar a month later, I will still have $100. Yes, the amount I can stretch that $100 may go up or down, but the amount of legal tender I have doesn’t change.
That’s not how cryptocurrency works. The value of your digital money does up or down based on how many people are buying and selling; just like Lindens, or the stock market. It is all speculative and reactive, a free-floating free market wonderland.
This makes it specifically bad for a UBI; people talk about UBI as a stable financial floor, a fundamentally uplifting foundation… but how can you provide a stable foundation, if the level of the floor keeps changing based on the whims of a market you have no real say in? When the person receiving the UBI can’t count on it having the same value when they go to cash out, as you said it had when you handed it to them? That’s the exact opposite of “stable financial baseline“. Given that Twitter and Google are both on the verge of banning cryptocurrency advertisements, that’s not going to help the value of cryptocurrencies, at all.
Cryptocurrency isn’t regulated.
For many of the cryptocurrency enthusiasts, this is one of the selling points; that there’s no government meddling in their financial exchanges. And that’s fine… except when you’re talking about providing a basic income to everyone for necessities. How is money coming into the system? Who’s deciding what the UBI distribution amount is, and why? Who’s making sure that people are getting the full legal tender value of their UBI? Who’s making sure no one is stealing bits and bytes? Or, like the latest news, who’s making sure those bits and bytes aren’t loaded with illegal things like kiddie porn?
Right now, cryptocurrency looks a whole lot like the tulpenmanie of the 1600s, or the South Sea Bubble of the 1700s. Someone has created a thing (electronic money), gotten people to buy into and invest in the thing, used that to drum up more excitement for the thing…until there’s more people wanting the thing than there is ever going to be thing, and it all implodes in one big financial mess. And, like the Wall Street crash of 2008, the people who get hurt the most are the normal, everyday people who invested their savings and were depending on that income to survive.
What we call UBI matters.
For something to be a true Universal Basic Income, it needs to meet some key requirements:
- It has to be universal. It needs to be accessible to everyone, regardless of access to the internet. Even though internet banking is ubiquitous now, it’s still possible to conduct basic financial transactions without ever using an ATM card or hopping online.
- It needs to be stable and not subject to random market fluctuation. There’s no point in calling for a stable financial baseline, if it isn’t going be a baseline in a functional legal currency. The rapid fluctuation of an exchange is different than basing something on GDP/GNP.
- It needs to be legal tender for all debts public and private. Requiring that you convert from your special money to legal tender is an accessibility barrier, and limits the usefulness of the currency you are distributing as a basic income.
It’s Not UBI
When some company says “We’re giving out cryptocurrency as a UBI!” they need to be able to answer some fundamental questions:
- Can you access your funds without the internet?
- Is there a buy-in? Does someone have to put real money into your system to get anything in return?
- Can this be used as legal tender for paying for the basic necessities of living?
- If not, how does a recipient convert your currency to legal tender that they can use? Are there fees involved in conversion?
- How do you guarantee that the basic income you give them remains stable and consistent- that $100 stays $100?
- Who is maintaining and regulating your currency?
Let’s look at Mannabase as an example, since they are the biggest newsmakers right now. According to their website:
Mannabase is an online platform for the world’s first
Universal Basic Income cryptocurrency.
So, how does their platform stack up to our UBI requirements?
Well, it fails the first one, right off. It’s not truly universal, because it requires access to the internet, and signing up for their program. They don’t appear to be means testing, but they also don’t say up front if you have to invest real money to be involved. If you have to put money in to get money out, it’s not really accessible to everyone, is it? Edited to Add: Evidently Mannabase claims to have about 10 years worth of money stored up to distribute, and you get your manna ‘for free, because it’s UBI’ without needing to put money into the system.
It’s not legal tender, and you’re limited to converting it though their exchanges, so there’s barriers to accessing your funds, and it can’t be used to buy gas, or pay rent, or stock your pantry. You have to be in their system to benefit, like a club. There’s nothing up front about any conversion fees.
It fails the stability test, because it says right there on the website that the “price is set by the free market on online exchanges”– meaning people are playing with the value of the money, and your “basic income” will change based on those forces. There are some things that should never be dictated by the whims of the free market. Healthcare is one of them, a stable basic income is another.
They also say that “Automated distributions send manna to all participants on a regular ongoing basis.” and that “…you have a basic human right to share in the money supply.” Not the nationwide legal tender money supply, just the money supply that they’ve created, that fluctuates based on how much people are speculating with that money.
The people maintaining, controlling & regulating the funds, are the managers of this NPO. This means the future of your basic income is in the hands of about 20 people, and whomever else is playing the exchange. You only get your “UBI” as long as people are playing the game.
There has to be some member provided money coming in; that may be in the “whitepaper” you have to give your name and email to them to receive. Otherwise they’re going to have tons of people signing up, and not enough money coming in, and suddenly your ‘automated distribution of manna’ works out to a few bucks a month… better leave it in the market so it’ll go up… oh look, a crash, and now you’ve got nada.
What you have in Mannabase is a group of people who’ve created a charitable NPO, who are converting real dollars to ‘manna’, buying and selling that manna back and forth (plus legal money influxes from a different NPO), and then regularly sending out manna to members. They’ve created their own money supply, and then are distributing portions of it to people in the loop, and occasionally giving money to charity. In a way, they’ve created a little micro-nation, and say they’re going to give some of their country’s money to all the citizens of their country, just for being there.
It’s not a bad system, but it just isn’t a UBI, no matter how much they want to call it that. It’s a profit sharing scheme that is going to be a draw for people who are already on the cryptocurrency/blockchain bandwagon. It’s not going to matter to the people who are in survival level jobs, or the disabled, or anyone who doesn’t have the time, energy and resources to play cryptocurrency roulette.
It might be a good pilot program for how a crypto-based UBI could work, if there was a single legal tender cryptocurrency, and if the basic income payout was guaranteed to be a stable, living expenses-based amount. But until we have that universality and stability, anything like this is just a closed-system experiment.
The end result is that the these blossoming crypto-account programs aren’t UBI, and calling them UBI is muddying the waters and confusing the efforts to build a real, based in legal currency & administered to everyone citizen’s social dividend.