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Yoni Assia, eToro CEO and father of the GoodDollar movement, sat down with The Defiant Weekly’s Robin Schmidt to talk about why he believes digital UBI can change the world.
Below are some selected extracts from the interview, edited for length. Or watch it all here.
Robin Schmidt: What I thought was really interesting was the blog you wrote back in 2008, which was the origin of the GoodDollar story, called “The Visible Hand“. And I wonder if you could talk me through some of the ideas there.
Yoni Assia: So back in 2008, I was front-row-seat into the global financial crisis…And what we saw is, everything froze. The system just didn’t work anymore…You went to sleep, trying to figure out if when you wake up in the morning, the money you had in the bank is still there. And at that point, I realized how broken the current financial services system is…And at the same time, I took passion to the fact that something wrong is happening, because if you look at the global financial crisis, the distribution of wealth got completely skewed…The rich get richer, and the poor get poorer.
And I realized that the reason for that is really how the system works…If you’re now very wealthy, and suddenly interest rates are going up, then you make a lot of money just on interest rates. You don’t need to do anything. You just make money on interest rates without needing to sort of contribute to society at all, just by having your money sit in a bank. Where in my view it should be the opposite: people who actually have more money, should get lower interest rates, especially on an absolute number, and people who have less should get more, because those are the people who need it the most…In my view, that is a more fair economic framework than the one that exists today.
Robin Schmidt: So the obvious issue here is, firstly, privacy…And secondly, if you are indeed wealthy, you can game the system. You can obfuscate money, and you can split it into multiple wallets. Did you ever go as far as thinking about ways to safeguard against gamification?
Yoni Assia: Gamification, definitely…So the GoodDollar protocol, I started writing it in 2008. Then came Bitcoin. I got early into Bitcoin because of my fascination around the GoodDollar. Then came Ethereum and smart contracts that led to the birth eventually of us developing the GoodDollar…Every person in the world can open a wallet and every day claim G$s. Everybody in the world can actually start educating themselves about digital currencies. They get an ERC-20 token for free, and they can experiment with it, which improves financial education and financial inclusion.
And…we’re doing a hash of face identification. So that way, you can’t really game the system. We take a face identification, and we hash it so your privacy is maintained. But we know that every person in the world can have only one GoodDollar account to claim G$s. So we definitely did think about that…So, as long as every person opens one GoodDollar account and claims for one GoodDollar account, based on face recognition, and the fact also that GoodDollar to start with is giving only…(a small amount of) money every time…which means there is really no point in trying to gamify the system from the outset.
Those two together basically build something that’s relatively resilient to gaming.
Robin Schmidt: So let’s get into GoodDollar itself and the mechanics of it. So, on the site, you say it uses free market forces and the principles of social investing to create this stream of free digital currency…It says anyone can receive real free reserve-backed crypto straight to your phone so you don’t need to invest in order to participate and learn. This sounds too good to be true. How does it work?
Yoni Assia: So first let’s understand…eventually I believe that this structure can solve financial inequality. I believe in Universal Basic Income as a concept and that everybody around the world should be able to participate in the digital economy. But trying to solve for inequality is a very big problem. So, we tried to say, okay, let’s look at a three-step process.
First, financial education. I think every person in the world, billions of people, should have the ability to have a blockchain-based digital asset in a noncustodial wallet for free. Everybody should be able to experiment with digital assets. And that’s the first pillar we’ve built…Every person in the world can go into GoodDollar.org and start claiming G$s and send and receive to everybody around the world and that doesn’t have any cost basis. So that’s for sure not too good to be true. Everybody can do that.
Second, there is financial inclusion. If you assume this is a decentralized autonomous organization (DAO) that’s running these smart contracts, then anybody around the world can now claim these G$s. And again, this is all blockchain-based, it’s a protocol. And again, not too good to be true and already happening.
And the third is value. And I call this hacking value…If you think about currency in general, currency is a concept — it’s our belief. When people in Israel use the shekels, or in the US dollars, or in Europe euros, they believe in the value of the currency and that’s really what’s running the economy. Everybody’s belief in the currency. What is Bitcoin? Bitcoin is belief, Bitcoin is the belief that it is important to have a deflationary asset that is a store of value…Supply and demand is based on belief. So let’s give you an example. So G$s today are obviously very far from 1 G$ equals $1. But if somebody believes in the ecosystem. Let’s say…Apple says anything you want to buy from Apple, you can buy in one G$ equals $1 in these countries. They automatically now peg the value of G$ to the dollar, right? And that’s a decision of one company to do.
Now this entire infrastructure is based on a reserve system. So…we at eToro are…staking into the GoodDollar protocol – we’re staking a million dollars. Those million dollars generate yield through (protocols) like Compound and Aave. That yield gets into the reserve and it increases the value of the G$. We at eToro, we don’t risk money. We just waive our right to interest rate (payments)…If you’re willing to waive those interest rates — that yield — and give it to the GoodDollar, you’re not risking your funds. You’re just waiving your interest rate and that interest rate goes into the reserve, increasing the value of G$ for anybody who holds G$.
People can…buy G$ from the reserve, in ETH or cDai, and then they add money into the reserve. They get G$s, but then the reserve increases as well, and therefore again, G$ prices increase.
So there’s two parts for how we create value to the G$. One is by usage. The more people (who) use G$ to sell goods and services, to buy goods and services, that automatically creates value. I’m sure a lot of people understand token economics today…The more volume and velocity you have in an ecosystem, it actually generates value to the token itself. So, the more people who buy and sell in G$, actually generate (more) good. It increases the value of G$…for everybody collecting and claiming every day…And the reserve is a fractional reserve – the more money you have in reserve…increases the price of G$ a bit more. So, we’ve built something that potentially can scale.
I used to give this as an example…if somebody like Elon Musk or Mark Zuckerberg decided to put $5 billion dollars into the GoodDollar, that would automatically scale the entire GoodDollar economy and value to actually provide for hundreds of millions of dollars of universal basic income every year to people who claim it. So, it has that leverage effect…In our view, this is hacking something that exists today – it’s called fractional reserve banking. That’s how the entire economy works — on fractional reserves…It’s a parallel economy and if people want to actually stake or donate money into that smart contract, it can increase the value of G$s for everybody who owns G$, (or) uses G$s for buying and selling services.
Robin Schmidt: …We were looking at a stablecoin today that’s just been launched on the Tron network. It’s called US Double D…Are you interested in looking at things like that? Maybe Anchor protocol on UST to generate a faster rate of interest?…You’ve got USDC and DAI on Compound here. They’re not the best rates of interest out there. And things like Anchor could provide a better rate of interest and get more into the system faster.
Yoni Assia: So, first of all, the team itself and the GoodDAO, the decentralized autonomous organization, can define which protocol they add as the next protocol to generate yield. But…my grandfather came from banking and maybe because of that I’m a bit conservative. He used to tell me whenever a yield is double-digit, and somebody’s promising you something that’s double-digit, just make sure you really understand the risks. So yield and risk – risk and return – (are) very much the two sides of the same coin. And when there (are) double-digit returns or significant APYs on anything you look at, you need to ask yourself, What’s the other side of the coin? What’s the risk here? And when we looked at what we wanted to do in order to build the reserve, we said we wanted people who actually invested in the reserve to not have the risk of the reserve disappearing. And because of that we were conservative as to what yield-generation protocols the GoodDollar reserve goes into.
Robin Schmidt: So, the big question that’s sitting in the back of my mind is how do you onboard people into the system? Because your target market really is people who probably have no exposure to crypto, and they might have a phone, but it’s a hard sell, I think, to get them in. Just to make that first initial step.
Yoni Assia: So you know, we have over 400,000 people who already opened wallets, we have about 70,000 people who are claiming. I think for us now it’s creating the ecosystem so people can see the real value. We have amazing stories. We’re trying to tell those stories over Twitter, over social media. We had people who claimed G$ for a while to actually pay for tuition in Nigeria, for university in Nigeria. We had stories actually in Israel, we’re working with a food kitchen…So we and the community are basically promoting a lot of these stories of how people can actually use G$s to receive sort of philanthropic goods and services or things that … everybody says are very good things to consume. But again, I think that the process is about hacking value. How do we make sure more people buy and sell goods and services in G$? Then on the other hand, how do we promote GoodDollar to more people who have wealth, who are willing to stake into the GoodDollar to increase the value of G$ for everyone?
Robin Schmidt: So that really brings us full circle to one of the big criticisms of UBI, which is that if you make it too easy for people to get money, then they will suddenly become lazy and entitled and won’t work for it anymore.
Yoni Assia: We did very interesting simulations in the GoodDollar. First of all, right now collecting 30 or 40 G$ a day is several cents a day. So, I don’t think you’re becoming lazy when you collect several cents a day…If you are collecting a few cents every day and you continue to collect a few cents every day, you probably need those few cents every day, so go and collect it.
If you think, at scale, of GoodDollar increasing from x cents, to 10x cents, to 100x cents…people really need this. So, if people suddenly claim half a dollar a day, $2 a day – which at scale I truly believe can happen. At $2 a day – there’s a billion people today who live on under $2 a day. The people who will actually collect the $2 a day are people who live on under $2 a day, so let them live and participate in the economy…If you tell me, what if this creates $5,000 a month? But that’s not the case. When you build something bottom up…you’re trying to first reach the people who are left out of the system – who were not a part of this system at all – and you say here’s 20 cents or here’s $1 a day. I don’t think that argument against UBI has any merit at all.Back to Blog
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