Hackinequality

Multi-disciplinary blockchain

HACKATHON

For reducing wealth inequality

Mind The Gap:

Widening Wealth Inequalities

The richest 26 people in the world have as much wealth

as the poorest 3.8 billion – half the world’s population (Oxfam).

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Problems on The Horizon

Wealth inequality: �is a barrier to realising potential. Some 94% of the world’s wealth is owned�by the richest 20% (Oxfam).

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What about income inequality?

• Some income inequality is needed to motivate people to work,�invest and initiate efficiently.
• The effect of income inequality�is harmful when it exceeds�a certain level.
• Inequality with Gini coefficient >0.27 is harmful.*
• The vast majority of countries and the global inequality are above 0.27. Far above optimal.

* A working paper - International Monetary Fund (2016)

Why Should We Be Worried About Inequality?

• Poverty - More inequality = more poor people.
• Cycle of Poverty - Poor can’t acquire education, skills, social connections, health. They have fewer opportunities and stay poor.
• Crime - If the society is divided between winners and losers, the losers won't play by the rules. Greater gaps between U.S. neighbourhoods led to more property crime (LSE study 2016). Strong correlations between inequality and violent crime (2002 World Bank paper).
• Political instability - In order to change the rules, losers may revolt in non-democratic countries or look for populist solutions and parties in democratic countries.

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What is wrong with Inequality

• Economic Crises
• 2008 Subprime Crisis The rich accumulated a lot of money in banks. The banks,�in search of uses for the money, lowered the thresholds for mortgages. Eventually, the borrowers couldn't repay because they were too poor. That ended in a crisis.
• Inequality among countries led to similar results. For example, the case of rich Germany and poor Greece (2009) and the South American debt crisis in the 1980s.
• Decreases GDP If the rich don't provide loans to the poor, they buy less stuff. This leads �to a recession and to a level of GDP as with the crisis, but years before. The rich have �a selfish motivation to reduce inequality.

Rise Of Technological Unemployment

Machines to displace 800 million

human workers – 20% of global

workforce – by 2030 (McKinsey Global Institute)

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"A lot of exciting new innovations … will make experimenting with ideas like basic income even more important in the years to come."

Richard Branson (Virgin Group founder)

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Planning A Better Future:

UBI Narrows Inequality Gap

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Universal basic income: revolutionary economic concept whereby

every individual is granted an equal, unconditional allowance

to cover basic needs

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UNIVERSAL BASIC INCOME IS BEING ADVOCATED

BY PROMINENT FIGURES

How UBI reduces Inequality

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If it gives everyone�the same?

An example:

How UBI reduces Inequality

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If it gives everyone�the same?

How UBI reduces Inequality

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If it gives everyone�the same?

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The Problem of UBI at the Global Level

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Dealing with Global inequality, �Critics argue that UBI distribution models that might work in the national level, are too complex to work globally.

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For example Harari. (47”-1:32”)

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Accessible

to anyone in

the world

Exchangeable to local currency

Low fees

on transaction

Smart

Mechanisms�for automatic contracts

Independent

from governments

Blockchain And Smart Contracts

New Opportunities:

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Blockchain-based technologies, including cryptocurrencies,�are redrawing what is possible.

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Thanks to exponential tech advances, UBI principles can �be adopted globally to help the poorest people of the world. ��

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Economic Model

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• Based on the GoodDollar (G$) cryptocurrency.
• Daily UBI of (free) G$.
• The sources for UBI are:
• Transaction fees.
• Mild monetary inflation (10% annually) = “Tax on holding G$”
• Donations

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All three are taking in larger part from the wealthier but redistributed equally.

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• Would reduce inequality among the users and worldwide.

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• To do so effectively, G$ must have a real value. And here we need you

Economic Model

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• Value of a new coin can arise from two major sources:

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1. Reserve / fractional reserve of another valuable cryptocurrency used �to buy back the G$. (e.g. Gold standard, Foreign Currency Reserve)

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• Utility from using G$ as a medium of exchange and a store of value.

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Economic Model

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Reserve / fractional reserve

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How can we prevent a run on the bank? �

1. Model of: Exchange rate pricing-rising price with diminishing reserve. Un-stable price!

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• Model of: Limiting access to exchange. Stable but less attractive.

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• Mixture of both, Your Ideas.

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Economic Model

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Utility from a medium of exchange can arise when:

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1. It’s easier/safer/better/cheaper to buy with G$. Ideas? �How to become the best payment method.�
2. There are things that can be bought or done only with G$. Ideas? (Market places, barter).�
3. G$ used as a complementary currency. Ideas?

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• Wherever there is unemployment caused by low demand & cash scarcity.�
• Your Ideas.

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Economic Model

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Unemployment of demand and cash scarcity

The Wörgl Experiment: Austria (1932-1933), “The miracle of Wörgl”.

• In the Great Depression, the small town of Wörgl, Austria.
• The mayor had projects to accomplish (re-paving the streets, making the water distribution system, planting trees along the streets and other much-needed repairs).
• People were willing and able to work, but the mayor had only 40,000 schillings in the bank.
• He put the money with a local savings bank as a reserve and issued Wörgl’s own 40,000 schilling’s worth of stamps then pay for the projects with stamps.
• People used the stamps to buy in local businesses providing work for others.
• Then they even pay their city taxes with the stamps so the town could have financed other projects.
• The new currency helped reduce unemployment, and many other communities followed.
• The experiment was terminated by Austria’s Central Bank in 1933.

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Economic Model

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Complementary Currency

JAPAN - Fureai Kippu ふれあい切符

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• People in Japan can accumulate credits for helping caring for their elderly people �and others in need, with day-to-day tasks like shopping, preparing food or ritual bath.
• Participants are then able to use this credits to serve their elderly needs or others�in their family, even if they live far away.
• Over 60,000 people use this system.
• In Switzerland – inspired by the Fureai Kippu. �

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Economic Model

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Many Others ...

• Greece - Volos - A complementary currency to mitigate the economic crisis.�It reduced unemployment. (1’ 26”)�
• Curitiba / Brazil – garbage and transportation
• Banco Palmas & Bangla-Pesa / Brazil – complementary currency, �to reduce unemployment and poverty.

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• �

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Economic Model

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We need your help with:

1. Model of avoiding run on the bank - Exchange pricing with reserve �or Model of Limiting access to exchange.�
2. How to invest the ETH in the reserve for yield with a decentralized system.�
3. How to make G$ an easier/safer/better mean of payment.�
4. Things that can be bought only with G$. (Market places, barter...)�
5. Uses and tools for G$ as a complementary currency. �
6. Models for places with unemployment & cash scarcity�(refugees camps, third world communities, Gaza strip...) �
7. Your Ideas of how to make G$ more valuable.

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How UBI reduces Inequality

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If it gives everyone�the same?

• Why not giving minimum wage only to the very poor?
• Today basic income benefits are given through a Means-tests,�so they target a selective group only. It might seem less costly in narrow budgetary terms but it has some serious disadvantages.
• Welfare states give universal basic health / education / child benefit / pension and more.

Criticism On Selective Benefits

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Mean Tests

• Taking means tests to prove one�is entitled to the benefit, may incur cost, humiliation and stigmas
• Bureaucracy required to control�and operate.
• Might encourage fraud and bribery.
• A poverty trap – motivates people�to remain poor, a single parent, pretend to be disabled, unemployed, etc. rather than integrate with the general, productive society.

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Criticism On Selective Benefits

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Not Fair

• There is no way to monitor user’s wealth or total income.
• Any formula based on proxy parameters would lead to frauds�or injustice.
• we can’t be sure if and how much�it is progressive.
• Could undermine the users trust�in the system.
• All the above may worsen with�a decentralised system.

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1. Could we avoid all the above with decentralised system? How?

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The Problem of UBI at the Global Level

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UBI is not selective, thus avoids all �these problems.

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Critics argue that UBI distribution models are too complex to organise�and manage globally. �For example Yuval Noah Harari. (47”-1:32”)

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Thanks to exponential tech advances, UBI principles can be adopted to help the poorest people of the world.

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How?