Epicenter - Learn about Crypto, Blockchain, Ethereum, Bitcoin and Distributed Technologies - Martin Köppelmann: Circles – Creating Universal Basic Income Economies for Everyone

Episode Date: November 10, 2020

Circles UBI is a blockchain-based Universal Basic Income created to promote local economy within communities. It was recently launched on Ethereum’s POA network. The idea is to create a parallel economy by forming trust lines within Circles. Anyone who joins Circles receives a basic income regularly, without conditions. And the more connected your community is, the more valuable your Circles become. Also it is fully decentralized. What makes Circles special is that it doesn't market itself to anyone specific in crypto. It positions itself as an ecosystem and protocol that can help anyone create and promote a local economy within their local community. In the current economic crisis, this is a hugely powerful tool for societies to utilise. Martin Köppelmann, CEO of Gnosis, joins us for his third appearance on the show. He is also the creator of Circles and chats to us about why he believes the world needs this, and how the project works.Topics covered in this episode:What Universal Basic Income (UBI) is and Martin’s interest and support of itPros and cons of funding UBI through taxationExplaining Circles’ decentralized UBIHow ‘personal tokens’ work in CirclesIssuance and trust connectionsDealing with sybil attacksOn throughput limitsConditions attached to your accountHow UBI keeps up with inflationGetting started with CirclesAttracting non crypto users and driving demandCan Circles move onto Layer-2 - UX Design choicesLearn more about Circles and get involvedEpisode links: Circles UBI websiteCircles WhitepaperMartin on Epicenter - Episode 271, How the dxDAO could become the world’s largest organizationMartin on Epicenter - Episode 139, Gnosis – The Ethereum Prediction MarketFind Circles on MeetupCircles TwitterMartin TwitterSponsors: Algorand: Learn how to start building on Algorand – Free webinar on November 17th - https://algorand.com/epicenterThis episode is hosted by Brian Fabian Crain & Sunny Aggarwal. Show notes and listening options: epicenter.tv/365

This is Epicenter, episode 365, with guest, Martin Copelman. Hi, I'm Sebast Sinkwitio, 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 the Libre review on Apple Podcasts. If you're on a Mac or iOS device, the easiest way to do that is to go to epicenter.rocks slash Apple. Today our guest is Martin Copelman. Martin is the CEO of Gnosis and he's been on the show, well, this will be a third appearance. He was on the show way back in the early days of Gnosis and about

two years ago to talk about DX Dow. Well, he's back on today to talk about another project on which he's working and that is Circles UBI. Now, you may have heard of Circles UBI. I believe it's one of the most serious attempts in the space to create universal basic income-based economies on a blockchain. And there's a couple of really unique things about it. First, it's fully decentralized. So it doesn't leverage K.Y.C or any form of identity to prevent against civil attacks. And they've built in this really interesting and robust trust mechanism where you essentially kind of create webs of trust within the Circles UBI 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 X-Di, which is one-to-one peg of dye 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

depending on, you know, their neighbors and people in their community to shop and consume in their business. 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 airdrop 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 Al-Garand 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 Al-Garand. What's great about Al-Grand 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 Al-Garand.com slash epicenter. and sign up for the webinar next week. And with that, here's Brian and Sunny interviewing Martin Copelman. Hi and welcome. We're here today with Martin Copelman, who is on the show,

I think for the third time. He's, of course, the founder of Knozis, the prediction markets company that we've also had on the podcast before. He's worked on some other things like DX down, some trading, decentralized exchange technologies.

With Knoisse, they've worked on the SAVE, 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 Meadows 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. And this is the 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 FullNote with some people, a small team that had been working on that like two years ago maybe. So it's been germinating for a long time. But now Circus has kind of launched and is getting, you know, some traction, some usage.

And so, yeah, we wanted to have Martin on to dive into, UBI and circles in particular and how to 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 can find basic income.

interesting. It's enabling human potential, I guess, making the world a better place, making the world a safer place, making the world a more technological advanced place, making the world a more cultural, rich place. So, yeah, the idea is if people don't have to worry about their very basic needs, are not trapped in kind of being afraid to, yeah, not being able to pay their food and their rent, that people can, unleash their potential. And the UBI just seems the best way and the most efficient way to do that, just sets this basic floor where everyone can stand on and can thrive. Above that, yeah, you can have competitive economy or you can have market-based economy. But yeah, there's this basic floor where no one can fall below. that floor. That's roughly the idea of UBI.

So could you explain like what is a UBI in the first place and how is this different than, you know, welfare systems that we already have today in most countries? Yeah. No, I think I think universal basic income, UBI, the core ideas, the core idea is that simply everyone 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 you don't need any bureaucracy to decide, is this person legible?

You don't have weird rules that sometimes create perverse incentives. So if you have some welfare, sometimes 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 worse it. So in UBI is just a very, very simple concept of saying everyone gets a specific amount, probably a month or a week. That doesn't really matter. But it's simply continuously paid out to every, yeah, usually a citizen as long 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 say this in like comparison to, you know, I think UBI has become quite a, you know, everyday term now, thanks to like, you know, the U.S. presidential candidate Andrew Yang kind of like bringing it into the commonplace, at least here in the U.S. But his approach, 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 positive, even if this automation wasn't an issue, like even in today's world, where there is an abundance of jobs, you still think that the UBI is like a positive force.

And so what is the, can you talk a little bit about this? For sure. I mean, I see the automation as a wonderful thing. So, I mean, it basically means that people are free to do something else. 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, there is, 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, we need to make sure that we can produce stuff and that we, that we get things done, that we need to get done. Yeah. But the explicit goal to say, well, we need to make. that a human has something that they can spend their time on, that seems absurd to me. Of course, I understand where it's coming from. It's coming from, well, if people don't have an easy or kind of straightforward way

to get the income and so on. So 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. everyone gets what they want. That should be great. Yeah, so I saw this video by Bruce Fenton, like the other day on Twitter, where 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 as 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, if you give it to do wrong people, then you kind of end up in this bad situation, then I kind of understand how this makes sense. But 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 such a great vision. I mean, also one way to look at it is what, I mean, if you say, well, you shouldn't give it, you shouldn't give it to those people. So what is the consequence? I mean, like, let's be radical here

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, they will not, no one will disappear, no one, no one should die, no one should not have enough to eat. So somehow, and this is true already. So everyone or base, almost everyone living in the US living in Europe somehow has an income. So, so it is already, whatever the sauce is, but people are usually not starving and are usually not dying because they can't get an

income. So they get an income. So the difference is it's, of course, not unconditional. So right now, to get this income, you need to do things. You need to work. And basically what a basic income is doing is it's not even changing the fact that everyone gets at least this basic income. It just changes the fact that everyone gets it unconditional. So yes, you are in. taking away power from people who have money. 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.

So it gives you the option to, yeah, if a job is offered to negotiate, you have better bargaining position. but yeah again the people have incomes already one of the like very interesting things about ubi is it it seems to have as like a political goal is it seems to have pretty wide support from like all different 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 I think it's a very interesting thing that kind of breaks past the traditional, like, socialism, capitalism, capitalism, divide that we normally see in 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 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 I have definitely no issues with the nation

issued UBI. And of course, I would encourage that. And luckily, several states are, I mean, softly moving in this direction or at least talking about it. So 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, yeah, do things without nation states. So one way to look at circles is simply to say, well, we can get there quicker. We can just do it ourselves in a way. But another way to look at it is also, yeah, I do have my skepticism towards nation states. So kind of at least in my personal experience, the way my,

My life works, states play only probably a weird role because kind of my connections are definitely not along nation borders. So the way I, the people I interact with are definitely not kind of only people in Germany or something like that. So it does make sense to me to also organize, to organize something like a UBI across those personal connections that exist instead of those artificial nation borders. Algarans 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.

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page and watch the replay. We'd like to thank Al Garand for their support of the podcast. So maybe before we go into like understanding circles a little bit and, you know, the circles idea. You know, what do you hope will be the on the kind of like the broadest level that you can think? Like in if circles like fully succeeds, what do you hope the impact on the world will be? Well, the hope of UBI or the hopes of UBI are, well, get rid of property, again, have technological advancements because more people can kind of take risks, be entrepreneurs. So, yeah, I think the picture you could paint is pretty, it's my view, pretty amazing,

what could come out of UBI, yeah. Cool. Okay. well then let's let's dive into circles so like how i mean the idea of course is to reach many people here and so many of course also means many like non-crypto people and blockchain system is often hard to understand for non-crypto people so like in your efforts to like onboard people onto circles like how do you explain the system yeah i mean that is indeed something that varies very much from who you are talking to.

But one way is to describe circles as a tool to give communities or groups of people, this tool to give each other a UBI to organize within a group, a UBI. yeah, the dollar, the euro, whatever, and built a UBI on top. So we could have a state, yeah, the state organizes and builds the UBI on top. Or 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, yeah, directly implemented. And then the third narrative is from probably those who come, yeah, more from the Bitcoin world, for example,

or that at least no Bitcoin. here's the story goes, well, Bitcoin showed it is possible 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, well, there is an agreement about how it works, 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 money, but we want to design fair. We want to design the money that no one is specifically preferred.

And I think Bitcoin did that already to a large degree in the sense that it took away a lot of almost all political power 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 early adoption. So like if you look globally at Bitcoin or if you would see, well, 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, there's only a limited supply and no one controls it. Let's use this asset as the money. and they try to convince the other 99 this is it. I mean, that's basically how the situation today globally is on Bitcoin. So there 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 what we all should use. By the way, we already hold 90% of the tokens, but well, still, you had your chance. You could have joined earlier. So in a way, circles, That's, again, third way to look at circles is to say, well, we want this fair money, but we want to make it also fair in more dimensions.

So process of minting new money is, first of all, yeah, everyone benefits from that. And not even just like in space, so kind of across the whole world and not just in one area. But also in time. So also kind of the next generation of people who are born tomorrow, They are also benefiting from this money creation process or money minting in a way. Yeah, that's another way to look at circles. How do you drive adoption here? Like, you know, 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, you know, can I make up a lot of money off of this? Not really. So I'm not really, you know, I'm not going to really bother. And so the money-making opportunity for, like, early adopters of cryptocurrency was a large part of its, like, rapid adoption. And so how do you do that in here in circles without that sort of property? Yeah. I mean, there are two sides, two circles.

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 kind of convincing people but of course that's not it the second step is absolutely required that there are people who give or offer something for circles

and basically in a way take on risk with circles by like if you give out stuff and you kind of accept then this currency of course or just whatever you call it of course you then have have the risk, well, is this anything worse? Can I get something back in return? And here the idea is that you yourself have, to some extent, a very, very clear interest to signal that your

personal currency, and I guess we will come into this, but not every circle is equal, but then at least yours is worse something. And that, because if that is not the case, you will have issues that people will trust your money and that will also mean that you cannot spend your money. So you need to be, to some extent, credible in the... Other people would need to think that you are also willing to 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 house circles work. So can you explain to the... You mentioned this personal money and stuff. Could you talk us through how this works? Right. So, exactly. So circles is, yeah, we are calling the whole system circles,

but there is no such thing as one circle coin or kind of token or, but instead, everyone individually, yeah, kind of issues their own personal tokens. So as soon as you join the system, you can immediately start issuing your own personal tokens. Let's call mine margin circles. And you are constrained in like how fast you can issue them. So that is the same for everyone. So globally, the issuance rate is fixed on a specific schedule. Right.

But then they are, everyone has their own. But then for the user, we largely abstract away from that. So kind of if you are not super, if you don't want to understand it, fully, circles will look like in many cases that they are, you don't need to think about those differences. And that comes from 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 are willing to exchange their circles for your circle one to one. And really technical. So trust is directional. So that does 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 his circles in exchange or I'm always willing to exchange mine. And that is also how the system can scale.

So 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 civil 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 would be a shitty money system if you can only like buy a coffee from someone where there is already a trust connection so what those trust connections allow are transitive connections so yeah if I trust Brian and we trust each other and then Brian trusts again someone and again someone and then 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, under the hood, again, this is all abstracted from the user, can be abstracted. I sent my circles to Brian. Can exchange them for Brian's circles. Brian is forwarding or without his interaction because he already generally agreed to this trust connection. is forwarding his tokens, and again is forwarding his token. So as long as there is a trust connection and this connection needs to be liquid, that's a small detail that's important, then I can pay, yeah, whomever. And this whomever is then receiving circles from someone they directly know or they directly trust.

An analogy here, you know, maybe for people to understand. It's similar to Lightning Network in that sense, like this trust network where, but on Lightning, every channel has the same token, which is Bitcoin. Here, it's every channel is about a personal token, essentially. Exactly. But, yeah, the concept is the same. Or for people who are even longer around, the original concept of ripple was also very, very similar.

I'm not sure kind of how much ripple today. But yeah. Interledger sort of is, I think, the continuation of that original ripple that idea. Also, there's a project Trustlines in the Ethereum space. Exactly. I think what's an interesting, another way to think of it in the Ripple or Trustlines context is Interledger or Ripple. It was about taking debt. In Interledger, it's basically we keep this channel open between us where we say, hey, I owe you 0.1 Bitcoin.

I owe you point two Bitcoin, I owe you point three 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 rest of your life. Exactly. So, I mean, there are also voices to say that is a mutual credit system and it is, like it would be a different way to look at it. So if I have 100 circles, or let's say that's purely my UBI that was issued to me, so 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. And let's say that's 100 units. So everyone would be at zero. And as soon as, well, but I can, 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 spend those 100 units. Now I'm at minus 100 and you might be at plus 100. And it's just in a way, a different view on the same data to say everyone is at 100 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 pay it back. And if I'm at minus 100,

that the minus already expresses this expectation that eventually I should go back to zero. With circles, that expectation is to a lesser degree there. And that's really also about, yeah, the social contract of UBI. So in general, UBI says, yeah, you can, It's unconditional, so, 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 give value into the system. The question is just, does it help to, yeah, to kind of have, in the traditional financial system, to have the obligation to pay back the debt and kind of worst case, you need to go to jail or stuff like that? that or is there enough intrinsic motivation from people to, well, later produce just out of their intrinsic motivation value and do things? And of course, then offer those things to circuits, also for circuits or for money in general. One question that kind of came up for me thinking in this like trust context. So if UBI, one of 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 the slow threshold. But you know, once it's crossed, it's sort of people are kind of equal. Yeah. I mean, that's that that's that that is a good point. And that is a fair criticism we are sometimes facing and it really depends on yeah i guess the social consensus of houses play out so indeed it could play out that people only trust each other or kind of in a way enters 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 will very likely produce something, yeah, something valuable. But there is also this element if the social consensus shifts towards more UBI. So the UBI narrative prevails or kind of wins. And it becomes just the default behavior. If you say, yeah, 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 many people, or at least within a specific area or within 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 again, the tokens become much more fungible because now I suddenly have some tokens, let's say, like just go to the example from this whatever poor person that I never expect to provide anything useful. 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 if everyone kind of agrees to the scheme in a way,

well, yeah, that is money and I can spend it within this network, then I don't care too much what this specific person might offer or not offer. It's really then the network that, yeah, kind of carries people along within their network. Can you talk a little bit about how civil accounts are dealt with or handled in this system? Yeah, exactly. So that is again another perspective to look at circles is there are actually plenty or at least five to ten blockchain UBI projects that all have that shared goal. Let's just issue tokens and give it out per person. And as you're hinting, your question is hinting to the big problem each of those projects face is civil attack or kind of who decides who can join the network and how do you prevent someone from just creating 100 accounts.

And some or some of the other project then tried to come up with, yeah, you need to kind of upload your photo or do some KWC or whatever. But circles tried to stay completely decentralized, so have no central authority whatsoever that kind of decides who can join. But again, relies on this trust network. So again, how is it solved or how does it address the Sible problem? It boils down really to the social consensus that you only should trust a person once. So if I kind of somehow, well, potentially go on Twitter, but or just in my network to people I know, the social, the strong social consensus needs to be, I can create a circuits account, but only one. And as soon as someone would, yeah, would misbehave, people should not trust that person or at the very least, well, kind of only one of those accounts. what happens if someone does that?

So let's say I'm trying to cheat. So you guys are trusting me with my real account and that's all fine. But then now I cheat in addition. So I create 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 hundred fake accounts those hundred fake accounts can spend a small amount within the real network let's say was sunny because they are connected to me and i'm connected

to sunny so this fake person can take their fake tokens send them to me and i 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 real margin tokens. Because then the fake tokens, yeah, I mean, there is no liquid trust connection anymore. So all I got was that I now have the fake token from my own fake accounts, and they are not worse anything. So I didn't got any advantage by doing that.

And again, the system boils down to as long as people don't trust fake accounts, they are not affected by fake accounts. 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 swarm 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 this, you know, this. you know, this one channel there is, and that has this throughput limit, right, which is kind of the circles you have. So, yeah, that makes a lot of sense, right? And I think that'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 I'll trust me. How would these two groups even be able to realize that I have a duplicate account? Yeah, I mean, I think I wouldn't make the claim that that is impossible. Specifically, if you indeed would have kind of two completely distinct or like completely non-overlapping networks. But I would claim A, most people kind of.

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 their people. They have a personal and direct relationship or kind of their friends. So, yeah, I mean,

Cycles does assume some form of honest behavior within friends. But that being said, the damage that like if one out of 100 people or one out of thousand people does that anyhow and kind of might even succeed with that, the damage to the whole system is, I mean, that wouldn't be a problem. That's basically like maybe half a percent of all money is 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 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 see really different behavior. So one is obviously like your Twitter account is like if you tweeted publicly, then it's, well, then it's already harder for you to, if you use your normal,

like face and normal name on Twitter, then it's already pretty hard to say, to kind of deny that or to then create a second account. That's one way. But another way is, again, there are those much more local and much more non-blockchain, or very specifically in Berlin. We have groups where people just meet in person and it's much more personal and, yeah, there is this community where people know each other. And again, I think 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? Yeah, I mean, the throughput limit, I mean, again, different ways to look at it. You can say the 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 we again looking at this attack scenario, well, you can cancel trust connections. So, well, if you feel like you are kind of drained or the circles are just always drained immediately as the throughput or kind of as a new circuit they issued, for some reason you always end up with those circles and you can never spend them anywhere. Then it might happen that you kind of talk to the person, well, why can't I spend them anywhere? Why is no one else trusting you?

Why are you not offering anything? You know, an earlier version of the paper, I remember there was like this concept of validators. And it's really different than like, it's not like the same thing as like proof of stake validators. But then I noticed it was actually removed 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 those are things. So there were two concept of validators and groups.

Those were just two things that are possible to build on top. And we just decided, okay, let's have the pure, the purest kind of basic version. And if needed or if wanted, we can build those things on top. and those are ideas to make it more practical for businesses to, yeah, in some form accept circles. So if we look at a business, it's not obvious, like even if they want to accept circles and let's put 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 accept? So they could say, yeah, only the circles of the business owner. Well, I mean, that would be problematic because there are only so-and-so-many circles.

So kind of the total amount of circuits they could even potentially receive is limited. So somehow they need to decide what circles they accept. So maybe even in other words, whom's depth they are willing to accept. And here, yeah, there is the concept or there can be a concept of validators. or you could even call it like lists or something like that. So somehow there is a process 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 show your idea or whatever. And if you do that, you are on this list. And then kind of a business could subscribe to such a list or validator. and say, well, everyone, everyone who's part of this list, all of those circles I accept. And again, as the next step, that wouldn't mean that only people who are on this list can buy or can spend their circles.

But at least you need to be connected. You need, again, to have this liquid connection to someone who is on this list. So, yeah, I do actually imagine that, yeah, that those concept will. or that that will happen. Another way to think for these lists would be, would they kind of be like

these giant curve finance style pools? Like, you know, here's a list of all these people who are approved and, you know, it's this, and 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? Who's in that pool?

I mean, in a way, the trust network is already this kind of what gives you already the ability to exchange across a pool or a graph. So circles should

or in a densely connected network, all circles are basically equal because you can exchange or you find a pass from any circles to every other circles. But if there are kind of more those local groups that are not and the graph is more loosely

connected, yeah, then some connections might dry out of, dry out of liquidity. But to, from, from the business perspective, it's not, yeah, really about, it's not really about being able to exchange those, but it's just a question, which are they willing to hold? So which, what, in a way, again, debt 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 for it? I mean, this is also, it's amazing how much trust we have today in our dollars or euros. So we don't even think about that way that if we are selling something,

we are already taking the risk because we are already giving away the good. And we just receive this paper, or maybe not even paper, in the hope that we will eventually get something for it. Of course, we have so much trust in money that we don't perceive it as a risk. to sell something and to receive money. But yeah, in principle it is a risk to accept money. You know, kind of like speaking of AMMs, 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 margin token and send grind 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 out?

Yeah, so that can make sense. One way to look at it is also to say if there are like three or four different passes, you should choose the shortest. And currently there is not really, or I mean, currently it wouldn't matter. Even a long pass doesn't really cost you anything. So there are arguments clearly for such a system. but there is at least one point where I would argue against, or at least that's not my idea of circles,

is one way to interpret circles could be, it's really this personal tokens, and that's almost like equity in that person. 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 how educated or whatever, kind of, that could be one way to look at circles, but it's definitely not the way I look at circles or I would like to see circles. So I would definitely like to see more this perspective of UBI.

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 to. We've determined that this system is good in like fair over time because as people are born, you know, they can join the system. What happens when people die? If I die 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, no, good question. So there can be different social consensus around 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 are simply this dead man switch or kind of

this concept that if you don't poke your account at least every three months, then it will stop or then you will not be able to any, 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 to circle account, you know, I'm accumulating my circle. I have this like trust network. Then I'm going six months on, I don't know, backpacking around the world. And then my account is gone. 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 more circuits. So what you would need to do is, you would need to create a new account and basically tell all your friends, sorry, you can see,

here's my old account. It's frozen. So you can now securely trust the new account and know I, you can still trust the old account and you should because those Ryan circles should still be valid. But they would then also need to trust the new account if they want to give you, well, you kind of, yeah, except going forward. Okay. So I would still have the coins, the old coins, but that would need to create a new account to like start printing again or minting.

Yeah, I mean like technically speaking, an account is smart contract wallet and it's just a not safe actually. So that you still have access to and all the tokens that are in there you still have access to. but again, 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 is if people die, but to some extent it also deals with the problem. What if I lost my account? So if I just lost my key, I mean kind of any form of real.

activation is of course problematic because I mean who who is allowed to do that and and so on. So if you lost the key and there is no central authority, well, in general problem, but in circles, a simple answer would be, well, you should create a new account. And now, but 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's almost a necessary. Yeah, condition that they can be assured that your previous account cannot be, like suddenly mint tokens again, and now you get it twice.

So for you to kind of clearly say, see it's safe, this old one is deactivated, please do the new one. It's, yeah. So one of the things about 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 that UBI keeps up to pace with like inflation? Yeah, so exactly. So there is, so if the issuance rate would be fixed, And currently it starts at eight circles a day. So, yeah, to 40 roughly a month. And if that would be fixed, then indeed, as you said, kind of the total amount of money in circulation, giving a constant population would continuously increase over time.

But you could then argue the relative amount that's kind of newly minted or given out as a UBI would relative to the total amount, actually converge over a long time towards zero. 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 scale. And it would also raise, again, this fairness point. So like future generations would say, well, why would I kind of accept all those old circles compared to me getting very little?

I mean, like taken to the extreme, let's say 200 years, why should I kind of be it relevant that 200 years ago someone lived and issued Circles and why should I kind of honor that in a way? So Circles addresses this and there's a nice concept behind it from another project called Dunnitor relative theory of money. circuits addresses that by simply increasing the UBI by 7% a year. So in year one, it's 8 units per day. In year 2, it's 8 units plus 7% and so on and so on. So that means that the rate of new UBI will actually stabilize compared to the existing total money mass,

given a fixed population at, by the way, more or less exactly those 7%. That number is actually not too far away from money we are very used to, and that is the US dollar. So if you simply look at the monetary mass M1, and you look at the last 50 years, I think the increase of monetary mass or total dollars in circulation increased roughly by that 7%. I think it's slightly less 6% per year. Cool.

Well, a 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 and in a different times and contexts. So a lot of these graphs. 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, in some maybe poor place in Kenya versus, you know, in Berlin, some communities, you know, will those circles, do you think they will have different values in their local contexts? Yeah. So that really depends on how strongly, yeah, two graphs or, yeah, two graphs are connected. If there are 100 people in one, let's say in Berlin, and everyone is connected with everyone there, it's clear that all those circles are, basically fungible and will have the same value. Now, in another place, again, another 100 people are all connected with each other. Within this context, within the space, all those circles will have the same value.

Now, let's assume just one, or just out of those two groups, there's one trust connection. So kind of out of this one group and out of group two, those two people trust each other. So now for a very, very limited capacity, there is the capacity 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 makes a purchase or kind of in the other group, then money flows out of this group to the other group. But then this connection is dried out or any more money. money cannot flow, which effectively means that the two groups are basically disconnected at this point.

So if they are disconnected, of course, then value or then of course they would have effectively different values. If the groups are like more and more than somehow somehow connected and more people connect with each other, again, the value would also then equal. One question I'm curious about, you know, you've worked a lot on DOS and, you know, these ideas of DOS to, 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 DAO and like how what potential

outcomes there? I would not necessarily say circles itself would turn into a DAO, but clearly we are already working on yeah, basically a Circles Dow, basically a DAO that has the goal to to bring bring circuits forward. But I would be very, very 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 circuits that there is no governance. So you see that it's a protocol that's like defined and that's not going to change. Well, I mean, there is a lot of going to change at the edges.

So basically in the kind of 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 that is that is something that is, yeah, kind of worse discussing is the, or that could be a thing where, where people might have different opinions about is this is 7% other than that for example whether the issuance rate is 8 or 100 that doesn't really matter because i mean you can if you say the issue's rate should be one well just create an interface and and call it one or basically just create an alternative interface where you where you say kind of this is one unit you get per day it's just a different view on the on the same graph yeah i think that's really cool

one more comment it is indeed a nice side effect of circles also towards your Dow question it is a nice side effect of circles that you suddenly create so this public public peer-to-peer graph where everyone has a private key that alone is is something useful yeah that's powerful yeah exactly exactly so there are plenty of applications that can benefit or that that could kind of use this trust graph kind of as a basis to get started. So you could imagine a rating system. So anyone can kind of add a rating to the system.

But of course, then you have a civil attack problem. And I think that is a real problem today in today's world with comments, with ratings, whatever, they get spamped by bots. But if you filter it through this trust graph and say basically, Yeah, just, I follow the edges from, from, I have this local view or this relative view from my own perspective and I kind of wait, ratings, comments, whatever it is based on this graph. Yeah, that is a powerful, powerful tool in itself. Yeah, this is really cool because I'm 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 rating system for OpenBazaar that used like a web of trust reputation system 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 upon circles and I'm like,

oh, wait, this is so cool because this has, this is basically an 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 mechanisms, 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 the real world side is how do we, like, drive demand for this? And 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 or circleization 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 that is what we are currently preparing, is have local groups. It does for sure make most sense in a local context. So have a group of people in the same physical place that together want to start circles. And by the way, we already have, we are starting this list.

And 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 Buenos Aires in Shenzhen and whatever, really, really all all over the world. So that's a way to go to kind of organize locally. Our slogan is also kind of build your local economy. One really nice story I already have or we already have was someone who said, yeah, I'm a small landlord in Cadiz, in Spain. And I have here a few shops in my building. and because of corona they are struggling to pay the rent. So what I did is I said, okay, you can pay part of the rent in circles under the condition that you then in your shop accept circles.

And of course, those are kind of the perfect, yeah, kind of stories or ways, how we could imagine circles getting bootstrapped. And we are trying to develop this playbook of how to locally get, community going that, again, in a way, is giving each other this basic income because that's 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 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 takeaway from like the, you know, it's about what, three or four weeks

in now 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 my friends. I think it's currently 40,000 accounts. There were two parallel, fairly disconnected graphs. So we actually started it at a local event here, in Berlin, we had a meeting or a meetup, and that was already a process of months before that we talked to very different entities here.

And there was, there was an event with 50 people, and that was really kind of the, at the moment, Circles Network, the contract was deployed, technically speaking, the Circles launch. And those are people that are really not on crypto Twitter and kind of not really at all into crypto. And then at the same time, or a few, like, maybe 12 hours later, of course, or it went somewhat viral on Twitter. And there, yeah, I mean, there the graph was formed in a quite different way. So there the graph formed still, I think, largely still across people that know each other. But of course, knowing each other 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 how that will play out and kind of how meaningful those connections. So I guess Twitter connections can be. Of course, the things that can be sold, yeah, traded or exchanged digitally. I mean, there is, of course, things. And one experiment I will do soon is selling an NFT

or like digital art or whatever for circles. So of course there are things you can also. That's also a route for circles to go. But we are definitely very much also into the very local, very concrete, very down-to-earce, like stuff like urban gardening or farming or, yeah, that world. One of the most common things that has been said about, like circles after the launch was the U.S.

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 and again. What was the reason for not, like, integrating with, like, you know, common Web3 wallets and things like that? Yeah. I mean, I think, I think it really depends from what perspective you're looking. So for someone who is already in crypto, it was weird that we would not have whatever, mask support 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 a user that hasn't heard about crypto and has a phone can pay their coffee with circles 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 X-Dai. or I mean actually fund your account so that you that you I don't know pay your gas costs and so on so on this node circles is running on x-di it's basically an Ethereum clone or it's basically the same as Ethereum but with a simpler proof of authority consensus algorithm Who's paying the fees right now? Yeah so the fees are actually paid we have a relay.

relay network. So transactions are relayed and yeah, kind of the circle circle's wallet is is paying those gas fees in X-Dye, but are actually refunded in circles. So the user is paying some circles, some tiny amount of circles to the relay service and the relay service is paying the fees in X-Dai. Luckily, fees on X-Day are basically close to zero. So it's not not really a concern. But again, talking about the UX perspective, yeah, I mean, you can, I mean, of course, we got the, the messages from the crypto world that they would prefer kind of the MetaMarsk route. But again, I would argue ZUX in a way is, or made quite some steps. So because we are, again, abstracting all this signing of transactions, we are basically using

this burner style wallet. So your private key is, yeah, in your browser. So you can just press regular buttons in the app basically to send transactions without any pop-ups, metamask pop-ups or stuff like that. One last question from my side is, how does this work on, like, layer two system? So a circle system is like existing on X-Dai. You know, it's funny. Usually we think of Ethereum as layer one and then like X-Di 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 social graph pathways and everything were still stuck on the X-Dye chain? So how do I do that? Or how would I do this on like payment channels? Have you thought much about layer two systems? Yeah. So in general, I would say circles can scale quite well because you don't need that global state. you only care about your local state. So there are indeed scalability solutions like lightning or, yeah, equivalent would be

Raiden that would somewhat naturally fit for circles. The question of whether you can move your circles 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 the 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 circles. And indeed, the circles are, of course, much more helpful if you can exchange them, if you can do them along the trust connections.

But it's, of course, not unthinkable that you have some, I mean, even from a user perspective, that they have some tooling to just take all their trust connections. and kind of copy them to another system and say, yeah, I don't care if I exchange the circuits one-to-one here on this system or on that other system. Cool. Well, thanks so much for coming on, Martin. Maybe a final thing. If people want to get involved, they want to help out, they love this vision and, you know,

want to bring it to reality. What are the best ways to get involved? Oh, yeah. That is super important because also, for people to know circles is to this point has a very small core team. So it's a project that kind of was described already. I think the oldest description is seven years old. But so there is, I guess, a wider community of people who somehow followed it 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 five people and doesn't have any funding. It also doesn't have the interest to kind of go a venture-funded route. So, yeah, circles will very much depend on more people getting involved. The options are numerous. So, of course, everyone who is a developer is very welcome.

We are, or there is already the process starting to create alternative wallets, probably also wallets that are more crypto kind of more towards. the crypto users. So of course, it's in principle, of course, possible to use circles with MetaMask

or with other wallets. Yeah, that's number one. Number two is, again, we are various processes of finding local communities. And ideally,

there will be local meetup groups that, yeah, explore the option to start a local circles economy. So that will be number two.

Number three is we for sure are or will start launching circles down, just as another entity to follow and support and kind of basically take place in shaping development around circles. And then, of course, there is plenty of things, yeah, kind of social norms that need to be developed

or kind of, yeah, basically just discussion around what is the right use. and number five, just be experimental. So there are people that said, okay, let's start a round of poker with circles. I remember in the old kind of Bitcoin days, you had those people who did this experiment. I want to live one week only on Bitcoin. Eventually it was then a month and eventually it was a whole year traveling around the world. 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 eBay would sell their used, probably some used stuff. What I could very well imagine is an Airbnb alternative that you say, yeah, I rent out my apartment over the weekend for Circles. And by the way, here also this kind of idea of the trust line might be interesting because at least there is the connection that if a person comes, you can kind of through the circle payment see how you are. It can to some extent establish in some form of initial trust if you have those. Okay, I know them, over them, over them.

But yeah, so basically just find creative ways to use 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 signed up today. And actually, just now, finally, I think some of these trust authentication 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. 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, YouTube, 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.tv slash subscribe for a full list of places where you can watch and listen.

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