Philip Rosedale Proposes Clever Tweak to Yang-Style UBI: Payments in Cryptocurrency that Quickly Decays in Value If Not Spent

Virtual economy pioneer Philip Rosedale recently unveiled a simulation which suggests that a universal basic income -- the kind recently popularized by Andrew Yang -- cannot ultimately prevent widening divides between rich and poor. 

However, that’s not the end of the story.

In a new simulation just posted on his newsletter, Rosedale proposes a pretty ingenious tweak to the UBI concept -- basically, fund the UBI with a transaction tax, and then pay out the UBI itself in a cryptocurrency that decays over time:

To simulate an ideal wealth tax in this simulation (which would have the appealing property of being easy to actually enact and impossible to avoid), you simply make money decay and fund a uniform dividend to everyone...

Using transaction taxes to fund a basic income is supported by real economists as well. This proposal from Economist William Gale at the Brookings institute is to use a 10% VAT tax to fund a basic income, for example. This Cato Institute Study agrees with the idea that consumption taxes are a better way to manage equity than wealth taxes. And political candidate Andrew Yang’s proposed ‘Freedom Dividend’ is funded by a combination of a 10% VAT and a carbon tax.

Creating a cryptocurrency for UBI that decays in value -- let’s call it “UBI Coin” for short -- incentivizes everyone to spend their UBI on goods and services as quickly as possible. This in turn plows more money into the economy, and prevents growing the rich/poor divide that a standard UBI model can cause. 

You can see this in Rosedale’s latest simulation of economic transactions which factors in UBI Coin, where the wealth of each economic player is represented by size and color (Green = rich, Blue = middle, Red = poor). Look:

Compare that to Philip's previous simulation of traditional UBI, where with every transaction, a handful of Greens rapidly become gargantuan, as most everyone else is impoverished. Watch below:

Rosedale, who supported Yang during the primacy race, tells me he’d love to present his proposal to UBI/cryptocurrency advocates like him -- especially as Philip's approach doesn’t necessarily require government approval or resources:

“I think [Yang] already knows that a sales-type tax could fund it since that's what he proposed," as he puts it.  "I guess the question is whether you could get it done any faster by running something independent, versus trying to get government to go for it. As with Bitcoin, so long as there isn't a central agency in control of the money supply (and the company doesn't offer exchange services), it's actually legal, too.”

Because Bitcoin and other proof-of-work cryptocurrencies have massive climate change issues, Philip recommends an alternative approach for creating UBI Coin:

“Since people would actually want to support something like this and it is (maybe) a really good thing. I bet people would run nodes for free. You can just use a simpler consensus algorithm that doesn't burn any power, and also set a max on the number of nodes at one time.” 

Read more about his proposal here. At its core, UBI Coin strikes me as a really worthwhile idea that should be tested. Implementation, as Philip acknowledges, is definitely the big challenge. (“One idea I had would be to use it in a tight-knit or geographically isolated community? Not sure but thinking about it.”)

Speaking for myself, another route might be to introduce UBI Coin to a virtual world/game economy, but also enable it for use in the real world. (IMVU did something similar to this recently with an Ethereum-based crypto.) The largest virtual worlds like Roblox, Rec Room, and VRChat have millions or even tens of millions of daily/monthly players. With enough traction, payment platforms would become interested in introducing UBI Coin as a payment option.

But really, the kind of groups who might want to try this, especially in these economically uncertain times, are countless.

“It's possible that if a community put up an app that did this it would go viral because it gives everyone an income,” Philip muses. 

“I mean that's the point, isn’t it? That basic income is better and what we all want.”

Comments

[Summer Haas]

Lets see the simulation where everyone gets $1000 a month UBI and all landlords simultaneously raise rent by $1000.

[Joey1058]

A crypto that decays in value if its not used is called a coupon with an expiration date. It's an interesting concept, but definitely needs testing before being released into the wild.

[irihapeti]

what joey said

it also doesn't answer the question of what happens when wealth is encoded in stuff. Like real estate for example. The way this is dealt with now is property tax - which is a wealth tax

a use it or loss mechanic will further drive the acquisition of stuff/property that holds (and/or increases) its denominated value

if or when that property is sold then a 10% transaction tax isn't going to curtail wealth growth to the same degree that property taxes do

[Captain Stupid]

I wish I was a multimillionaire who could sit around and procrastinate about how poor people shouldn't get anything based on some graphs I made when I was bored waiting for my next latte.