Tuesday Project Spotlight: GoodDollar.org
Updated: Feb 25
Income inequality is a growing problem, particularly in the wake of the Covid-19 pandemic. A system in which “the rich get richer and the poor get poorer” is symptomatic of an economic model that does not work well, according to Yoni Assia, the chief executive officer of eToro (1).
Other economic models exist, including “Universal Basic Income,” or “UBI.” This model envisions a transfer of funds “that is provided universally, unconditionally, and in cash (2).” UBI has been piloted in various regions around the world, including the city of Stockton, California (3). A study of the Stockton UBI project found that recipients of a steady cash payment each month were healthier, happier, and more likely to find full-time employment (4).
Recognizing the potential success of this model, Assia and eToro set out to create a UBI model that does not rely on governmental involvement. Can blockchain technology offer a way to scale a global version of UBI? The GoodDollar project, grounded in decentralized finance, aims to find out.
GoodDollar.org, a nonprofit launched in 2018, is “on a mission to leverage new blockchain technologies to deliver a scalable, sustainable model to deliver basic income (5).” With an approach similar to endowments, GoodDollar utilizes interest to distribute UBI to “claimers” – those who apply for funds through its wallet app. Unlike endowments, however, interest earned on GoodDollar’s reserve funds does not go to the owners of the funds. Rather, it feeds into a monetary reserve that supports a cryptographic token called G$. Those whose investments generate the interest are rewarded with an amount of tokens in G$ equivalent to the interest their deposits have generated for the reserve.
Using the decentralized finance protocols Compound and Aave and the power of smart contracts, GoodDollar builds on the concepts of yield farming and liquidity mining to attract capital. As more people deposit capital to decentralized finance protocols and direct their interest to go to the GoodDollar ecosystem, more G$ tokens are minted. The tokens are then used for two purposes: to pay liquidity mining rewards to GoodDollar supporters and to generate basic income that is distributed to those who are verified claimers (6).
“More than 400,000 individuals living in every corner of the globe have already joined GoodDollar, and membership is increasing every day,” said GoodDollar co-founder Anna Stone. “Think about that: hundreds of thousands of people ignored or underserved by traditional finance have gained access to the digital economy and the wider world of DeFi through our protocol, with zero risk and zero cost. All they needed was a mobile phone and access to the Internet.”
To become claimers, users create accounts with the GoodDollar digital wallet. No bank account or government-issued ID is required. Claimers can use the G$ token in the GoodDollar Marketplace or exchange the token for other supported cryptocurrencies.
G$ tokens are minted relative to the amount of capital in reserve, so the value and utility of the token will increase as more “supporters, recipients and merchants” join this ecosystem (7).” In this way, GoodDollar is designed to scale globally and easily. In addition, by combining mining rewards and UBI, the project seeks to align incentives between the “stakers” (those who stake the capital necessary to finance the system) and the “claimers” (those who receive the G$ token as basic income).
Will GoodDollar succeed? It launched with the support of eToro, an established company and has distributed USD $85,000 worth of the token to date. The team hopes and expects this number to rise as more social-good-minded cryptocurrency owners learn about and join the project.
GoodDollar demonstrates a creative use of decentralized finance to advance a new global economic model. By using DeFi, GoodDollar is proving that blockchain technology’s open source, transparent nature can combine with smart contracts to promote social good around the world. If GoodDollar can make even a dent in the modern problem of income inequality, it is a project worth supporting.