Crypto is redefining traditional business models and driving social innovation. At the centre of this reimagining, crypto entrepreneurs are exploring blockchain’s potential for fostering discord with fiat, including Universal Basic Income (UBI).
Bringing UBI into the fold of decentralised technologies has the potential to not only provide people with a better safety net and economic stability but greater financial autonomy; it forms the basis of an ambitious push toward more fair and inclusive versions of decentralised finance (DeFi), a development that should do much to accelerate global adoption of crypto. What is the relationship between crypto and universal basic income? Let’s break it down.
What is universal basic income?
Universal Basic Income (UBI) has, rapidly, become a widespread phenomenon, in recent years. It is being studied by international NGOs as a strategy to assist vulnerable populations, including refugees and rural communities, and trialled by governments as an alternative to legacy social welfare systems that grant recipients more autonomy. The COVID-19 pandemic has fueled interest in UBI. As governments, urgently, sought to aid those impacted by the health crisis and economic recession, UBI provided a way to do so quickly and with a reliable minimum guarantee. But what is UBI?
In principle, UBI provides a basic income lump-sum to everyone, universally, in place of food stamps, emergency care, unemployment pay, and work. A fundamental, guaranteed portion of a worker’s pay is received every pay period, regardless of reason or length of time. It seems that consistency, being regular receipts of some money, even lump-sum payments of small amounts to known contacts, could ease stressful uncertainties, when people are unsure if and when regular assistance will arrive.
Crypto universal basic income
Most contemporary governments agree that old-guard infrastructures are, simply, not up to the task anymore. The new paradigm for UBI demands cost-effectiveness, flexibility, and, perhaps, most importantly, transparency. Crypto-UBI could deliver this, potentially, solving old problems that involve low participation, bureaucratic inefficiency, and insufficient oversight. Here’s how key features of crypto could enhance UBI:
Decentralisation
So perhaps the most exciting use of blockchain for UBI would be harnessing decentralised scripting. For example, UBI initiatives could be managed through decentralised autonomous organisations (DAOs) or, in more high-level terms, beneficiaries might be able to play a stakeholder role in their administration. The creation of a poverty alleviation model in which beneficiaries manage the UBI on their own, without a central authority and with limited community involvement, would represent a new frontier. This could empower local communities to better address their challenges.
Efficiency
Blockchain also has the potential to make UBI systems more effective and less costly, as currently, fiat-based UBI systems can depend on intermediaries such as banks or payment processors, increasing fees and slowing transactions. Blockchain-based UBI systems eliminate these middlemen, potentially, reducing costs and ensuring that more funds reach the beneficiaries directly. Additionally, blockchain can expedite the transaction process.
Automation
Another key innovation of Web3 technologies is smart contracts which, although unfinished, are already up and running to drive all sorts of applications, such as decentralised exchanges (DEXs), DAOs, and DeFi protocols. They can automate UBI programs, which benefit not only from a reduction of costs but also from a boost to efficiency and a lower risk of human error.
Blockchain UBI benefits
Let’s examine some key benefits that blockchain technology can bring to UBI schemes:
Global Accessibility
Borderless cryptos would be, perfectly, suited to delivering UBI to all, wherever, they might be.
Financial Inclusion
Crypto could provide access to global capital markets for the world’s currently unbanked and underbanked This might be a common way for micro-organisations to use their crypto assets: distributing UBI to locals who might not, otherwise, have access to such payments from their governments because they don’t have traditional bank accounts.
Reducing Costs
Traditional welfare systems, often, incur high administrative costs. Crypto-based UBI programs could, significantly, lower these expenses, ensuring funds, directly, reach the intended recipients.
Transparent Transactions
Blockchain technology embraces transparency and traceability, reducing the risk of frauds and ensuring that different tiers of UBI payments are not eaten up en route to recipients by private hands and corrupted institutions.
What are some of the challenges?
Crypto offers several advantages for UBI programs, but they also face some challenges:
Regulatory Issues
For crypto-based UBI to enhance, rather than subvert freedom, they might require clear regulations, not just on the part of governments and regulatory bodies but elsewhere.
Volatility
The volatility of prices in crypto markets risks decimating the value of UBI payments over time.
Education
It would be doubly difficult to implement crypto-based UBI programs, if their recipients also needed to be educated about how to use and store digital assets.
Conclusion
Crypto-powered UBI could have transformative effects on economic and social welfare systems, and these initiatives could make financial movements more equitable and inclusive, in line with the decentralised, open, and secure ethos of crypto.
There’s a boldness to the social experiment of combining crypto and UBI, but there’s also a possibility that it could lead us towards, eventually, creating a world where economic power, money, income, and financial opportunity are rights and not privileges, for all. We hope to see more attempts in the coming years, as more organisations discover how to use blockchain and crypto for more effective and efficient UBI programs.
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