Why All Universal Basic Income Systems Fail

*This post began as a comment to this article:* UBI Is Usually Economic Insanity

*...then I realized my comment had become larger than the original post...*

I find that your post primarily speaks on the subject of distribution and why government is a bad idea for UBI. However, government or non-government backed UBI is not the real issue with UBI. The problem is that your usual UBI system has shitcoin mechanics. 

Let's say you and I agree to make a UBI blockchain right now. We'll call it Equalcoin. Yay for equality! Every month people check in with Equalcoin to get their equalcoins and spend them. Because Equalcoin is all about being equal, everybody gets exactly 1000 equalcoins.

For some very odd and troublesome reason, we'll likely see a gradual drop off in people even bothering to get their 1000 equalcoins. Don't believe me? Cool, why don't you go check out the Manna project and see how well it is ranking on Coinmarketcap.com. Here's a hint, its definitely not in the top 100. Why is this? I can't tell you for a fact why this happens, but there seems to be a consistent trend when it comes to money: people value unequally distributed assets.

Let's say you did an airdrop for your specific blockchain project. I can confidently say that you will do better with your coin if you vary the amounts you give out. To some 50 coins, others 500, others 5 and a very small number of people get 5000. Why does this happen?

You actually bought something from all those people when you performed the airdrop. From the people you sent 5 coins to you only bought their *attention*, but from those you gave 50 to you bought their *excitement*, while you bought from those that received 500 *loyalty*, and from those with 5000 *extreme loyalty*.

Now, if you gave everyone in the world 5 coins exactly, what do you think would happen? My bet, no one would care about your coin, just like you see happening with Manna. This is because humans struggle to think outside of social hierarchies. They want what others have that they themselves do not have and if they have something others do not have it makes them feel good about themselves.

UBI and other similar concepts keep failing to work because it just doesn't match with what motivates the human psyche. Disparities, tragically, match with human nature and the human desire to climb some form of a social ladder. In other words, you only want to have a level 79 Dark Elf Lord char because most people can't seem to obtain it. Give everybody a level 79 Dark Elf Lord from age 18 for free and nobody will play your game.

This happened with the game Star Wars Galxies. Jedi was this mysterious, rare type of "profession" you could unlock by performing unknown feats, yet then people whined that there was no immediate jedi option. The idiots gave them jedi at start, and it was the beginning of the end. Do that with money and you won't have created dollars, you'll just have dollhairs...

Okay, so does this mean UBI can NEVER EVER work? Not necessarily... Let's think about it some more.

A government controlled UBI is the devil. A government created UBI system will have long-term problems. One problem is that governments always grow beyond their original mandate and seek ever increasing control over its population and indeed other national populations as we see happening with the weaponization of USD.

Government UBIs will almost certainly have strings attached, such as scenarios wherein people get all their purchases spied on and UBI payouts somehow become used for punishing behavior the government does not like. Even if it does not happen initially, at some point a high ranking individual will think of a use case where they would like to have that lever available to them.

So, yeah, UBI must, MUST, MMMUUUUSSST be decentralized!

However, UBI on a blockchain only works if it has immediate usefulness (e.g. you can pay bills with it) from day #1. This is a problem, because no cryptocurrency ever has immediate usefulness, not even Ethereum. As a "utility token" for handling smart contracts, sure, but not paying bills. Well, damn... If that is so, how can you do UBI on a blockchain?

Here's how...

UBI on a blockchain has to start from the very beginning by either having support from major grocers, clothing stores, housing companies and pretty much all walks of the economy OR it could simply have support from governments as a means of paying taxes.

People are saying "tax is theft" and I agree for most taxes. These days the IRS wants a piece of the action if you swap your classic Nintendo for your buddy's wicked cool guitar. Yep, I definitely call that theft in the form of unlawful double taxation since you most likely bought your Nintendo with post-tax dollars.

However, *(somewhere is an anarchist calling me a statist for saying 'however')* there is one tax that actually makes sense for a government to charge: land tax. It is a logical fee for providing basic protections of your "capital" in a capitalistic environment, plus keeping you and your children and womenfolk from being raped and pillaged by the inevitable horde of raping pillagers. Look, that's just a historic fact of humanity, which happened not that long ago and modern piracy currently serves to remind us of this when we get a little high on our horses and believe that government serves absolutely no purpose at all. 

It is also the easiest tax to charge the public without any real possibility of evasion. After traveling abroad there is one cost I know we all must pay, which is the cost of having a place to sleep. Even if you rent, the person owning the land would simply add the cost of the land tax into the rental price. 

Okay, but what does land tax have to do with a decentralized UBI on a blockchain?

Governments Have A Few Problems:

Problem #1:
Tax fraud creates losses for local governments every year. If tax compliance were optimized then the state would be able to perform optimally.

Problem #2:
Nations as big as USA, China and Russia can manage quite well on their own if they needed to do so. However, lots of countries really depend upon import/export markets. As this need grew over time and international trading became the norm the US dollar grew stronger than ever. Why? One of the reasons is that every nation has absolute control over their currency, which makes their currency not a trustworthy store of value for the other countries.

Solution:

Solution #1:
Land tax is not something you can evade. You need to buy or rent a home, and being that it is an immobile asset tracking and enforcement of laws is quite easy. Land owners renting land out would simply pay the tax themselves and add the cost to the rental price.

Solution #2:
Nation states need stuff from other nations and their local businesses. Since the centralized nature of a national currency is the reason other nations can't trust that currency, a decentralized currency is a natural choice.

But what could a decentralized currency used by nation states for international trading as well as citizens of those nations base such a currency on? I suggest that land is the best method. Sure, there are drawbacks to this measure, but its also kind of the best one regardless.

Land is the primary resource nation states protect and so it has a logical connection to a currency. A state secures land and needs continual funds to do so, thus the land tax. Nations would value it because other nations value it, while national citizens would value it because their national government would accept it for payment of land tax.

Let's call this blockchain Metereum. The Metereum blockchain would require verification of being a unique human. No human could be allowed to have a duplicate ID, this would be essential to the system.

On Metereum, the governments don't receive currency that they get to distribute to their citizens, instead every human receives an equal amount of meters every month and pays land taxes with it or trades meters for other stuff. So, the government is dependent on the citizens in order to obtain meters, which they can trade with other states for steel, guns and all that fun stuff.

If governments could be motivated to value this currency enough to agree to accept it as a means of obtaining value from their citizens in the form of land tax, then this UBI currency would have very real value. However, how would you get the governments to value it enough to do that?

Some small states are already beginning to welcome cryptocurrencies as payment for business taxes. This shows that it is really not that difficult to motivate a government to accept payment with crypto. However, the currency can't start from $0, so there is a problem here.

So, now we have to go back to what I said earlier: UBI doesn't work because of human nature and game theory, so to launch this we need to apply human nature and game theory. We need the nations to compete for advantage.

Nations with large populations, wide land space or both will be the most attracted to this concept. Russia, China, India, USA, Argentina, Indonesia, Brazil and many other nations would all benefit from varied advantages compared to other nations due to larger human population or land mass.

Then you could provide a one-time airdrop to all the nations on the planet recognizing their human populations and square meter measurements. The nations favored from this assessment will like it more than the ones receiving less, but it will motivate the advantaged nations to use the currency and accept its use, while the disadvantaged nations will likely feel the need to accept it eventually.

Citizen Bidding Wars

Not a perfectly equal situation? I agree, but it gets better. This system will motivate a new form of competition among nations, something I would call a *citizen bidding war*. Life as a citizen may become better than ever if the nation states begin to realize that their income is directly correlated with their citizen retention rate. This tax competition already exists for corporations with many nation states touting a lower tax rate than other nation states in an effort to win lucrative corporations over to their area.

Imagine if nation states eagerly sought citizens in an effort to win them over to them. Then you would see states treating their citizens as customers to keep happy rather than cattle. It could potentially give birth to a new age of human rights and liberties policy.