COINZ Official

Citizens Online Income New Zealand


Hi everyone,

It’s been busy due to events completely unrelated to digital currency. There have been many exciting developments (which we’ll fill you in on soon enough), but I’d like to mention a few things in passing.

-The Kiwicoin is really a digital complementary currency. The concept of demurrhage can solve some of the issues that plagued digital currencies before.

-The Freicoin project is a successful experiment in demurrhage, although the proof of work system is one I’m personally not as excited about when compared with proof of stake.

-Additionally, the sidechain concept proposed here is highly relevant to a digital currency.

More to follow, as we’ll be present at Bitcoin South.


The Positive Sum Finance of Basic Income

The Kiwicoin project I have initiated is designed to appeal to an often overlooked term in politics and finance: positive-sum games. The greatest economic innovations and inventions often benefit multiple parties at once, which is why they tend to be copied far and wide.

Savvy business people often recognized that positive sum solutions benefited them. However, zero-sum logic, or the idea that only one clade can dominate at the expense of others, has become more common. The irony is that the historical norm (and more common practice) is the adoption of positive sum solutions, whether intentionally or not. For example, Henry Ford paid his workers enough to purchase the cars they manufactured, thus ensuring he’d have plenty of demand for his products (and also ensuring positive relations with employees).

The basic income, at least our approach, offers multiple benefits for every sector of society. The poor and less affluent have another lifeline. The middle class has compensation for shrinking wages and the ability to pursue their own business or spend a bit more. The affluent get a bit more pocket change to invest or spend.

There are benefits to institutions as well. Governments can earn more indirectly from increased tax revenue. Financial institutions gain more money invested within them at a regular interval, as well as the digital currency having a constant store of value relative to other investments. Businesses, large and small, gain more consumer demand, as well as having more to invest in themselves. At the same time, the national economy becomes less fragile when dealing with international economic crises.

The digital currency itself is independent of the government, and thus little to no taxpayer funds are required. Likewise, even if the digital currency were to fail, it would give lessons for the next incarnation. The low capital requirements mean that it has a low barrier to entry. The point of the Kiwicoin is to demonstrate a digital currency solely for social investment, the greatest example of positive sum thinking.

Moving from Alpha

An alpha build of our Kiwicoin software exists, and we would prefer to expand outwards into a public beta. This will be a key period in the development of our Kiwicoin project. We thank you for your interested and support thus far, and we will let you know how things unfold.

Moving from Alpha

An alpha build of our Kiwicoin software exists, and we would prefer to expand outwards into a public beta. This will be a key period in the development of our Kiwicoin project. We thank you for your interested and support thus far, and we will let you know how things unfold.

Democratic Principles

Simply pegging the Kiwicoin to the NZ dollar is not enough. What is necessary is a reason for others to invest in it. This is why the secondary lair of software will be designed around another protocol: online direct democracy. A portion of COINZ’s reserves would be converted to cash each month, and much of this would be spent on things chosen by a direct election.

Everyone who holds a minimum balance of Kiwicoins for a period greater than a month (or other interval between payments) is eligible to vote in directly democratic elections on how to spend proceeds, as well as all verified adult NZ citizens and permanent residents. This is to ensure someone doesn’t simply by and dump a large load of Kiwicoins so they can manipulate a key vote. The idea of some kind of “political interest” on held Kiwicoin balances may be an interesting idea, but can also be fairly anti-democratic and supportive of corrupt interests. As such, we will largely try to avoid that.

The actual funds released by COINZ for the results of the election may be vetoed, if the Director and board find such a cause questionable. As such, here are some rules regarding how we plan to conduct elections. Please note this is NOT a comprehensive list, and is prone to changing in the future. The following rules refer to how COINZ will distribute funds with regards to proposed uses:

1) Eligible voters may submit one proposal per month, to be voted on by peers.
2) Proposals not responded to by a certain number of votes may be ignored.
3) Funds cannot be spent on activities contrary to the letter or spirit of NZ law, especially the Treaty of Waitangi.
4) Proposals cannot promote discrimination, advocate violence, or violate human rights documents, such as the UN Declaration of Human Rights, the Bill of Rights Act 1991, or similar laws.
5) Funds cannot be issued to an arbitrary individual or promote the election/ouster of a single individual.
6) Funds cannot be used to develop fossil fuel exploration or exploitation.
7) Funds cannot be used to build real estate, but things for community benefit may be considered.
8) COINZ may withhold funds for other reasons.

Expanded Geopolitics of an Online Basic Income

As covered previously, a digital basic income could be a potent geopolitical advantage, for both strategically “offensive” and “defensive” reasons. As a “defensive” measure, the benefits of UBI are well-documented and thoroughly covered, but there is also some other aspects of it.

Increasingly automation and robotics threatens the traditional livelihoods of even white-collar employees. A basic income would allow them to survive, as well as up-skill and apply their skills and experience to generate new economic sectors.

In an increasingly unstable global economy, a basic income allows a strong domestic market. One government (typically) cannot control global demand and supply for their key imports and exports, so a basic income backed strong local economy can act as a fallback to such instability.

Finally, there’s the “nuclear option,” if you will: Use of a digital currency pegged to a neighbor’s currency, but still able to operate due to the decentralized nature of digital currencies (heedless of said neighbor’s policy). It would mean that the “targeted” country’s residents have a reliable source of income (perhaps a directly democratic way of deciding how to spend said income’s surplus), independent of the current government. This means that such a government (and their currency’s value) would be at the mercy of the country initiating such a project.

The last case is particularly interesting, because it could be considered either a humanitarian project or a more cynical attempt to solidify economic relationships or both simultaneously. As such, I nickname an “offensive” basic income the “Hemlock Approach.”

The natural defense against the Hemlock Approach is in fact a domestic basic income. It means that independently of foreign efforts, you can offer a better service than your would-be rivals can. If both are engaged, inflation could result, but multiple sources of income are likely to mean citizens are more robust and prone to starting businesses, consuming, and raising living standards on their own.

Limitations on Cryptocurrency Pegs

It is tempting to believe that a peg between a digital currency and fiat one can be set arbitrary. At the same time, the novel nature of the Kiwicoin project means there is a substantial lack of relevant real world data. While similar projects like Peercoin and Gold Backed Coin can offer antecedents, we are traveling in uncharted territory.

Since the Kiwicoin is intended for New Zealand, many of the cryptocurrency exchanges here are registered as Financial Service Providers, and have limits on how much they can deposit per month. Our initial peg was devised after reviewing these limits, but also with other considerations: to allow for divisibility of our currency, to make a meaningful impact financially, to allow for extra space on both sides of the decimal point, and so on. We also have reserves that we will maintain in case of operational issues.

A peg, in the long term, many not necessarily be required, but at we are going to be deploying it as long as we can for the foreseeable future. Likewise, other countries and regions can learn from our implementation, and to adjust accordingly. We would advise any would be collaborators to mind things like their own country’s financial laws (especially among individual states in the EU and US), the existing cryptocurrency market, potential for misuse, and ways the system could fail. To understand a thing is to know how it can be destroyed, as well as how to repair it.

Of Dynamic Pegs and Digital Politics

A digital currency pegged to a fiat one sounds simple, but in practice can be very complex. For example, the Bitcoin and proof-of-work style communities are very decentralized and prone to volatility compared with other commodities. One of the issues with this is the 51% attack, when a single actor has control of 51% of the processing power of a network. As such, pegs would have to be agreed upon by all actors, something the decentralized network makes unlikely.

Proof-of-stake currencies (such as Peercoin), however, offer alternatives based on “stakeholders” of the currency itself. Interestingly, there is also proof-of-activity, a somewhat hybridized approach of the two. A 51% attack there is difficult and perhaps self destructive, and costlier than the proof-of-work concept. As far as a peg goes, the issue comes with finding people to uphold this, even when selling to each other (also highly unlikely).

The dynamic proof-of-stake structure proposed here offers some advantages. For one, we have a reserve account that represents a fixed portion of all currency of in circulation, updated on a regular basis. If something happens to one address corresponding to the reserve, the reserve simply shifts down the list. Our goal is that the reserve cannot be touched, save by software. If addresses become inactive, they are removed. If new addresses are added, they are accounted for each time the reserve updates.

The Kiwicoin project was built entirely around the idea of an exchange that automatically pegs itself at a particular rate to a fiat currency. A government could print more money to devalue it (and indeed, much devaluation has been going on), but an “inflation gage” program could estimate and try accounting for this. For our basic income initiative, the size of the payout could be adjusted in this case.

Beyond basic income, we are adding another reason to purchase our digital currency. Holders of said currency would be able to hold stake in directly democratic elections, including submitting ideas or proposals. Those elections would determine how to best spend (or save) a fixed portion of the reserves that are converted to cash each month.

The system is essentially an alternative legislature and financial model independent of party politics, arguably a type of consensus based model instead of a representative one. If it can be done for one fiat currency, it can easily be done for others.

Basic Income as Economic Security

Most national economies are indirectly affected by factors beyond control, such as dependence on natural resources (which may or may not be present in said nation in significant quantities), foreign industries, and foreign consumer demand. Whenever a significant economic crisis or vulnerability affects one nation, it can ripple through the region and world at large. Many key and strategic domestic industries may be closed down due to being unprofitable.

That is why a basic income is another level of economic security. It allows an economy to compensate for the lack of external demand, to focus on internal and local demand. “National resource” countries (such as Saudi oil or Australian minerals) depend upon manufacturing countries (such as China) to buy their goods. But if the larger manufacturing economies have no one to export to, the resource economies can slow down. A basic income means that the unemployment that results instead can become another level of security. Instead of turning to crime or radicalism, the newly unemployed could try building entirely new industries.

Dynamic Proof-of-Stake Overview

Bitcoin and many of the so-called altcoins use the proof-of-work concept to generate new units of currency (a process called mining). One of the issues with this, however, is the vulnerability to the “selfish miner” or the 51% attack. Typically, new units of digital currency go to whomever contributes the most processing power to a network.

That processing power is used to verify and encrypt other transactions. Theoretically, if someone contributing a majority of processing power in an altcoin network (say, 51%), they’d be able to start messing with the integrity of other transactions. This recently happened with Bitcoin itself, in fact. The word of the body (the mining pool) contributing that processing power is all the rest of the community really had to go on.

Another issue with standard Bitcoin derivatives is the electricity costs of mining can be rather inefficient. While this has been rectified in some newer altcoins, the standard method of mining can be rather inefficient.

An alternative to this is the proof-of-stake currency, where all (if not most) of the units are generated at first. Peercoin is an example of a proof-of-stake digital currency. This implementation makes a 51% nearly impossible, but is also vulnerable to someone monopolizing the supply.

Enter the dynamic proof-of-stake. The dynamic proof of stake is a slightly different animal, how we intend to implement the Kiwicoin. The main issue is the Kiwicoin is intended to possess a software managed “reserve” account, dependent upon the roster of registered recipients. This registry is perhaps the structure weak point, as well as the reserve (potentially).

The primary idea, however, is that the reserve constantly increases (or even potentially decreases) relative to the total Kiwicoins in circulation. This means a monopoly attack is much harder. The reserve cannot be accessed, save by automated monthly payments. No matter how many are in circulation, the reserve will always be a fixed percent of all the Kiwicoins in circulation.

The Kiwicoin is intended as a basic income vehicle, rather than a conventional digital currency. Despite this, we believe the dynamic proof-of-stake idea can be a contribution the rest of the digital currency community can make use of.