Circles UBI

Circles UBI is a decentralized protocol that enables the creation of personalized, community-backed currencies as a form of Universal Basic Income (UBI). Launched in 2020 by the Circles Cooperative, the system issues a unique, non-transferable digital currency called CIRCLES to each verified individual. Unlike traditional cryptocurrencies, a user's Circles are minted at a fixed, continuous rate (e.g., 7 Circles per week) and are initially only spendable within their personal trust network. This design aims to create a parallel economic system where value is derived from social connections rather than capital or labor.

The protocol's core mechanism is the trust graph, a decentralized web of mutual trust relationships. Users must mutually agree to trust each other to enable direct transactions between their personal currencies. When two trusted users transact, the protocol automatically creates a new, merged currency representing the intersection of their trust networks. This process of currency merging allows for the creation of a common medium of exchange that gains liquidity and utility as the trust network expands, moving from a purely personal token to a more widely accepted community currency.

From a technical perspective, Circles was initially deployed as a set of smart contracts on the Gnosis Chain (formerly xDai). User identity is managed via a decentralized identifier (DID) to prevent Sybil attacks, where a single entity creates multiple accounts. The system's inflation model—issuing new tokens to individuals over time—is intended to incentivize cooperation and circulation rather than hoarding, contrasting with the fixed or deflationary supply of assets like Bitcoin. The ultimate goal is to foster economic resilience by enabling communities to create their own liquidity based on social capital.

The vision of Circles extends beyond a simple UBI distribution mechanism. It is an experiment in plural money, where many complementary currencies can coexist and interoperate. Proponents argue it models a more democratic and human-centric economy, while critics highlight challenges with initial adoption, the complexity of the trust graph for new users, and the practical difficulties of achieving widespread acceptance. The project represents a significant attempt to implement a Web3-native social contract, using blockchain technology to reimagine the foundations of money and economic participation.

Circles UBI is a blockchain-based economic protocol designed to distribute a universal basic income (UBI) through a decentralized network of personal currencies. Each verified user receives a unique, eponymous cryptocurrency (e.g., AliceCoins) that is minted at a fixed, continuous rate—the UBI. Unlike a single, centralized token, the system comprises a network of these interdependent personal currencies, whose value is established not by a central authority but through a web of trust connections between users. This creates a decentralized credit system where the acceptance of another's currency acts as an extension of credit, building collective value.

The core mechanism relies on a user's social graph. When User A "trusts" User B, they signal they are willing to accept BCoins at a 1:1 ratio with their own ACoins. This creates a transitive trust path: if User C trusts A, and A trusts B, then C can indirectly accept B's coins through the bridge of A's acceptance. Over time, this forms a network of mutual credit, where the most widely accepted and interconnected currencies become the most liquid and stable mediums of exchange within the community. The protocol uses Gnosis Chain (formerly xDai) for its low-cost, fast transactions, ensuring the system remains practical for daily micro-transactions.

Value accrual in Circles is organic and network-driven. A currency's utility and stability increase as its issuer builds more incoming trust from other reputable users. This design incentivizes cooperative economic behavior and community building, as hoarding one's own coins is less beneficial than engaging in reciprocal trade. The system aims to create a parallel economic layer that is inflation-resistant for holders (since your personal supply only grows at your UBI rate) and distinct from speculative assets, focusing instead on facilitating local exchange and community support.

The term Circles UBI is a compound noun derived from the project name Circles and the economic concept of Universal Basic Income (UBI). It was coined by the Circles project, founded in 2020, to describe its unique mechanism for distributing a decentralized, personal cryptocurrency. Unlike state-funded UBI, Circles UBI is generated through a web of trust within a peer-to-peer network, where each participant mints their own currency, called 'Circles,' at a fixed rate.

The historical and philosophical underpinnings of Circles UBI are deeply rooted in cryptographic and mutual credit systems. It draws inspiration from earlier concepts like LETS (Local Exchange Trading Systems) and Ripple's original trust-based ledger, applying them to a global, digital context using blockchain technology. The goal was to create an inflation-resistant, grassroots economic layer that operates independently of traditional financial institutions and national borders, emphasizing sovereign money creation at the individual level.

The development and deployment of Circles UBI were primarily driven by the desire to experiment with decentralized governance and economic resilience. The system's core innovation is its trust graph, where users vouch for each other's identities, enabling the flow of personally issued currencies. This design aimed to bootstrap a parallel economy where value is based on social connections and mutual recognition rather than scarcity or centralized authority, representing a significant experiment in the broader Web3 and DeFi (Decentralized Finance) movements.