TL;DR: Glo is pivoting towards a fully-backed stablecoin that invests its reserves in short-term treasury bills, then gives away the yield as basic income by donating to GiveDirectly. We plan to release Glo in January 2023. If this appeals, we’re looking for public testimonials and also hiring broadly.
Context
Global Income Coin went public in April 2022 with a funding announcement and accompanying posts on Hacker News and here.[1] The public feedback we got at that point generally fell into one of three categories:
- Crypto is bad so we're bad
- In theory Glo sounds great but it’s absurdly ambitious and unlikely to succeed
- Sounds great, where can I sign up?
Simultaneously, we got a lot of positive, private feedback from successful entrepreneurs. These folks seemed to resonate with the ‘maximalist’ language on our website – e.g. “philanthropy is missing out on $2860 billion/year” – that others found objectionable (the most upvoted comment on our initial HN post calls that claim “laughable”). One thing we concluded from this is that our donors – the people who help us keep the lights on – are a pretty different audience than potential Glo participants. This has implications we’re still mulling over.
Two updates to the environment, and to our thinking
Since we launched, a few things have given us reason to reconsider our trajectory:
- The collapse of Terra/Luna and the broader crypto sell-off. While Glo and Terra are fundamentally different, because of Terra’s collapse, anything even remotely resembling an algorithmic stablecoin is now working against a presumption of distrust.
- Bonds started yielding higher returns. This means that a stablecoin can be both fully-backed and expect a reasonable yield from liquid assets.
So in light of these events, we’re announcing a few big changes.
Glo will now be a stablecoin that donates money to GiveDirectly
First, Glo will be a fully-backed stablecoin pegged to the US dollar. A person can always exchange one Glo for one dollar, and vice versa.
Second, Glo will invest its reserves in three-month treasury bonds, which have an expected yield of about 2%.
Third, we will distribute basic income by donating all revenue to GiveDirectly's UBI program.[2]
The long-term plan is still to transition to the seigniorage-based model that we describe in our first post, or find another way to safely increase yield. But we’re deferring this until the inflection point when we have
- a secure brand identity (and a public track record of being good financial stewards);
- a viable means of distributing crypto payments to people for whom $1/day would be meaningful;
- Confidence that an unbacked cryptocurrency can have a steady enough valuation to be useful as a currency.
All of these problems need to be solved for Glo to achieve its vision. But the pivot buys us time, and in the short-term, it means we can focus on solving one core problem: getting a stablecoin adopted as a means of exchange.
We have some thoughts about what that will look like here, and some rough calculations of the potential scale here. In a nutshell, we think that stablecoins are a true commodity, in the sense of being completely interchangeable; and in such an environment, a product that does good for the world when you use it (and is transparent about where and how its reserves are held) has a potential competitive advantage.[3] The next frontier for us will be widespread merchant and vendor adoption – a world where you use Glo to buy groceries, or pay friends back, or receive your paycheck.
Upsides and downsides of this new approach
In the pro category:
- Donating through GiveDirectly, rather than to folks who already have crypto infrastructure set up (or trying to set it up ourselves), means that right off the bat, we’ll be helping people for whom small cash transfers are meaningful.
- It allows us to focus. We can’t solve every problem at once, and we’re still aiming for a future in which growth in the money supply is distributed equitably to all humans. We just think that promoting stablecoin adoption is a plausible first foothold.
In the con category:
- Our basic income plan has suddenly become much less universal.
- If bond rates go down, we generate less revenue.
- We expect our return from treasury bills to be lower than the 8% we were aiming for with seigniorage.
Thoughts, feedback, concerns?
We’re happy to discuss in the comments!
Does this sound good to you?
Great! We’re looking for folks who will buy Glo when it's released and would like to share that pledge on social media. We’d be grateful to have your support. We’re also hiring broadly.
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If you’ve not heard of Glo before now, that previous EA post will provide helpful context.
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We are neither affiliated with, nor endorsed by, GiveDirectly.
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Incidentally, this brings us in line with the ‘Guided Consumption’ model proposed here recently.
Yes... if you have $3m lying around which you don't need at the moment.
If you buy $3m GLO, you generate the same amount of interest for charity. But you also receive $3m worth of GLO which you can then go and use in the world as money.
As long as the money stays in the form of GLO, it keeps on generating funds for GiveDirectly because we keep on earning yield with the underlying USD.
With your idea, only money that's not currently needed can be put to charitable use. With GLO, money that's being actively used (e.g. what's on checking accounts) can be used as well.
Put in a different way. Imagine every dollar bill had an imaginary button that you could press to toggle on and off. Turned on, the dollar bill donates $0.02/year to GiveDirectly. Other than that, nothing changes, you can still use the dollar bill as normal. That's the idea.
This of course is contingent on us working to make GLO an accepted currency, or to at least have payment rails (e.g. credit cards, Stripe, PayPal) support it. That's indeed what we'll do. Not unrealistic, as said payment rails already support cryptocurrencies (most notably USDC, a stablecoin we'll directly compete with and has pretty much the same properties as GLO).
But even before we make it an accepted means of payment, GLO can already start competing with today's $150b stablecoin market. For a sense of scale, if we capture 7% of that, assuming 2% yield, we'd generate $215m annually. That's roughly the amount of cash distributed by GiveDirectly over 2020.