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.
Global Income Coin went public in April 2022 with a funding announcement and accompanying posts on Hacker News and here. 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.
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. 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.
If you’ve not heard of Glo before now, that previous EA post will provide helpful context.
We are neither affiliated with, nor endorsed by, GiveDirectly.
Incidentally, this brings us in line with the ‘Guided Consumption’ model proposed here recently.
I think this is an incredible idea and would love for it to win. My biggest concern with this pivot is the odds of the loans defaulting and philanthropy and people potentially losing billions of dollars. But if USD bonds default, it's likely that the US is going through a very bad time, and the USD (instead of GLO) that was otherwise held would potentially do very poorly too. Is there any sort of research on the odds of these bonds collapsing, and how does that relate to the yield?
A smaller concern is that crypto has had major hacks that stole millions to billions (I unfortunately was part of one of those hacks), and I would like the GLO team to think and assess the risk of that happening to them.
And if the "In theory GLO sounds great but it’s absurdly ambitious and unlikely to succeed" is a negative feedback point, I strongly disagree with that. With your two million seed donation and the potential being 2900 billion a year in UBI, any odds that are above 0% are worth that initial investment. At EAG London it was emphasized many times we should be pursuing bigger ambitions, yet I continue to hear from people with the most ambitious ideas that they are told to be realistic. You can always make the idea smaller, but it's hard to make an unambitious idea ambitious. If you get this feedback it means you're on the right track!
We've also been thinking that we need a comprehensive assessment of bond returns, and yes, that will need to take into account their probability of default. Speaking to US bonds in particular, apparently, the Treasury did default on some of its bills in 1979 due to 'technical errors,' and a few times, the US changed the terms of its obligations post facto. (Others dispute this characterization.) But either way, the fact that these events are really rare is reflected in bonds' relatively low yield, compared to, e.g. the S&P.
Our general plan for security is to open source everything and hire auditors to take a close look. We'll have more to say on this when we launch.
Hope that helps!
That does help a lot to know that the risk has been very low but does exist. Open source for security sounds like a good idea, but I'm non-technical so I might be wrong. At least the transparency of that is something that I value a lot.
I'd still be interested to know if you would only invest in US bonds. With China likely eclipsing the US in our lifetime, and these things not always going down without a literal fight, that might make US bonds more risky than the market currently thinks, meriting a more diverse bond backing.
Absolutely, on my short-term agenda is a research piece comparing the returns to different countries' historical bond returns. I'm thinking of limiting it to just OECD countries (or some other criteria of developed-ness?), and that would also function as a basis for figuring out which countries' bonds would be a good bet.
Keen to know if you have worked out the legal risks of offering such a product!
If you have, I also wonder if you'll be able to offer higher risk products to users, such as bonds of lower rating. As a stablecoin protocol, you face significant competition, whereas as a bond provider you may be able to offer a new product.
(This last part is just a random thought I had, I'm aware there's a lot of pros/cons to it)
👋 nice to hear from you again!
We are working on the legal/regulatory stuff as we speak. We won't launch the coin until we're in good shape there.
So, we've bandied about a few different ideas for increasing yield, and something like what you suggested is a possible future, but as you say, it needs to be really thought through before we go that route. Just in general, we think a very low risk stablecoin is a sensible step 1, and that's why we describe it in detail here...but in the future, yes, it's definitely possible.
Thank you this makes sense!
Cheers, chaps! Thanks for the update. I hope you're right and I hope you win
Sorry about not sparing effort to sound nicer, want to write comment quickly: I think of markets (in the sense of "which things are generating how much yield?") as rather fickle, and if I was involved I wouldn't build any strategy at all around these short-term signals, my assessment of your circumstances is not the assessment that would lead to me getting behind a myopic strategy. And I'll go one further-- it's a bit of a red flag that y'all are willing to stake so much on fickle behaviors that you're observing in a notoriously fickle market.
The discussion here is a broad one: on the one hand, I don't have a good track record in that I've never been super glad about worshiping at the altar of EV theory (the altar hasn't made me an OOM more money than I could make working hourly), which you can interpret as either lack of luck or lack of wisdom, and you don't want to listen to advice from people without a good track record. On the other hand, the nature of your product is specifically more involved in trust and stability, which comes with a kind of responsibility that makes the class of reasoning you want to do decidedly not the "EV theory YOLO" that characterizes for example SBF's journey from a well-off jane street alum to $30b. The fact is that a person reasoning about the journey from $1 to $100 /day has a qualitatively different EV theory than a person reasoning about the journey from $1000 to $10000 /day, because logarithms. A claim I'm considering making is that the GLO team ought to be using the former EV theory -- because it is the one used by the users! -- even though most defi projects prefer the latter EV theory.
I think I could be wrong by not misassessing how much the strategies you're building around short-term properties of market behavior really actually are short-term strategies, and won't shoot you in the foot when the properties change and you have to reassess.
Thanks for your thoughtful reply Quinn.
For us, 2% is a fine (if perhaps conservative) estimate, though, as you note, it fluctuates. We don't think that bond rates are likely to fall to zero any time soon, and if they fell by half (say, to 1%), that would still be a substantial amount of UBI generated. (I've edited the text to reflect this.)
To flip this around for a second, what would suffice — in terms of concreteness of future plans, benchmark returns at which we’d explicitly plan to pivot, or something like that — to make this no longer a red flag? Just curious if something comes to mind.
If I’m understanding the point about different theories of EV correctly, it’s that moving up 3 OOMs from extreme poverty to middle-class-in-America (MCiA) is a qualitatively different thing than moving from MCiA to fabulously wealthy (another way of saying this is that utility is non-linear)? If so, would you mind clarifying how endorsing one theory or another would impact how we conceive or execute our plans? It might not be super essential that I understand, so if it's more effort than it’s worth to explain, no worries 😃
Some note to the effect that you've redteamed the strategy, planned for contingencies. I think if I had read a brief comment like
I think you're following the way I set up the point about EV theories, what I meant really just had to do with risk tolerance, that I think the risk tolerance of the user base implies a more conservative approach.
gotcha, thanks. This goes back to the thing we've learned in the past few month that our potential donors and our potential users have, we think, pretty different attitudes towards risk. This is speculative, but I think that a stablecoin approach is likely to generate more usage but less fervor, and I think that tradeoff makes sense.
"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."
Totally agree with this point. Thank you for the updates!
So, if I understand your plan:
You want to:
* take donations
* invest donations in 3 month Treasury bills,
* donate interest in dollars to Give Directly UBI
* provide transaction handling through Polygon
* GLO is pegged to the dollar
* dollar donations invested in t-bills form cash reserves
* cash reserves in some % of GLO supply guarantee GLO liquidity
* Polygon charges 1-5 cents per transaction
* GLO will not be pegged
* GLO branding and its UBI purpose will attract GLO buyers
* GLO transactions will be increasingly popular/ubiquitous
* sales of GLO will generate value for GLO holders of new GLO supply
* Donations purchase GLO when reputation won't keep GLO value up
* UBI disbursements will be direct and in GLO crypto
Correct anything that I got wrong or missed, if you like.
I have a few questions:
1. What is the percentage of reserves that you aim to keep while GLO is a stablecoin?
2. Have you run EV calculations of UBI disbursements from GIC vs Give Directly?
3. Could large-scale money laundering or fraud with GLO and following transaction freezes require your cash reserves to smooth over?
4. Your stablecoin model and your planned seigniorage model are so different. What is the downside across the inflection point you mention between them?
5. Does your organization suggest improvements to current cryptocurrency regulation to make the space safer for traders/investors/users of cryptocurrencies?
Just to be clear, I am not a trader or investor, it's too close to gambling for me, and I barely understand the jargon. However, you are a nonprofit looking for donations, and a curious mix to me, so I have these questions for you.
Thank you for your time.
Thanks for your thoughtful summary and questions. I would like to give you solid answers but first, two comments and a few requests for clarification.
Comment 1: converting money to GLO is not a donation, but a currency transfer.
Comment 2: the future stuff you describe is broadly possible and, IMO, desirable -- but I just want to be clear that GLO the company is not making any specific commitments to this as a roadmap; rather, our post serves to state our big picture intent at this juncture, and our intended first step on that path.
Requests for clarifications
Hope your Friday is going well,
Thanks! I'l take a stab at answering these here:
Thank you, so:
There is also the matter of the transaction fees, which could be meaningful in some calculations of expected value.
(let me know if I got anything wrong or missed anything)
Based on what little I know about this area, the biggest claims of web3 benefits, decentralization and blockchain-ensured security, don't show up in practice for users who keep private wallets on their computers and who rely on a few companies to handle their web3 transactions. The underlying technology that handles their transactions is mostly centralized web2. This makes me doubt the difference in friction and costs that crypto companies can provide versus more traditional securities vendors who can also use web2.
I believe that most in finance have a security in mind for folks to trade that does not involve the blockchain or cryptocurrency, no matter who those folks are, and the only question is if Wall Street can get past regulators and develop that market (for example, put an app in somebody's hands, and get them to commit dollars in a marketplace for the security). That's just business as usual. I wonder how you would improve on it in case of web3 and cryptocurrency. I guess that's a question you'll have to answer later.
Thanks, Seth, for your time. It's refreshing to talk to someone who is sincere in wanting to do good in what seems to be a wild west full of speculators and information asymmetries. There's so much money moving through cryptocurrencies, I see the rationale for wanting to do good through the technology.
Hi Noah, a pleasure to talk to you as well! My apologies for the delay, I have been traveling.
GLO will be fully backed! This means 1-to-1 between cash and equivalents and GLO in circulation.
RE: reducing donations to GiveDirectly -- we see a purchase of GLO and a donation to GiveDirectly as complements rather than substitutes. A purchase of GLO is not a charitable donation, can't be deducted, etc. Our aim is to invest in only very safe options -- cash and equivalents -- and we don't foresee major fluctuations therein.
If KYC fails, we'll have to evaluate our options based on the specific failure, which could take a lot of potential forms. But this is one reason why we're taking care to work with reputable partners.
RE: algorithmic stablecoins -- we think that the GLO project is fundamentally different than those projects so there's not much obvious relevance, to my eyes. I would say general lessons like "don't say anything on Twitter that will look really bad if something goes wrong" is a good one though 😃
RE: the security/usability tradeoff -- we have some nascent thoughts about this but I'm afraid that I personally don't have much to say about it. But you're right that in the long run, this is going to be important, for GLO but also for crypto generally.
Oh, nice surprise to hear back from you, thanks!
OK, so I used "security" in a couple different senses in my prior comment, thank you for putting up with that.
There could be fluctuations in returns on treasuries, given that there have been before, how does it work if they dip into negative territory unexpectedly? Do you pull GLO out of circulation?
So, it looks like going back to 2017, there's only been one week in which returns were negative , which was late March 2020: https://ycharts.com/indicators/3_month_t_bill . And that was (clearly) a very unusual moment so I'm not worried per se about rates truly going below zero. I am more worried about rates going to zero, in which case, yeah, we'd have to figure out some other low-risk investment opportunities for the model to keep working. This is on my research agenda -- get a good sense of the ROI of, say, short-term bonds from all the OECD countries, rank them by yield and perceived risk, and then rank things that fall near that on the risk/reward scale but that still definitely qualify as conventionally safe. I'm afraid I haven't gotten to it yet, this week I've been focused on writing something up about why we are donating to GiveDirectly and not some other great charity (e.g. GiveWell's top ranked charities, which as of this week no longer include GiveDirectly; GD's response is interesting https://www.givedirectly.org/giving-directly-still-means-giving-well/).
Hope that helps!
Yeah, it looks like, the rates stayed close to zero between 2008 and 2015, and more recently as well, March of 2020 to January of 2022.
I took a look at GiveDirectly's response. They mention the multiplier effect of cash, and the possibility that Givewell might lower its cost-effectiveness requirements from 10X. Now I am confused about GiveWell's estimates of the cost-effectiveness of cash and in what circumstances GiveWell actually makes the comparison.
GiveDirectly's point about meeting the needs of its charity recipients while respecting the choices of the recipients is an interesting point. Pro and con arguments might track arguments about UBI in general. Your efforts here could reflect your philosophy about UBI, I think.
I wish you the best of success with your efforts!
When you say pegged to the dollar -- is it pegged to the US Dollar?
Thank you, it is indeed pegged to the USD. I clarified this in the text.
What can we do to signal to vendors that we would prefer/demand to be able to pay in GLO?
So glad you asked!
We're still working out all the regulatory/legal details of deploying a stablecoin, so GLO isn't out yet.
But in the meantime, we're asking folks to take the GLO pledge, and when the coin is out, to purchase some on a monthly recurring basis.
We (and you!) can then take concrete evidence to potential partners as evidence that there is GLO out there waiting to be spent.
Any other thoughts on ways we can speed this up?
Potentially you could gather purchase commitments that are explicitly contingent on being able to be processed through GLO... Potentially you could offer inducements to the companies that accept GLO, such as an advertising deal with Google Maps or Waze that is like "Spend your GLO here at taco bell on a tasty cheesy gordita crunch." Idk
Really great project... I'm so stoked!
What are the frictions involved in liquidation (how long, any other issues)?
Basically, would it be feasible for me just to have all but a few grand in my checking account, and then the rest in GLO for easy access?
So right now (given that GLO isn't currently broadly accepted by merchants), what EAs should do is.
And if EAs do this, 2% of our "checking accounts", probably 10s of millions of dollars collectively, goes to the poorest people in the world. Even in its current iteration, so much good can happen if people just get on board!
You could just invest in 3m Treasury bills directly, or invest in a conventional fund that buys bills, (or indeed whatever other investments you thought were most appropriate given your circumstances) and then donate the interest to charity.
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.
Edit: this comment was in the wrong place, sry -- now it's here
Thanks! The goal is to have a situation where liquidating (i.e. redeeming) is as fast as making a crypto transaction, and can be done at any time with any amount.
It might be the case that in the beginning it's a little less efficient than this. We'll prioritise getting the token out in the world first and then move towards that level of service.
Of course, eventually we'll work towards the situation where you won't need to liquidate your GLO to use it as money, either because
But you're right. In the meantime, for a supporter to maximally advance Global Income Coin, they'd keep an as large amount as practically possible in GLO, try to make their purchases in GLO as much as possible (because this is what incentivises merchants to accept GLO), and keep a USD balance for making purchases that can't be made with GLO yet.
I guess the limiting factor would be the time delay between money as GLO and money as cash. The faster that transition can happen, the more GLO can function as a pseudo-checking account.
Like as an EA, it might make sense to put savings in something like an index fund because it allows for greater yields that you could potentially donate or otherwise deploy. This savings yield would probably be like 7-8%, but would be harder to liquidate, so you wouldn't want to 6 put all your money in it.
But a checking account has basically 0% interest per annum. GLO is basically 2% per annum (to Givedirectly). So even with the current limitations (i.e. Limited ability to spend with GLO), it could still function as an intermediate checking account. So, if I want to have 20k somewhat easily available and 4k of it readily available, I'd have 4k in my checking account, 16k in GLO. That 16k would be accessible as cash within a few days. Is my analysis correct?
That's right! In the early phases, how hard it is to change GLO to fiat will be somewhat out of our hands, because at some point you'll be touching either ACH or Fedwire. But again, the long-term vision is to build up the infrastructure, and the network of participating merchants, to make this as easy as possible.
Considering that the scale we're talking about probably involves reaching out to non-crypto people, I feel like my question isn't too basic given that premise:
How fast/cheap is "making a crypto transaction" currently? I've heard bad things about how expensive it is but have no idea if that's actually true.
in general, it depends on which crypto network you're using.
GLO will deploy on Polygon, where transaction fees should be 5 cents maximum (in practice usually less than 1 cent per transaction), and we expect the network to handle about 7,000 transactions per second.
Is a little more expensive (on both fronts) in Ethereum (but that should change soon), and a transaction on the bitcoin lightning network should also be much faster than bitcoin used to be.
I'm no expert on Cardano or Solana, but I think both offer considerably faster/cheaper transactions than we came to expect in crypto's earlier days. Hope this helps 😃
P.S. one of my personal dreams is to create a dashboard of GLO usage that will make this info easier to find than it currently is. When I researched this a bit I found a bunch of stuff from explicit boosters that had a very sales-y tone but no actual data, and then a bunch of pessimistic stuff from naysayers that also had, you guessed it, no data. Blargh
EDIT: bitcoin link fixed
So, if I have 20k in GLO, and I want cash to buy a car, how long before that 20k in GLO is $20K USD?
So this is one of those questions that's good precisely because it's deceptively difficult to answer. Here are some possibilities.
But these ideas are hypotheticals right now. (We've also made a note to flesh these ideas out into a 'request for startups' 😃)
As you say elsewhere, when we launch, we won't be expecting folks to put money that they actually need to spend into GLO, because in our early phases, spending GLO on essentials will be harder than spending fiat (re: potentially impossible) .
So, bottom line: it depends on whether you're spending at a 'participating merchant' or not, and at what point in the development of the GLO ecosystem we're at.
Hope this helps!
It does... Creating the mechanisms to eliminate friction on the user end is likely to be key to enabling your early supporters to maximize the degree to which they can help the project. I would love to have nothing but a hundred or so bucks in my checking account and the rest of my easily available money in GLO,but then I would need to know that I could immediately redeem. Have you thought about doing something with Zelle to facilitate immediate redemption?
Yes, we'll definitely be looking into partnering with digital payment networks.
FTX and Binance have credit cards that could let you hold GLO and convert it in USD at the moment you buy something (like a car). If GLO get's listed on those platforms you should be able to pay with GLO instantly using a mastercard or similar from those platforms.
Interesting development. This changes the nature of the project completely... I have some threaded questions, mostly related to the new "problem" of high initial donations that's mismatched with a low initial pool of recipients:
Not critical, just curious.
I can also suggest you partner not only with GiveDirectly but also with ImpactMarket. They operate on a similar basis, qualifying villages and villagers. They are already crypto-native, and they support people with flip-phones, removing the need for expensive smart phones. Having more capacity to distribute initially could help you with kick-starting your new economy.
Hi Noak, thanks for the thoughtful questions!
Hope that helps!
I feel like if you pitched this as "decolonizing crypto through cash reparations" you might mitigate a lot of the ~"Crypto is bad" comments from the average person who hears about it.
So, a few thoughts about this:
But it is definitely an interesting/non-trivial problem!