Can you spare an ubu, pal?
SA start-up sets out ambitious plan to combine unused assets, such as leftover food and groceries, with a digital universal basic income currency to alleviate poverty and (one day) change the world
A universal basic income that gives poor people the chance to become economically active without help from government sounds pretty far-fetched, right?
Well, the folks over at Project UBU — an SA start-up founded by Bridge Capital director Dudley Baylis — are developing the idea of a universal basic income called the universal basic unit (ubu for short).
Project UBU’s initial testing has been funded by the company’s co-founders and a Norwegian angel investor, Globalvoice. Together, they’ve spent US$1.79m over the past 30 months to deliver the minimum viable product (MVP).
"Our philosophy is to create a universal basic income that is decentralised and does not rely on taxation," Project UBU CEO Justin McCarthy tells the Financial Mail.
It may sound like pie in the sky, but a mathematical model, built by someone with a Cambridge PhD in the subject, sits behind it.
So what are ubus? At its core, an ubu is a digital currency that aims to unlock "currently dormant, inefficiently allocated and unrealised resources to create economic and social value".
The only barrier to accessing wasted assets, such as food, in the economy is the lack of "an efficient distribution and payment system", say the founders of Project UBU.
In this system, they explain, citizens can use issued tokens in exchange for these assets, giving vendors and service providers a way to sell them, while providing previously excluded citizens a way to participate in the economy without straining the fiscus. For example, companies with millions of dormant loyalty-programme points on their balance sheets could exchange these for ubus, or grocery retailers could accept ubus as payment for expiring stock.
While these cases may still be some way off, Project UBU hopes current test cases will provide proof that the system can work for larger vendors and be scaled beyond the "bottom of the pyramid".
Currently, individuals in controlled test groups, known as citizens, receive 100 ubu tokens a day into an e-wallet. "Pure market forces", says McCarthy, determine the value of these tokens. So if a spaza shop owner decides she will accept 10% of the value of a R10 can of Coke in 100 ubus she has effectively assigned a value of 1c/token. If she accepts 10 ubus as payment for 10% of the coke, she has assigned a value of 10c/ubu.
In other words, in the early stages of its rollout, the value of an ubu will be determined on a per-transaction basis, largely by the vendors that accept them.
This will make it a highly volatile currency initially, McCarthy admits. But once the rate of adoption and the rate at which ubus are exchanged increases, so the value of an ubu, he says, will be pegged within a narrow range – kind of how highly liquid fiat currencies are traded within a narrow bid-offer spread.
To avoid hoarding of ubus and encourage transacting, UBU Core – the legal entity responsible for the creation of the ecosystem – has implemented a dissipation rate at which ubus, held by citizens and vendors, slowly disappear if unused, based on an "inflation-stabilising set of mathematical algorithms".
This shouldn’t hamper asset accumulation, says McCarthy, because the more widespread the use of ubus, the more valuable they become and the more individuals can buy with the same number of ubu tokens.
A commercial release is planned for April 2018, with a target of 500m citizens by 2028.
To fund the rollout, UBU Core is issuing a derivative token, called UBX, which will allow investors and speculators to participate in the ubu story in the same way that they might, say, invest in bitcoin.
Through three initial token offerings (ITO) — the final one running from October 21 to November 3 — UBU Core hopes to raise between $1.5m and $58m.
About 3%, or 511,159 UBX, of the ITO will be issued to staff and investors in Project UBU. This represents a price/UBX of $3.50 and is a 30% discount to the expected initial UBX price of $5.
UBU Core also plans to float UBX on a public crypto-exchange by the first quarter of next year.
The co-founders, says McCarthy, will partially pay themselves in ubus. "A number of suppliers have also accepted complete or partial payment in ubus/UBXs for services on a risk basis," he says.