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Using Blockchain as a Reward Scheme in Decentralized Democracies

By 1st May 2017 No Comments

The concept of decentralized governance is one that’s picking up momentum, it’s becoming more and more common for municipalities to include their citizens in city related decision making processes. Unfortunately very few citizens partake in these processes, and attendance to related events is often limited to the ‘usual suspects’.

One of the largest barriers to decentralized governance is finding enough citizens willing to participate, willing to give up time to not only discuss their own needs, but also to listen those of everyone else. This can be a lot to ask from people who could also be spending time participating in hobbies, or with family and friends instead.

This is where computer scientist and activist Denis ‘Jaromil’ Roio enters the picture. Jaromil works at an organisation called D-CENT, an EU backed project researching frameworks and tools to support citizen led initiatives in local policy making. Part of D-CENT’s framework is about that all important issue of motivating participation, and this happens to be Jaromil’s task.

D-CENT has come up with several intriguing solutions to the issue, but its most forward thinking concept is most certainly a blockchain reward scheme called Freecoin. During a talk organised by DATAstudios, Jaromil explained the functioning of the reward scheme and the reasoning behind it. He also explained the four component framework Freecoin played a role in.

The framework aims to create stable, self run citizen democracies and initiatives. So before breaking into the Freecoin discussion, it’s a good idea to understand the framework Jaromil talked about, it is essentially the design context of the reward scheme itself. Here it is in a nutshell, and D-CENT has software supporting each component of it:

Citizen Notification
Municipalities are huge, they deal with an impressive amount of issues and problems every day. Figuring out which of these issues is relevant to you as a citizen can be tough. For a decentralized structure, the framework calls for a system to convey relevant background information on municipal challenges to citizens.

Collaborative Policy Making
Once equipped with the necessary background knowledge to base solid opinions on, the framework urges citizens to gather and discuss the issues relevant to them. Ideas are proposed and policies are drafted. This is where concepts such as participatory budgeting really get to shine, offering a structured process to avoid chaotic debate between large numbers of participants.

Electronic Voting
This is when a community as a whole voices its opinion. It’s pretty self explanatory, citizens are given the opportunity to vote on policies made by their communities, making sure that it piques the interest of the majority. The framework calls for electronic voting because of its ease to deploy and carry out.

Blockchain Reward Scheme
The part of the framework this article is all about. In order to create incentive for individuals to take up a common cause in their community, to participate in this framework, a reward scheme is set up to support such efforts.

And for this final component, D-CENT’s suggests using the Jaromil’s Bitcoin fork. Freecoin in itself can run as an independent social currency. So what’s a social currency? It’s a currency that promotes local socio-economic development in one way or another. In the case of freecoin, this is achieved by rewarding socially involved behaviour, such as cooking meals for the elderly or indeed, participating in collaborative policy making. There are similar currencies in circulation right now, to mention a few: the Bristol Pound, SoNantes or Sol Violette.

Freecoin however, is a few steps ahead of its ‘competition’. Not only because Freecoin runs on blockchain technology and is therefore completely decentralised, but because the currency is created, or printed so to speak, according to the amount socially involved behaviour. Every time someone partakes in an activity that benefits their community, it generates freecoins, and reimburses the individual for their efforts.

For example, you cook a meal for your neighbouring dementia patient, and are compensated with freecoins. Your neighbour is unlikely to have the funds to fully compensate you, so instead your kind efforts generate freecoins. In the same way, if you are involved in a neighbourhood clean up action, you generate and receive freecoins. If you partake in collaborative policy making, you generate and receive freecoins. Any action that benefits your direct environment and society will generate freecoins. Just like the printing of US dollars is backed by the equivalent amount in gold (or at least in the past), the generating of freecoins is backed by a certain amount of goodwill and generosity.

What is important to know is that Freecoin itself is only the building block and infrastructure for a social currency. The idea is that the exact details of operation and exchange, the rules of the game so to speak, are defined using the democratic instances that are in place already, preferably one that implements D-CENT’s framework for direct democracy as described above.

Quoting from D-CENT’s research directly, the legal democratic instances need to make decisions on “the way in which money is issued and distributed, the way in which the complementarity between business and collective social needs is ruled, the time when hoarding may be accepted, the possibility to remunerate specific work in complementary currency, or the opportunity to use them to pay local taxes to local governments”.

Going back to that initial four component framework, the ‘blockchain reward scheme’ hopefully makes more sense now that its placed in context and explained (as best I can). In the end, Freecoin is far more than a mere reward scheme, it is a currency dedicated to supporting good intentions of the locals, beyond that of the decentralised democracy.

Unfortunately, there are some questionable matters related to Freecoin that I can’t put out my mind. I’m mostly concerned with the idea of quantifying the display of generosity of individuals in a community. Helping that elderly lady cross the street is an act kindness, one gets enjoyment out of seeing someone else benefit from their kind gesture. The moment these acts of kindness are weighed and valued with respect to a currency, the honour in the gesture disappears. It starts to become questionable whether these gestures are out of kindness or whether there is the underlying intent of earning freecoins.

The example of walking an elderly lady across the street may be a bit of an extreme, but when placing the issue in the context citizen political movements, it becomes a little more worrying. Grassroots citizen movements are based on shared principles and values, these initiatives then gain support because their values resonate with followers. However, once again, if the amount of supporters reflect social benefit, and therefore produces free coins, then the motives of grassroots initiative leaders becomes questionable. To what extend are the values expressed by these movements genuinely cared for by its leaders, are they just being spurred on to say populistic ideals in return for greater support?

The thing is, it’s not likely that these pessimistic occurrences will happen often, I don’t believe people to be that terrible, nor do I think the compensation of freecoins will be enough to warrant any behavior of the sort. The problem is that just the possibility, the thought, of untrue motivation only adds a layer of doubt to the already murky waters of politics, which certainly is no incentive to support decentralization efforts.

All these criticisms are based on slight speculation, and I believe the outcomes of a Freecoin system will vary widely per implementation. The success is very much dependent on the culture and mindset of the locals, and their trust in each other. I am looking forward to the case studies D-CENT will produce as Freecoin develops further. There is no doubt that Freecoin is a daring project, and making it work across cities and borders is no easy task.

Let’s hope freecoin’s benefits outweigh the doubts. Systems like these are prone to abuse, there is no perfect system, there is no perfect currency, all we can do is find the best solution and with time, Freecoin may just prove to be one of them.