Glo Dollar, an ethical stablecoin: model, potential impact, and roadmap

Jasper Driessens15 Sep 2022 14:20 UTC
21 points
17 comments4 min readEA link

TL;DR: Glo Dollar is a fully-backed stablecoin that passively eradicates extreme poverty. Glo Dollar maintains a treasury of cash and equivalents equal to the value of all Glo Dollar in existence, earns a yield on that treasury, and gives that yield to GiveDirectly. If Glo Dollar becomes half as popular as the US dollar, we can effectively end extreme poverty. This post outlines the Glo model, its potential impact, and roadmap. It concludes on a more aspirational note about the potential impact of moving everyday economic activity onto an ethical platform.

The Glo model

Let’s break down “fully-backed stablecoin that passively eradicates extreme poverty:”[1]

  • Glo Dollar is a stablecoin,[2] a cryptocurrency whose value is $1 per token.

  • Glo Dollar is fully backed, which means the non-profit will maintain a treasury of cash and short-term Treasury bills greater than or equal to the value of all Glo Dollars.

    • You can exchange Glo Dollars for the equivalent amount of dollars at any time.

  • Glo Dollar’s backing assets will be invested in Treasuries, which provide a yield. We’ll give our portion of that yield to GiveDirectly, a highly-regarded, EA-aligned charity that gives money unconditionally to people living in extreme poverty.

  • That’s how buying and owning Glo passively eradicates extreme poverty – you only need to switch currencies to contribute. It’s analogous to earning passive income.

AUGUST 2023 UPDATE: Glo Dollar is available for purchase on Uniswap .

Why do all this? Why not just donate all your money to GiveDirectly?

Glo Dollar dramatically expands the pool of available “for good” dollars. For EAs—and also for GiveDirectly—this means expanding the total effective altruist budget without asking for more donations. For foreign aid more broadly, we’re proposing a new revenue stream that doesn’t depend on political will, which can be fickle.

Scope for impact

Doing some back-of-the-envelope math (calculations here), we estimate that it takes $20,000 of minted Glo Dollar to provide $1/​day of income for one person for one year. This will effectively lift one person out of extreme poverty.[3]

Let’s run through a few scenarios to give a sense of potential impact.

1. If Glo became a $12B stablecoin, it would:

  • be the fourth largest stablecoin and comprise about 8% of the total stablecoin market;

  • generate about $240M yearly for GiveDirectly;

  • create basic income for about 600,000 people.

2. If Glo became a $84B stablecoin, it would:

  • be the largest stablecoin, slightly edging out Tether;

  • generate over $2 billion yearly for GiveDirectly;[4]

  • create basic income for more than 4 million people.

3. If Glo reached $14T[5] in value, it would

How will Glo get to $14T (planetary scale)?

In stages!

First up for Glo is to be the best stablecoin. This means marketing Glo to individual and institutional investors who use stablecoins, e.g., to facilitate trades on crypto exchanges, for liquidity for market making and trading, and as loans using volatile crypto assets as collateral. Once we achieve parity between Glo and the leading stablecoins on stability, transparency, and availability, we think Glo’s comparative advantages will be that using it lifts people out of poverty.[7]

Second, we will encourage altruistic folks to put some of their savings into Glo. A sum of Glo on your balance is both stable in value and easily made liquid, like other savings vehicles; the difference is that your Glo balance helps others at no cost to yourself.

Glo’s further stages require the sponsoring organization (and its friends and allies!) to do some heavy lifting. Basically, we need to make Glo useful for all the things people currently use money for.

Our third stage is to make Glo a viable substitute for money in a checking account. For this to work, you need to be able to spend Glo at the places you normally spend money, e.g. at the grocery store, for subscriptions, or on utilities. This will require a lot of technical and infrastructure development (i.e. support from payment processors like Stripe and PayPal, or debit card integrations), but we think that the ethical and corporate branding benefits of Glo adoption can provide the needed impetus.

Fourth will be corporate cash holdings. The goal here is that when businesses get paid in Glo, they’ll keep it as Glo. They can then pay their bills, and their employees, in Glo, or just keep cash on hand in Glo. This would have a huge impact–converting half of the $1.52 trillion that non-financial S&P 500 companies were sitting on in 2021 would provide recurring basic income for 90 million people–while also helping companies fulfill ESG requirements. Plus, if we succeed in marketing Glo as the ethical currency, we think that a lot of consumers and employees will actively select for places that use Glo.

The fifth stage is the culmination of the fourth: the point where most businesses default to using Glo. At all levels, we expect Glo adoption to start with people who are unusually ethically-minded, e.g. effective altruists and mission-driven businesses. But based on the numbers above, to really eradicate extreme poverty, Glo has to be broadly accepted by conventional folks at conventional places. This is, to put it lightly, ambitious, and we’re thinking about decades in the future. But for the kind of scale we’re aiming for, we need widespread mainstream adoption.

Conclusion: thinking about helping others in a new way

The thrust of this piece was to provide a sense of Glo’s numbers: at X value, we could help Y people, etc., and how we plan to get there. But we hope we’re also providing a more intangible sense of how much good we can do if we shift everyday economic activity onto ethical platforms. Brad West and Vincent van der Holst call this Guided Consumption, we think it’s a nice antidote to “no ethical consumption under capitalism” thinking. But more importantly, we think the potential for impact from putting everyday activity onto an ethical track dwarfs the scope of conventional charity. Put simply, the money people are willing to spend on themselves is probably always going to be bigger than that which they’re willing to spend on others. Glo’s goal is to harness that essential fact and put it to good use by creating and promoting an ethical currency.

Happy to answer any questions in the comments!

If this appeals to you, great! Please see here for ways to contribute.

  1. ^

    If you read our previous post here, this section will be familiar.

  2. ^

    A stablecoin is a cryptocurrency designed to keep a tight, consistent value. Some so-called stablecoins are ‘stabilized’ through an algorithm, and one of these failed so spectacularly in May 2022 that it basically set off a crypto meltdown. The other, better type of stablecoin is defined by having a sponsoring institution that maintains enough assets on hand to provide a 1-to-1 backing for the stablecoin’s entire value. Glo is the second type.

  3. ^

    We know that there has been dispute about the long-term impacts of cash transfers on poverty. Rather than rehash that–GiveDirectly’s research page is a good overview of the pro-cash case, but see also Johannes Haushofer’s pinned thread for a conflicting take–we note three things that make us optimistic. First, Glo transfers continue indefinitely–we’re not transferring a lump sum and then evaluating how much money they had five years later. Second, GiveDirectly’s basic income program distributes money to every person in selected villages, which addresses concerns about spillovers. Third, because the program provides recipients with cash once a month, every month, GLO helps people smooth out income over time, which, as Portfolios of the poor argues, is a serious problem for very poor people. So that’s why we think that existing evaluations of of cash transfers form a lower bound for estimating GLO’s impact.

  4. ^

    This, combined with its existing revenue, would push GiveDirectly to its operational limits.

  5. ^

    If Glo reaches trillions of dollars of market cap, we’re most likely operating in a world where we issue multiple stablecoins in different currencies. Each reserve would then be backed by government bonds denominated in each stablecoin’s currency.

  6. ^

    At this point, we’d have to either seriously scale up GiveDirectly or find new distribution channels.

  7. ^

    We’re also in the early stages of registering as a nonprofit, which we think aligns incentives between us and depositors. For-profit stablecoin companies always have an incentive to invest their treasuries in riskier assets, and thus earn a higher yield, but of course that puts depositors’ accounts at risk. We do not. We just have to keep our donors happy to keep the lights on.

Jasper Driessens15 Sep 2022 14:20 UTC
21 points
17 comments4 min readEA link