HullCoin, the currency that rewards volunteers
HullCoin is the city’s crypto-currency, programmed on top of Bitcoin to be issued by charities and social organisations as a way of combating financial exclusion. Residents can earn HullCoins and then spend them at various places around the city. It’s an innovative model. But how exactly does it work? Aaron Fernando of Shareable spoke with the two founding members, Dave Shepherdson and Lisa Bovill.
Q: Both of you have had significant experience in local government before this project. Did your work influence you to start HullCoin?
Lisa Bovill: I worked for the local authority for 20 years. I delivered and managed advice services. I was also in charge of developing anti-poverty strategies for the city and as part of that, strategies to combat financial exclusion. So working with those who couldn’t get access to mainstream financial products and were penalised as a result. At the same time, most local authorities across the UK were experiencing funding problems themselves — reductions in the amount they got from central government — which meant that they could do less to help people to manage their finances and to combat poverty. That was really where this whole thing started, and we were looking for creative solutions. We looked at technology and emerging technologies as having potential to help us with that.
Q: Is HullCoin similar to time banks and loyalty reward programmes?
Bovill: We do have a local time bank, and we work closely with it. It’s similar in that we are looking at non-monetary value systems. But we are different in lots of ways: It’s not just an hour for an hour. We are looking for a reward system that isn’t based on time, it’s based on social outcomes. HullCoin has a value, in terms of being able to redeem it for goods or services in a way that a time credit doesn’t have.
Shepherdson: When we were looking at mutual credit systems and local currencies, what we saw was that local currencies were all effectively pegged to fiat currency. Like Lisa said, we were looking around the anti-poverty strategy in the city and we wanted something that would be generated into existence through social outcomes. We looked at Bitcoin and blockchain technology as a decentralised clearing house which gave us regulatory freedom. It was 2014 when we started looking at this. In the UK certainly, a lot of what was going on with Bitcoin and blockchain was still cottage industry.
Q: How does an individual HullCoin unit get issued? Is it backed by anything?
Bovill: We will work with a number of grassroots and local organisations that will be given an amount of the currency and then they will be allowed to set their own rules around how they issue it. With some guidelines — quite broad guidelines from us — so it will really be up to those people. We’re not planning to regulate this or be really hands-on in terms of how you issue or what you issue for. It’s up to those organizations who work with the city to make those decisions.
Shepherdson: And it’s not backed by any commodity. It’s backed by the community itself.
Q: When one organisation issues HullCoin, will it be the same type of HullCoin as when another organisation does? And those can basically cross paths?
Shepherdson: Yeah, absolutely. The only thing that will differentiate between different HullCoins is that into each HullCoin, we insert software which documents evidence of positive social outcomes generated by the coin into the coin itself. An issuing organisation — whether that be a charity, a local authority, the NHS, the university, schools, prisons, – will be able to insert positive social outcomes and that stays within their own transaction histories.
The person who generates the coin who has done the positive social outcome — for self-improvement or volunteering, or it could be mentoring, or caring for relatives — that positive story stays with them on their wallet, on their app. It sits on there and any business or retailer that accepts HullCoin as a form of discount also receives a time-stamped copy of that positive social outcome.
What you get collectively, then, is distributed ledger of all the positive social outcomes that have taken place in Hull..
Q: Why would you create a local currency using blockchain over traditional digital payment systems?
Shepherdson: We did a full appraisal of all the different systems and which we could use, including blockchain. Because we’d developed links with Feathercoin, we were able to obtain the skills to develop the distributed ledger (blockchain) infrastructure very, very cheaply. What I think mutual credit systems — and any currency systems — have trouble with, is that at scale they become incredibly inefficient and it becomes more expensive the more successful that that you are.
One the things with local currencies: with paper, the more that you issue, the more your running costs and maintenance costs stack up. While we obviously have server costs around the tech, the actual payment infrastructure is incredibly efficient. Not only that — it’s incredibly secure.
We’re a social technology company that specialises in distributed ledger technology. The application of HullCoin in this first instance… This is something that could be genuinely valuable and is complementary to the economy as a whole, but provides that platform for the adoption of the technology.
If we’re able to achieve successful public penetration of [blockchain] technology, then the potential becomes extremely attractive. If you think of Bitcoin as being the world’s first-ever programmable money then it has become a no-brainer to use the model we’ve landed on — and the fact that we’ve been able to develop the infrastructure and everything at a fraction of the cost of what the industry rates are.
Q. How do you see a local currency scaling? And is it a relevant question for a local currency to scale?Shepherdson: I think a local currency can scale. I think local communities should own their own currencies. You can basically share the platform. The way that we’ve designed the whole current platform is that you can take the front and you can share the back-end and have your own customisable set of coins which are specific to your geography or your interests. It doesn’t just have to be around a local area. You could have one which is specific to a college, education, or health. It’s interoperable in a number of ways and you can white label the same platform and it’s extremely efficient and cheaper to do so rather than developing anything from scratch.
Q: Is there anything unique about the city of Hull that lends itself to success of a programme like this? And in the best case scenario what do you hope to achieve with HullCoin?
Bovill: I don’t think there’s anything so unique about the city of Hull apart from the fact that it is a northern city and every time there’s economic downturn, it’s just battered because the primary economy gets battered. There’s a disproportionate effect on the local citizens. We were trying to — in our strategies — to prevent that. We were trying to think about some way to create economic resilience for cities like Hull and Northern cities like Hull.
Shepherdson: I suppose Hull’s always had a bit of a rebellious streak to some historical extent. I like to think in some ways we plug into that. It is mostly beaten down. But again, when there’s issues like the things that we were looking to address that’s where innovation sometimes comes from— necessity, really. If we can provide a mechanism which gives people an opportunity to contribute to their economy and their community and also helps themselves and it gains traction — if that achieves success and credibility then our work here is done.
Bovill: In terms of ultimate aim, with the local currency, it is about trying to operate a key component in create a secondary economy. A secondary economy which matches unmet need with what would otherwise be wasted resources.
Shepherdson: And also, we have an interest and aspiration to link with the universal basic income model of welfare. The current model of welfare that we have in the UK really is not really fit for purpose. And it certainly isn’t fit for purpose in what I think we would determine is a post-automation economy.
You’re going to have to look at ‘what is value?’ In a much broader economic sense then what is currently considered by western governments. Hopefully what we’ve developed with HullCoin — both within its economic modeling and its blend of technology and application — is fit for purpose for the future model of welfare which reflects the changing economic activities people will be undertaking. You can have a corporate and a communal contribution to your economy, which is somewhat different from what it is now.