The proliferation of AI-based tools for creating visual and written content means we can no longer always trust that anything we see online has been generated by a human. Only a few short years ago, image manipulation was the preserve of those with Photoshop skills. Today, someone with no illustration skills can generate any type of image using just a few keywords. Natural language generation is now so authentic that around one-third of people cannot discern whether they’re talking to a human or a bot.

As AI makes it ever harder to discern legitimacy, and complicates interactions between individuals, our daily dealings online could become ever more murky. A simple proof-of-personhood such as Encointer’s could make it more difficult for malign actors to use AI impersonators.

Cloned attendees

One scenario where AI could fool humans into thinking that it is a legitimate human presence is in remote meetings. For example, employers have flagged that remote working has enabled a phenomenon whereby workers secretly juggle two or more full-time jobs, which could require attending multiple work meetings at the same time. Certain types of online meetings might also require individual participation, such as shareholder votes, where someone could manipulate the outcome by cloning their presence using an AI bot.

Encointer’s proof of personhood could be used to authenticate meeting participants as human. Thanks to blockchain consensus, the process can be made foolproof by introducing a lock that allows the authentication process or vote to happen only once for each participant at any time during the meeting. Therefore, the attendee would need to commit to a single interaction that can take place at any time during the meeting or agreed work time, meaning they would need to attend the entire session to be sure of authenticating their presence.

Social engineering

Social engineering attacks such as romance scams, where fraudsters pretend to be a love interest so they can convince people to hand over money, have become famous thanks to the success of Netflix documentaries like The Tinder Swindler. AI vastly increases the potential reach of such scams by allowing common tactics, such as spinning stories of financial hardship, to be deployed at scale using bots rather than humans. The advancing sophistication of natural language models means that more humans are likely to fall prey to such scams.

However, the use of AI in such scams can be prevented by making proof of personhood the standard for online interaction, in a similar way to how HTTPS replaced HTTP as a standard for online communication. Encointer could become the foundation for an authentication process where anyone can challenge another party to prove their personhood during an online interaction, making it far more difficult for AI agents to convincingly handle interactions. While such an intervention can’t prevent social engineering attacks, it can prevent the potential for the attacks to escalate exponentially through the application of AI.

Astroturfing online reviews

Online reviews have become a go-to method for ascertaining whether a product or service is up to scratch. From Amazon to TripAdvisor, the process is fraught with issues due to the fact that people try to game the system. Famously, a writer for Vice managed to get his garden shed to the coveted top spot of London restaurants simply by posting fake reviews.

AI can easily be used to flood online review sites with fake reviews posted by bots, further compounding the issue. The fact that AI language models are becoming more sophisticated means that site operators can’t rely on weeding out fake reviews using instantly-outdated language-detecting tools. Instead, making proof of personhood a baked-in requirement for leaving an online review is a far more robust way of preventing comment bots.

Big problems, simple solutions

These are just a few scenarios where the ability to prove personhood could help to prevent AI from being used for harmful purposes. As with any technological development, there is no putting the genie back in the bottle, and there are no silver-bullet solutions that can address every scenario. Instead, regulators and innovators will need to develop a robust set of rules and tools that can help to improve online transparency and tackle the use of AI in ways that may be unethical.

AI regulation is likely to try to balance the potential of AI to trigger innovation and opportunity for business with the legitimate concerns of users regarding transparency, safety and accountability. This may involve making certain AI code and trained models open source so that they can be publicly scrutinized and, in cases where legally relevant decisions are assisted by AI, mandating that a human decision-maker should sign off on them.

For example, open-source code should be a minimum requirement for industries and processes where AI is used in decisions that affect humans, such as insurance claims or hiring. In such instances, the need for AI transparency needs to be balanced with the data privacy rights of individuals. A hybrid of blockchain technology and trusted execution environments could be used to create this balance. 

However, regulation will never be a catch-all solution. We will also need a dependable means of identifying whether the parties to any given transaction are human or AI. Machines like locomotives and chainsaws feature a safety device called a “dead man’s switch,” which prevents them from continuing to run if the operator becomes unconscious or incapacitated. In an enterprise environment, a proof-of-personhood could be used similarly, preventing an AI from running out of control without human input. If linked with a user account, proof of personhood can also serve as a digital signature for AI-enabled transactions, ensuring that there is a legal accountability for any decisions taken.

Now that we have tools to verify personhood, it should become a standard for transacting online. Combined with pragmatic regulation that requires firms and individuals to identify how they are using AI, we can envision a future where humans can begin to interact with algorithms more confidently.

Photo by Waldemar on Unsplash

NYOTA (NYT), a community inclusion currency for Dar es Salaam, Tanzania, is planned to launch on the Encointer mainnet this September. 

Encointer is delighted to announce the launch of the fourth community currency for Dar es Salaam, Tanzania this September. The launch of NYOTA (NYT) follows a successful effort on behalf of the local team – Bujo, Victor, Teresia, and David – who have been in close contact with the Encointer team since the Dot Safari Conference in Kenya earlier this year. 

Together, these innovators are driven by their shared vision of creating value by bringing new technologies to their communities. They have worked as a team to develop NYOTA through numerous iterations in order to reach an optimal value proposition for NYOTA as a community currency. 

“Nyota” is a Swahili word meaning “star,” and the team chose the name to convey the idea of a currency that brings positivity to people, uniting them in the shared hope of a brighter future. 

One of the biggest challenges facing new Encointer currencies is the need to adapt to local circumstances, which is necessary to achieve a virtuous cycle where recognition of the value of the currency supports growing adoption. The Nyota team is leveraging the established structures of local so-called “Village Community Banks” (VICOBAs). VICOBAs are a micro-financing scheme comparable to a credit union, where local participants can combine their savings into community pools that can be used for extending lines of credit. 

VICOBA networks already operate based on in-person meetups, and the concept is familiar to local residents, making it an ideal mechanism to create a soft landing for NYOTA participation with regular proof-of-personhood gatherings. 

The idea is to peg Nyota to the value of the Tanzanian shilling, where one NYT is equal to the value of one thousand Tanzanian shillings. The initial allowance is still being discussed. The current state is to set to 50 NYT per participant and month. 

The team will use three pillars to engage the local community:

1. Educational programs consisting of workshops, webinars, and tutorials to propagate the knowledge of Encointer among local residents.

2. Human-centric activities, such as networking events and meetups, to get people talking about Encointer and its real-world use cases, with a view to building a volunteer program. 

3. Adoption, focusing on merchant engagement and the development of pilot programs. 

To support the team in launching NYOTA and spreading the message of how it benefits the local community, the Encointer introduction video will also be translated into Swahili. 

After several weeks of successful testing on the Encointer Gsell testnet, the team is now preparing an ambitious roadmap to launch NYOTA on mainnet by end of September. 

We at Encointer are proud of the efforts to bring digital community currencies to life in Dar es Salaam and trust that the team there will continue their efforts to make the launch of NYOTA a success. 

If you are interested in joining the NYOTA-Community, please get in touch with team on twitter or reach out to us!

@bujo_rasta,
@noplanetBCD
@victorthetravlr
@machuche_

When trying to form an opinion about a product or service, we often find ourselves gazing at the stars on platforms like Amazon or TripAdvisor to help make up our minds. While user reviews and comments are the backbone of most Web2 Internet platforms, their veracity is being increasingly called into question by the growth of paid comment farms, social bots and natural language AI tools. Encointer offers a unique way for users to tackle the problem and take back control of online discourse.    

Backed by a tailwind of glowing five-star reviews, the Shed at Dulwich quickly became the top-rated eatery in London on TripAdvisor. Through a polished website and slick social media operation it promised stylish, contemporary dining experiences tailored to your mood, such as “lust” or “contemplation”. There was only one problem. It didn’t exist.

The restaurant, website and reviews had all been fabricated by Oobah Butler, a London resident on a mission to demonstrate how easy it is to game online review platforms. Together with a few friends, he used fake five-star reviews to manipulate the TripAdvisor ranking for his fictional establishment, before publicly revealing the deception and conducting a round of press interviews highlighting the problem. It was a poacher-turned-gamekeeper case: years earlier when living with his parents and strapped for cash, Butler had worked for an online vendor who paid him £10 per review to write up glowing appraisals of London restaurants he had never been to. Now, he was exposing the charade for what it was.

Comment fraud: A problem that affects every aspect of online discourse

Review fraud is by no means limited to the restaurant and hospitality business. On any platform or forum where people can voice their opinions online, doubt is increasingly being cast on their legitimacy. Oftentimes, there are direct monetary benefits for those involved. Private groups on platforms like Facebook and Telegram with thinly veiled titles such as  “R**fund Aftr R**vew” act as a recruiting ground for those willing to write five-star reviews on platforms like Amazon, TripAdvisor or Yelp in exchange for free products and/or cash incentives. Review fraudsters typically use numerous alias accounts to avoid arousing suspicion and separate the illicit activity from their primary identities.        

In other cases, the motivations are political. In a 2020 article titled “Bots Are Destroying Political Discourse As We Know It”, privacy specialist and writer Bruce Schneier detailed how politicians and foreign actors were commanding armies of chatbots to distort political interaction online. A 2019 study into the practice found evidence of an international black market for reusable political disinformation bots, noting that hundreds of Twitter accounts which shared alt-right content during the 2016 US Presidential election switched focus and started sharing rumors and disinformation about President Macron during the 2017 presidential elections in France.

Human voices in danger of being crowded out by AI

Estimates vary as to the scale of comment fraud. Amazon, for example, contended that in 2018, less than 1% of reviews on the site were inauthentic. The fraudulent review detection service Fakespot, however, claimed that 42% of the 720 million Amazon reviews it assessed in 2020 were fake. In political discourse, rumors and misinformation are often spread by a complex interplay of bots, politically motivated actors, and real people who are likely unaware of the origins of the content, making it hard to derive a precise number that captures the full scale of the problem.

In the past, it was relatively easy to spot fake reviews and comments on the basis of their linguistic content. Many different accounts would post almost identical five-star reviews of the same product or service, for instance, suggesting a coordinated bot operation. In other cases, reviews would be very brief, comprising non-specific statements like “excellent” or “great”, without any details about the product or service in question. In the political and social arena, bots sometimes repetitively posted and retweeted a limited range of slogans and hashtags with little nuance or variation. 

But with the sudden widespread availability of large-language artificial intelligence models like Chat-GPT and Google Bard, it has become trivial to create many linguistically correct and believable reviews and comments at the touch of a button. Practically overnight, many of the most widely used algorithms for fighting review fraud and disinformation, which analyze and look for patterns of speech in suspect comments, have become ineffective. 

In response, researchers and platforms have looked for ways to flag and ban reviewers who have been recruited through private groups. Amazon even went as far as suing the admins of more than 10,000 Facebook groups which it alleged were involved in soliciting fake reviews. Ultimately, however, this is a game of regulatory Whack-A-Mole, with groups that are closed down quickly reappearing in a slightly different guise. And while Twitter is ostensibly charging $8 per month to prevent spam accounts, this would pose no real barrier to well-financed bad actors.

Bringing humanity back to the fore 

In concluding his article about bots and disinformation, Schneider strikes a resigned tone, stating: “We have to recognize the limitations of online political conversation, and again prioritize face-to-face interactions. These are harder to automate, and we know the people we’re talking with are actual people. This would be a cultural shift away from the internet and text, stepping back from social media and comment threads. Today that seems like a completely unrealistic solution.”

Indeed, this solution sounds onerous, requiring people to only trust people who they can meet in the real world. While the internet promised to create a “digital town square” in a global village, bots seem to be forcing us to consider a radical departure — returning dialogue to physical locations. 

But what if we could create a nexus between the physical and online world, allowing us to know we are interacting with real people in online settings? At Encointer, we are creating a badge for social media platforms, starting with Nostr, that will guarantee that a user is a single account, without requiring them to provide any ID or reveal personally identifiable information.

So how does it work? Users download the Encointer app, which is currently available for Android or iOS smartphones. In the app, participants in each Encointer community are randomly assigned to periodic small, physical gatherings at a randomly selected location in their local area. When it commences, each participant scans the QR code of the other attendees to confirm their presence and the attestations are recorded on the highly secure Kusama blockchain ledger. As all Encointer gatherings take place at the same time, it is impossible to attend more than one event during each cycle. This makes it impossible to validate more than one Encointer account. 

By taking advantage of the trusted-execution environments provided by our partner Integritee, we will make it possible for users to create an unlinkable connection between their Encointer account and their social media profiles. The end result will be that people can display a badge on their social media accounts to prove that they are controlled by a unique individual. This proof-of-personhood badge will greatly enhance a person’s credibility when they comment or leave reviews online. Conversely, malicious actors or bots would no longer be able to post multiple reviews or comments using separate aliases.

Beyond personhood, Encointer provides a broad indication of the geographic region in which a user account is located. This enables comments to be ranked or filtered by region. For example, users could choose to filter reviews of a restaurant to those written by locals. Platforms may even choose to de-emphasize foreign comments or label them to provide more context for consumers. Similarly, a regional newspaper could prioritize comments written by readers actually living in the area. As each participant needs to attend in-person gatherings to validate their account, their region cannot be obfuscated using a VPN.

While attending occasional gatherings requires some commitment from participants, it requires a far less seismic change to our culture than moving all discussion offline. Ultimately, by linking the trust of the physical world with online profiles, decentralized proof-of-personhood protocols like Encointer could help to enable humans to take back control of online discourse and banish the fraudsters and bots to obscurity.   

Photo by Elin Tabitha on Unsplash

Encointer has made it possible for any community to create and distribute its own local currency. With its highly secure and decentralized Sybil-defense protocol, it lays the foundation for community-issued income. The current version of the protocol, known as Encointer LoCo, has proven its capabilities in pilots such as the Leu community in Zurich.

However, we understand that launching new communities and defining the economics of a currency can be demanding, slowing down widespread adoption. This is where BeeDance comes in.

BeeDance enables event organizers to create their own, flexible Encointer community for a single event or a series of regular gatherings. With BeeDance, organizers have the freedom to choose the event location and determine the timing of key-signing gatherings that suits them best. The beauty of BeeDance lies in its simplicity and flexibility, making it far easier to launch compared to Encointer LoCo. While it can serve as an excellent user acquisition tool for LoCo, it also serves as a standalone proof-of-attendance (PoA) protocol.

BeeDance: A new more secure and flexible way to prove attendance

PoA is commonly understood as evidence that you participated in a physical or virtual event, typically issued by the event organizer. Traditionally, using a protocol such as POAP.xyz on Ethereum, attendees scan a QR code to claim an NFT, creating a fun experience for collectors. However, such protocols can be easily manipulated, allowing participants to claim multiple times or share the QR code with others who are not in attendance. It takes just one person to leak the QR code for the system to become ineffective and the event organizer acts as the single trusted authority for PoA issuance. These vulnerabilities pose a significant problem in any situation where the PoA and its associated benefits have real value.   

Building upon the robust foundations of Encointer LoCo, BeeDance enhances the security and reduces the centralization of PoA, while injecting an element of fun. Event attendees are randomly grouped into clusters of a dozen people, who gather in specific areas of the venue to scan each other’s QR codes in the BeeDance app. We call this a BeeDance because, from a bird’s-eye view, it resembles a bustling beehive, with participants buzzing about, exchanging information, and forging connections. Besides enhancing security, these randomized gatherings can also be leveraged for speed networking, thereby integrating the key-signing gatherings more organically into the overall event.

Although the event host holds a privileged role in being able to grant or deny access to the BeeDance, their actions are publicly observable, and any attempts to mint illegitimate rewards or PoA can be detected and addressed by attendees.

As a host, BeeDance offers you a large degree of freedom and flexibility in determining rewards. Whether you issue commemorative NFTs or an event-specific currency that can be used to obtain drinks, food, or merch, it’s up to you. Moreover, event organizers who host a series of events can use the same event currency across gatherings, creating a token ecosystem around their meetups.

As BeeDance events gain momentum and foster a sense of community, they may eventually decide to launch their own Encointer LoCo community. By this point, they will have reached a critical mass and gained valuable insights into how their community currency can hold substantial value.

Composability is another essential aspect of Encointer BeeDance. The PoA rewards earned will be standard assets that can be issued on other chains and are compatible with XCM and every Polkadot wallet.

Looking ahead, Encointer plans to deliver the BeeDance MVP in Q4 2023, with the first events scheduled before the year’s end. Overall, BeeDance offers a more secure, flexible and engaging approach to PoA and we look forward to seeing it in operation later this year.

 Table: Differences between Encointer LoCo and Encointer BeeDance

The research is clear — when women gain and maintain more control over their finances, it results in economies which are more resilient, diverse and equal. But how can we move beyond this macro insight to drive change in local communities? In this post, we discuss the barriers and enablers of female economic empowerment and how Encointer could help. 

Men splurge, women invest: the truth about female economic empowerment

Cliches about women going on shopping sprees and having wardrobes full of shoes are common, but research tells a different story. So men, you might want to take note – a wide range of studies from developing countries like Bangladesh and Haiti, to developed nations like the United States have all come to the same conclusion: women tend to be more prudent budgeters than men, directing more household income towards things like food, education, and long-term durable goods.     

Female economic empowerment is a term that you’ve probably seen mentioned before in articles or conference presentations. But what does it mean exactly? In any market-based economy, an individual’s ability to make independent decisions tends to be closely tied to their financial resources. You might be a talented craftsperson who always dreamed of starting your own business, but unless you can access money and control how it is spent, it will be highly challenging to bring your idea to fruition. Female economic empowerment occurs when women receive an income that they can control independently and use for priorities that are important to them. 

Female empowerment benefits everyone

When women get more economic opportunities, it is not only beneficial for the women involved. In fact, many studies have linked empowerment with numerous macro benefits including higher economic growth, lower social inequality, and higher resilience to shocks.

How Encointer fits in

Our platform enables communities everywhere to establish secure and inclusive digital community currencies. Once a community currency has been established, any individual can participate in an Encointer gathering and receive a community income on their smartphone, even if they don’t have access to local employment networks. 

This could serve as a way to receive an income, while bypassing potentially restrictive social hierarchies. For instance, Encointer could enable communities of women to start producing and trading goods without needing support from traditional financial institutions. This could help bootstrap female-run businesses initially, which may go on to receive funding from traditional financial institutions in the long term once their viability has been demonstrated. 

In addition to providing an income, Encointer also helps to ensure greater financial independence. As mentioned previously, additional resources have limited developmental benefits unless women can control how they are spent. By design, Encointer’s protocol ensures that each participant has a separate account. Furthermore, each account is secured in the Encointer wallet app by a user-generated PIN, as well as any in-built security features that prevent the smartphone being unlocked by an unauthorized user. This could help women exercise more control over their community income than schemes where funds are paid in cash or into shared accounts.

By providing women with a secure, independent income, Encointer can potentially provide women with a greater incentive to engage in the local economy and help to spur greater female economic empowerment.

To understand inequality, you have to look at asset ownership – including intangibles such as education and job security. And to fight inequality, you have to think beyond redistribution. 

Is economic progress really moving in the right direction? We are often told that global inequality is reducing. But in fact, not only is that improvement unequally distributed across regions; within most countries, it is increasing. That is especially true in the most advanced economies. And there’s another, telling wrinkle: income inequality, the most commonly measured indicator, gives only a partial picture – and a very misleading one. 

The hollowing out of modern economies

Reductions in measured income inequality often reflect drops in the highest salaries (for instance, slashed bonuses for bankers after the 2008 financial crisis), but rarely is there significant improvement at the bottom end of the income scale. This shows the impact and importance of wealth inequality, which is actually getting worse. In a headline-grabbing statistic, in January Oxfam reported that nearly two-thirds of all new wealth generated globally since 2020 – a total of US$42 trillion – went to the top 1%. Increasingly, income is generated in the form of dividends and other returns that accrue to capital owners, not work-based earnings. Inevitably that means that the rich are getting richer, faster than ever – and as we see a broad market restructuring toward the “gig economy”, part of that wealth gain is coming directly at the cost of job security. 

It has been argued that a core asset underpinning middle-class prosperity in the 20th century came in the form of stable jobs that brought attendant benefits such as pensions and health insurance. That employment model is rapidly disappearing, as the “flexibility” of freelance working replaces security. This is a profound change that will drive more and more inequality as gig workers take the brunt of every new economic crisis, and it is contributing to the erosion of the middle class in developed countries.  

Wealthy households can weather drops in their income quite well, thanks to savings and other assets; in fact their wealth itself generates income, whatever happens to their jobs. Moreover, when you include less tangible assets, such as education and insurance, it becomes even clearer that asset ownership drives opportunities and social mobility, generating yet more income and securing inter-generational benefits. But poor households have no resilience in the case of lost income.

With the IMF pointing to a “rocky recovery” around the world – in fact, with medium-term forecasts the lowest they have been in decades – the current cost of living crisis is surely only going to get worse. And the reshaping of the job market has seen to it that millions will be worse placed to cope with this trend than ever before. 

According to recent McKinsey research, for example, around a third of the US workforce currently identifies as gig workers (whether full- or part-time). That leaves a frightening proportion of the population without a safety net in cases of personal or general crisis – such as the pandemic. On top of that, the Oxfam report points out that for at least 1.7 billion people around the world, inflation is outstripping wage increases, and at least 820 million people are living in hunger. 

Bear in mind, too, that inequality reflects both transient and systemic factors, with extreme poverty tied to stubborn structural problems that hold back entire regional populations or segments. Examples include employment barriers for refugees, or cultural and educational restrictions on opportunities for women.

What this means for solutions

In this context, it is interesting to consider this three-by-three matrix for analysis of potential policy interventions to address inequality. One axis represents the income groups mainly targeted by a policy; the other, the economic stages at which interventions can take place. This locates interventions as applying at the pre-production stage (for instance, education and training, or at the top income level, inheritance taxes); the production stage (covering wages, in-work benefits, enterprise support programs and the like); and the post-production stage, which includes social transfers such as housing benefits as well as income and wealth taxes. 

Anti-poverty and redistributive efforts tend to target the first and third columns – aiming to improve household circumstances through better preparation for employment, and to redress inequality through taxation. These are the areas of social policies, while the central, production stage is left to economic policies aimed at stimulating growth, without directing that growth toward social goals. 

Is there more that can be done in this central economic stage to further social goals? Might this stage lend itself well to grassroots efforts to improve opportunity, and reduce inequality, on the consumption side? 

Encointer’s innovative platform aims to empower communities with a democratic tool that distributes an unconditional digital income. The community-governed digital currency can be spent at participating local businesses, giving a boost to the circular economy and enhancing the purchasing power of every Encointer member. 

This works in two ways toward the goal of financial inclusion. For merchants, it contributes to business growth. And for households, it enables them to increase consumption, freeing up more of their conventional resources for savings or other spending. 

Because Encointer currencies are locally distributed and governed according to community need, they provide resilience against wider economic shocks, especially for gig workers. And because they are freely available to every member, they can help to redress systemic imbalances such as gendered inequality. 

Addressing inequality in the modern economic order will demand understanding of the structural factors at play, especially the concentration of wealth and erosion of job security. Creative thinking that aims to support prosperity for an entire community, and ensure equitable access to consumption opportunities, must play a part. And Encointer is here to help. 

European countries are often assumed to provide a good standard of living for all citizens. But the real picture is more troubling.

In economic comparisons between continents, Europe is frequently touted as the ideal, and indeed the data shows that wealth distribution on the continent is broadly better than its counterparts. But viewed over time, inequality in Europe is on the rise. Furthermore, while overall inequality in the region may be comparatively low, national and even regional disparities can be far more significant.

The Gini index measures inequality by quantifying the extent to which the distribution of income or consumption within an economy deviates from a perfectly equal distribution. A higher Gini index is a stronger signifier of inequality. According to World Bank data, the Gini index in several major European countries has been on the rise over recent decades.

In the UK, the most pronounced rise in inequality occurred during the deindustrialization and deregulation of the 1980s, with the Gini index rising 26 percent in the period between 1979 and 1991 – around the same level it has today. Inequality did climb further after that but dropped back after the 2008 financial crisis.

However, in other major European countries, the Gini index has risen in recent decades. For example, according to World Bank data (see above graph), Germany witnessed a 5 percent rise between 2003 and 2018, which is the most recent available data. France saw a similar net increase over the same period.

Perhaps most surprisingly, Sweden, a country with a history of very low levels of inequality and high rates of redistribution, experienced a sharper increase in the Gini index – 18.5% – over the same 15-year period.

Across Europe, levels of inequality vary by region, but Southern and Eastern European countries face the highest rates.

Why does it matter?

Inequality has wide-ranging economic and societal consequences, hampering progress. While the interactions between economic growth and equality are complex, many studies have highlighted the potential negative effects of inequality, such as growth volatility. And beyond GDP, countries in Southern and Eastern Europe (which, as mentioned, score higher for inequality) also tend to score lower on the European Social Progress Index (see below), a measure of societal development and quality of life. 

In addition, more unequal societies tend to be more susceptible to political instability and populism. 

Geographical disparities

Patterns of inequality are also evident, particularly across the larger European economies.  Income and employment in Europe are often geographically concentrated in larger metropolitan areas. This disparity leads to economically marginalized communities further out, which exhibit higher rates of unemployment and outward migration and enjoy less trust, economic connectedness, and social capital. In turn, this makes it more difficult for people there to form the human relationships and networks critical to achieving upward income mobility.   

France, the United Kingdom, and Italy are all examples of countries with a stark geographical divide in the distribution of income, opportunities, and inequality. The conclusion of a 2021 study published by French statistics institution Insee makes reference to France being “bisected by a diagonal line running from Calvados to Gard; since World War II, the ‘winners’ have often been situated on the south-west side of this line, while the ‘losers’ have been located on the north-east side.”

In Italy, the north-south economic divide is well documented. A 2021 survey that divided Italy into four economic categories found that unemployment was as much as six and a half times higher in the poorest areas of the south than in the wealthiest areas in the affluent north. Investment in social care can be as much as 27 times lower in the most deprived areas than in the highest. 

However, the UK appears to be among the worst performing when it comes to inequality, with a very strong concentration of wealth in the south of the country. According to The Economist, in a 2020 study that used 28 different measures of inequality to compare wealthy economies, the UK was above average for geographical inequality on all 28 measures and was top of the list for six of them.

This tends to result in liquidity shortages in disadvantaged regions – that is, not only generally depressed economies, but a lack of immediate spending power that holds local communities back. These marginalized communities often depend on seasonal industries like tourism or agriculture, resulting in liquidity droughts during periods of low demand. And gig economy workers, or those who rely on informal self-employment, must contend with low pay and income fluctuations. Again, this problem is greatest in the most deprived regions, and reinforces that deprivation.

Tackling the challenge

Inequality is undoubtedly a complex issue that requires a broad policy response. However, local currencies offer a way for communities to increase liquidity at a local level and improve their resilience. Encointer currencies are intended to be complementary, working in tandem with regular money. When participants can cover some of their basic needs and daily expenditure using their Encointer community income, their effective purchasing power is increased, so they can save more of their fiat income or use it for other purposes. 

A study by Damla Welti, a postgraduate scholar at ETH Zurich, used an agent-based model to simulate the effect of Encointer community currencies in low-income communities. The results indicate that the introduction of Encointer currencies could enable participants to save a higher proportion of their fiat income, resulting in greater equality in terms of purchasing power.      

Without the influence to change global policy, Encointer empowers communities that may be the worst affected by inequality with a straightforward, user-friendly financial tool that can improve their situation. Furthermore, the benefits of Encointer only increase with greater adoption, since retaining money in local communities prevents the so-called “leaky bucket” effect. 

Beyond the financial benefits, Encointer also enhances community cohesion by promoting participation in a mutually beneficial shared initiative and requiring regular in-person meetups to claim individual allowances of the local currency. For local merchants, there are many benefits to adopting Encointer currencies as a complement to existing payment methods. 

To discover more about how Encointer works and how it could benefit your community, visit our homepage, or contact us for an initial discussion about launching an Encointer currency. 

Encointer’s digital local currencies offer a tangible way to reduce income inequality by disbursing a regular allowance to community residents who join regular in-person gatherings. The income comes in the form of tokens that can be spent only within the neighborhood, at participating businesses.

However, while the attraction of a free income is clear, the benefits for merchants accepting the currency may not be so immediately obvious. Here, we outline six ways that joining Encointer’s local digital currency initiatives can help boost your business.

Increase turnover

Community currencies issued through Encointer have demurrage built in, which means that over time, the balance held in each wallet decreases. This creates an incentive to spend the money, since otherwise it will be lost – and as one of the places accepting the currency, this benefits you. As a participating merchant, your business gains exposure to the entire Encointer user base, who will regularly be looking for opportunities to spend their currency before it starts losing value. Your business gets a directory listing on the local currency home page, along with Encointer marketing assets to display on your premises or at payment terminals.

Research shows a strong and increasing consumer desire to support local and independent businesses, with a majority citing the local economy as a principal driving factor. Joining Encointer is an ideal opportunity for your business to tap into this shifting appetite and further expand your reach through referrals and word-of-mouth marketing.

Increase footfall by hosting meetups

Encointer’s regular signing gatherings are always face-to-face events requiring a physical presence from the individual claiming the currency. This security mechanism prevents any one person from claiming more than their allowance. It also means that there’s a rota of Encointer groups seeking suitable locations where they can meet up to hold a signing gathering – and since the concept is so new, regular informational meetings are also helpful. 

By hosting gatherings for your local community currency, you can also help to increase footfall through your premises, creating organic opportunities for people to spend their Encointer income and providing even more exposure for your business within the Encointer community. 

Exchange rate flexibility

Each Encointer currency can define its own exchange rate policy according to local economic conditions. This is helpful for merchants, as they can be flexible in how they apply the policy when setting their prices. For instance, in locations with an unstable national currency, inflation rates can fluctuate widely in the short term, and merchants are forced to update prices frequently. 

Encointer communities can opt to issue a currency that’s unpegged from the national currency and instead governed entirely by local market forces. As part of the Encointer merchant network, your business can freely set prices in the community currency based on supply and demand. 

If you decide you want to attract more people to pay with the local currency to stimulate a more stable monetary supply, then that is in your hands. You can choose to sell at a slight discount to promote uptake of the Encointer currency, or offer your employees a premium in the local currency as part of their remuneration.

Strengthen local supply chains and support circular local economy

Encointer local currencies can only be spent at participating local merchants, so they help to counteract the so-called “leaky bucket” phenomenon, which describes what happens as money leaks out of local communities to larger chain stores and globalized corporations. While this effect is well-known, the underlying complexities are less well understood. 

A 2002 book “Plugging the Leaks” outlines the “local multiplier effect,” which describes the circularity of money in a local economy. Effectively, money taken by one local business being spent at another local business is worth more to the local economy than money that goes to a local business that sources everything from global suppliers. 

Encointer merchants are making an active contribution to a local supply chain, supporting this multiplier effect. By spending your Encointer income at participating nearby businesses, you’re also supporting a circular local economy – which means your own business benefits. 

Reputational boost

Most people would say they support regenerative local economies in principle, but how many of them actually walk the walk? Encointer is a proactive initiative for long-term local financial sustainability. Joining our merchant network can boost your reputation in the community as a business that’s taking active steps to support the local economy. You could even inspire other businesses to follow your lead. 

A safe, secure payment channel with no overheads

Most payment methods come with drawbacks. Cash is a security risk and creates operational burdens, whereas credit card and payment networks typically levy fees and require dedicated payment terminals. Encointer only requires a connected smartphone running the Encointer app, and you can begin accepting payments within a few minutes in a way that’s safe, secure, and accessible to everyone. 

If you’re in one of our local communities, you can get started with Encointer today by downloading the app. Alternatively, discover more about Encointer on our website, or via LinkedIn. 

Our first year operating a common good parachain on Kusama has clearly demonstrated what Encointer can do, with our first currency growing steadily and more on the way.

As we take stock at the end of our first year in operation, Encointer is proud to have made great strides. Our first community currency, Zurich’s Leu, is circulating steadily and growing in acceptance. Our protocol has been refined and adapted in response to the lessons we’ve taken from practical experience. And, most importantly for our mission of inclusivity and empowerment, we can show good progress in developing further currencies around the world. Below are Encointer’s key achievements from 2022.

Leu leads the way

The first test of Encointer’s concept in the real world came with the launch of Zurich’s own Leu community in May. We are proud to say that the currency has grown steadily, attracting press attention (from a mass circulation daily as well as ETH’s student magazine Polykum) and convincing a growing number of merchants of the benefits of accepting LEU.

In detail:

• Members can claim 44 LEU every 10 days, and spend them at 7 participating merchants in the inner city. From a local bar and food retailer, to yoga and music lessons, and even local honey and homewares, the range of uses for the currency keeps growing. 

• Leu has also been accepted at occasions such as the Openair Wipkingen music festival, with more special events planned for 2023. 

• At the start of December, total turnover reached 9,049 LEU. 

• Over a thousand devices now have the Encointer app installed, and 180 accounts hold at least enough Leu for a coffee. 

• The economic impact of Leu will be studied in a Master’s thesis for ZHAW in 2023. 

• To build awareness, we have run a billboard campaign, and presented the currency to renters at the trendy Viadukt shopping precinct.

• We have a regular social events program with guest speakers to discuss topics around inclusivity in economics, tech and other areas – of course, always including an opportunity to explain how Encointer works and answer any questions. 

We are also focusing on expanding the base of participating merchants, recruiting a part-time sales force to approach suitable businesses, and building a community-owned “market maker” to promote the circular economy.

After Zurich, the world 

With Leu firmly on its feet, we are directing more efforts toward starting new communities elsewhere, especially in developing countries.

On the global stage

We participated in a number of events, which have been effective in drawing approaches from community leaders around the world.: 

• Polkadot Decoded, in both Berlin and Buenos Aires.

• The LATAM Polkadot hackathon. 

• The RAMICS Biennale (Research Association on Monetary Innovation and Community and Complementary Currency Systems) in Sofia, Bulgaria. The event, where a representative of the Bulgarian National Bank joined the opening panel, yielded valuable connections outside the crypto world.

• We also presented Encointer to ReFi Zurich and to the Data Innovation Alliance. 

We were also invited to the popular Green Pill podcast, hosted by Gitcoin Founder Kevin Owocki, where Encointer is the first featured project outside the Ethereum ecosystem. (Other guests have included Martin Köppelmann and Vitalik Buterin.) 

We also ran a boosted social media campaign focused on sub-Saharan Africa, drawing over 70 registrations within days, and are now reviewing these applications. We have set up an overview of the on-boarding process, where anyone can easily see how to apply to start a community as well as reviewing communities already in the process of exploration and development.

We have set up a milestone-based unconditional seed funding process, with staged rewards starting at USD 2,000. Initial milestones have been set to support the launch phase, with further milestones being defined in consultation with the community leaders.   

Our new and upcoming communities are:

• Green Bay, Wisconsin, US. Our third community is set for launch on mainnet at the start of January. The team has registered with the local chamber of commerce, to promote acceptance by local businesses, and will start with very few meetup locations, in order to build community cohesion. 

• Berlin, Germany. The Berlin team is close to launching on testnet, having taken a very thorough conceptual approach. They have established further touchpoints with CirclesUBI, which is also based in Berlin.

• Kigali, Rwanda. The Aslah currency was formed on October 30th, with 10 bootstrappers each creating 25 ASL. Unfortunately, the currency is currently purged as a result of 5 unsuccessful cycles. This highlights the importance of having a more extensive network in place prior to activating a currency, a lesson we will keep in mind in other communities. We are in contact with the local community leader to seek a resolution.

Fundraising for impact

In the course of Q4 2022, we started contacting NGOs active in the fields of financial inclusion and development aid, such as World Vision Switzerland. We are preparing documentation to support these approaches, aiming to start closing deals in Q1/Q2 2023. The goal is to help the local implementations of Encointer communities in the global south. 

The Leu community is important to pave the way for communities in less developed countries. We have reached out to organizations working with less privileged people in Zurich, such as AOZ – Stadt Zürich (Asylum organization for the canton of Zurich) and Essen für Alle (food for all), to help us ensure inclusion locally and add social value. Further meetings are scheduled for the next quarter.

Protocol and other progress

In August, we implemented a runtime upgrade that fixed a critical bug as well as improving the protocol based on our practical experience in Zurich. The next upgrade is currently in the Gov2 pipeline, and aims to improve security and support community growth by enabling reputable members (not only bootstrappers) to endorse new members, as well as allowing members to cancel their registration for upcoming gatherings. On December 23, Encointer’s latest Treasury Proposal was granted by the Kusama community, which will fund our operations for Q1 and Q2 2023.

Another improvement in the works is implementing Integritee SDK sidechains in order to decrease latency and preserve the privacy of participants. We have also on-boarded an app development team in Kyrgyzstan to improve the wallet app.

Organisational scaling

Finally, at this stage of development, it became necessary to make some leadership changes. Malik el Bay has been appointed as deputy to our founder and president Alain Brenzikofer. With Malik taking over day-to-day operations, Alain has been able to devote his energies to on-boarding new communities in the Global South, furthering Encointer’s core mission of empowerment and inclusion.

Another key goal for 2023 will be to advance integration with other parachains in the DotSama ecosystem, providing them with Encointer’s unique benefits in terms of financial inclusivity, Sybil defense and one-person-one-vote democracy.

Looking back on all the events of 2022, we are proud to see how well Encointer’s team and technology have proven themselves. The inevitable bumps in the road (such as network outages, or the discovery of limitations in the design) have served only to help us improve – and to boost the community’s confidence in Encointer as they see how effectively and transparently we have resolved issues. 

The year has shown exactly how much we can accomplish, and set us well on our way to doing so. Stay with us in 2023 as we push on toward building a more inclusive Web3.