Welcome to the first episode of Blockchain Beyond Hype! After a decade of development, blockchain is attracting not only financial institutions but also local governments. We have been talking with Stephen DeMeulenaere from Qoin Foundation about the issuance of local digital currencies that incentivize people for cooperating with each other in a way that contributes to sustainability goals.
Laks: We’re so excited to be able to talk to you about your thoughts on the blockchain. So it looks like you have been around the cryptocurrencies way before they became hyped. Can you recall how you made the steps into what kept you busy doing this last decade?
Stephen: I got involved in digital currencies long before cryptocurrencies or bitcoin were invented. So way back in the early 90s in Canada, there were some digital currency systems for local economic exchange within some cities in Canada. That’s where a lot of these early digital currencies for public use were first introduced.
Laks: You are involved in a very long list of projects related to the usage of blockchain technology. Ripple is certainly an interesting point. What were you advising them on?
Stephen: So Ripple started off, well, it’s now known as Ripple Classic. So Ripple Classic was invented in Canada in around 2004 by a young man Ryan Fugger. Ryan was a young developer who was looking at ways of developing a digital currency with what we were doing already, with a digital currency that we were working with. But his was much more advanced, and it took advantage of new technologies that were being developed that we were not yet using in the systems that we were running in the city of Victoria in British Columbia.
So Ryan contacted me by email around 2004 because I was very actively talking about digital currencies and the future of payments and social impact and social inclusion and a lot of things that we’re talking about nowadays. And he said ‘Hey, I have this idea for a new kind of digital currency that allows people to issue each other credit.’ And so we do that in a way in our systems, but the model that he proposed was very innovative.
He asked me what I thought of the model and did I think that people would make use of the model. And every once in a while he would send me an email or call me up and say ‘Hey, I’m thinking of this new idea or this new idea’ as he was developing his model about how to get it up there in the world and the marketplace.
Around 2009, four or five years later, he was contacted by Jed McCaleb who then owned Mt. Gox. Jed McCaleb made a deal with him to buy the Ripple brand name, ripple.com and the concept. Jed was already a high-level cryptographer. He took the Ripple idea and put cryptography in it and developed a much more cryptographic kind of structure for Ripple. And this was all being done before bitcoin was introduced to the world.
Laks: All right. So though Ripple is in the past. Now your main focus is on Qoin Foundation. As you say “Money is a social construct, a human invention. We can redesign it to fulfill our needs.” Could you explain briefly how it may work?
Stephen: Sure. Well, we have the way that currencies usually are issued into an economy now. The central bank makes a provision for banks to issue loans to people at interest. The interest rates are really low, so it doesn’t have such a huge effect on the way that our lives operate. But a lot of people still think in terms of money as being something that scarce and a loan that they have to repay.
So maybe the money that’s in our wallet right now isn’t part of a loan that we personally have to repay to a bank, but someone else does. And when that happens people think very competitively. They’re like ‘Oh, I’ve got to repay that loan.’ And so, that drives people to do things that are not good for the environment, and it has no connection to sustainability at all. That’s a big concern for me as an environmentalist.
What many people and we have been trying to do is to change the way that money is issued because that changes the way that people behave. We can design the issuance of money in ways that encourage people to cooperate with each other or work with each other. As opposed to just being competitive with each other, or collecting our salaries and not thinking about the people’s needs around us.
So, bitcoin took a different approach. They said – no, we should have an algorithmic issuance of currency which goes to the miners, and then the miners sell those tokens, the bitcoin on an exchange. People buy them and then circulate them around.
But what we at Qoin actually do and with other organizations that I’ve worked with is we allow people to issue the money themselves. So if you join a network that I’m in, then you’re automatically given access to credit, and you can spend that credit right away even before earning the money you know that you have. So that’s even more decentralized form of issuance of money than we see in bitcoin and most other cryptocurrencies now. However, the original Ripple Classic was also like that.
If I said I know Laksmini, I know someone else, e.g. Roberto and so we know each other, then I could say that I grant you credit because I know you through him. And then as more people join the network and know you or know him or know me, then we ripple that credit through society or through the community that we’re in. So that really changes things a lot when we change the way that money is issued.
Laks: So let’s say I’m the owner of a waste management company in Jakarta. What could you offer to such a client?
Stephen: So what we try and do when designing this system is just create local circuits. Very simple local circuits – like a standard circulation of money at one time. As that grows and becomes more well-known, then we add on other circuits. With a recycling or waste management company in Jakarta, we could say ‘well, do you have enough funds?’ A lot of them don’t have enough funds.
As you know here in Bali, waste management is a really big issue. We have all these businesses that want to support waste management, but they’re worried that their donation is just going to go into the sand. That it isn’t really going to be put to the use that it was intended for. Whether that’s given to the government or whether it’s given to another agency for handling it. But what we could actually do is develop a kind of network where, for example, the business makes an in-kind contribution which is tokenization to that waste management facility. And that waste management facility sells those tokens to the general public, to anyone who wants to support that project.
Then those tokens can be spent at the local business. We will usually make a contribution, and we don’t think about that contribution anymore. But now what we’re doing by adding people into it is that we put a lot more eyes onto that actual waste management process and what they’re doing. Are they doing it right? Are they collecting it properly in the way that we want it to? Are they doing the right thing with it? Like they’re not just dumping it in some other river that we can’t see but are they actually processing it and things like that.
So this is a way for businesses and the general public to come together to support new forms of government or new forms of governmental activity. I mean we usually generally think of waste management as something that governments handle for us but as we see in Indonesia that doesn’t work so well. So it needs to be privatized, and so this is a way that businesses and people can work together to privatize these kinds of industries and decentralize them further in ways that are more efficient.
Laks: A marriage of sustainability and loyalty points within the cities business ecosystem seems to be a great idea. Which cities around the world are on the Qoin’s map?
Stephen: Qoin started off a project very much like this in Rotterdam nearly 20 years ago to incentivize people to organize their waste collection more efficiently at home, so they organize their recyclables properly. They take it out to where it’s going to be collected, and if they’ve done it right then, they would receive a token from the waste management collector whoever it was. Usually, in the Rotterdam case, it was the city.
So the city gave a token to people for organizing the recyclables properly and then those people could spend those tokens at the skating rink or the swimming pool or the public park which had private areas where you would have to pay to enter or in taking public transit. And there are a lot of examples already in the world of those kinds of things.
There’s one in Surabaya now where if people take their garbage to the right collection center, they receive a bus token. They can then ride the bus if they want to or they can sell that token to someone else and just collect plastic garbage all day for money.
Laks: That’s great. It builds a sense of community too.
Stephen: Absolutely. There are many empty seats on a bus, and sometimes there are not many empty seats on the bus so that’s something that can be monetized without having to take a fiat money from the central government in order to do this. So there’s actually a lot of opportunities for people and businesses to use tokens to incentivize good behavior, and that’s what we do Qoin.
Laks: Did you encounter a lot of obstacles and what were they? Were they the same or different obstacles that you faced in like mass adoption?
Stephen: No, they’re different because governments often think that they only have a certain pool of money to work with and so they’re really locked in that mindset that ‘oh well, we only get so much from the federal government every year’.
So when an organization like Qoin comes along and says ‘well, no, actually you have quite a range of options for issuing more money into your local economy to achieve certain specific goals that you’d like to achieve’, and because most city or urban governments are locked in that kind of conservative mindset, it’s not easy for them to get out and say ‘oh sure, come in and tell us more about it’.
But there are some really cool cities in the world that are really looking at this, and of course, it’s kind of the usual suspects like Vancouver, Amsterdam, San Francisco, Rotterdam, Lisbon, Barcelona, etc. They are all very innovative in terms of the kinds of services that the cities provide for their citizens, and they’re concerned about integration and social cohesion and reducing the negative effects living in dense urban areas.
Laks: Encouraging the peer-to-peer economy might be viewed by governments, like you said, as not the best outcome. What kind of obstacles are you facing from governments in the EU and Asia in terms of peer-to-peer finance?
Stephen: Of course, they’re all very new with blockchain technologies and peer-to-peer payments. So it’s going to take a lot more time for them to become familiar personally with these kinds of platforms. And I’m sure they are. I mean, we have GO-PAY, Grab, Uber, we have all these different peer-to-peer kind of payment platforms that we’re starting to use on a regular basis.
As city officials become more familiar with that, then they’re going to see more opportunities to encourage peer-to-peer payments within their cities specifically. We have, for example, the Bristol Pound in England which is the largest city currency there which has some 800-900 businesses involved and many thousands of people that are transacting peer-to-peer.
Those funds that they are using can be used to pay taxes at the city level, i.e., pay taxes with the city government. So the cities that say they can’t issue more money into their urban economy than what they receive from the central government, they’re becoming more willing to try it out after seeing such examples.
Laks: How many active users do you have, is there any highly active city?
Stephen: Well, the most highly active ones would be in Amsterdam and Bristol. We’re an advisory firm. So we design, and we implement together with other city governments or with the citizens’ organizations within those city areas. So they’re not really our users per se but I mean they would go into the tens of thousands of people.
Laks: I am sure plenty of people would love to use cryptocurrencies and contribute to overall sustainability. But even using bitcoin is still a pain. How do you make it easy, accessible and feasible for communities to use the niche coin enabled by Qoin Foundation?
Stephen: Apps are still the best way to do it. As you might know, I was working with Pundi X which has a cryptocurrency card and a point of sale device and that point of sale device can handle crypto as well as fiat payments, credit cards, whatever you wanted to pay it with. But generally speaking, right now apps are really the way to go. So QR code payments are pretty easy to implement. We’re working with a few providers like Beam Wallet which is popular in Australia and a few other countries as well for payments and peer-to peer-payments.
Laks: Qoin should enable local businesses to use currencies to strengthen their turnover and to display their social commitment, attract new customers, create loyalty with customers, display their social commitment at local charities and clubs. Is blockchain a must for meeting these objectives?
Stephen: I come from the era before blockchain technologies, so it’s not really a must. But for security and transparency, absolutely! That’s where we’re going, if we want to know the impact of each of those transactions so that we can map it and say ‘okay, are we achieving the Sustainable Development Goal highly enough?’ for example in housing or health or education for women and so on.
Then we can actually track payments in a way that’s decentralized so it doesn’t involve harvesting data in ways that can have negative effects on the people who use these currencies but can actually be used to identify areas where city governments are doing really well and where they’re not doing very well. That’s the data that we’re hoping to start presenting to city governments over the next few years.
Laks: Yeah, and then knowing where actually to implement things and stuff like that.
Stephen: Absolutely. Then they can target their programs much more efficiently to areas where they need to build things up.
Laks: Thank you for telling us about Qoin. We do like to ask all our guests how they envision blockchain changing the world. So what are your thoughts about that?
Stephen: I’m very involved in social impact and environmental issues. So I think that we can do a lot to incentivize people’s behavior in ways that will enhance that. Now, of course, by getting rid of the way that we normally issue fiat money into an economy as I was saying earlier as loans with debt attached to it when we can issue currencies in completely different ways. That would have such a huge impact on our environment. And given the seriousness of climate change, I think that we need to start looking at that matter really really quickly. Very urgently. So the blockchain technologies have come at the right time for us to really start to address that properly. Now we have the tools we just need you to learn more about them really quickly.
Laks: Yeah, and get more used to them and start using them.
Stephen: Yes, absolutely. And through institutions like Blockchain Zoo, that’s how this is happening.
Laks: How do you think the blockchain-base solutions market will evolve?
Stephen: I think it is evolving the way it should. I don’t have any major issues with how things are rolling along. I think we’re going to see another big wave of people becoming involved with cryptocurrencies partly from speculative or for speculative reasons like they were last year when the price of bitcoin went up to 20 thousand dollars. But I think that we’re also going to see people who are much more interested just in improving the way that things are running in their area around it. They will become more involved in these kinds of currencies.
Laks: Especially since it’s not just the hype anymore and people are actually using it.
Laks: All right. Thank you for coming to speak with us at Blockchain Zoo. It’s been very interesting finding out about Qoin and your thoughts about blockchain just in general. We wish you luck on your current and future projects.
BBH Guest: Stephen DeMeulenaere, Asia Region Leader at Qoin Foundation
With over 25 years of experience with the digitalization of businesses, Stephen spent the last 8 years on designing and implementing cryptographically secured Smart City Currencies as Asia Region Leader at Qoin Foundation. He has been involved in a long list of blockchain-related projects. To mention some, he was an advisor to Ripple in their early beginnings, became Certified Digital Currency Professional with the Digital Currency Council, paid reviewer of “Bitcoin and Cryptocurrency Technologies” for the Princeton University Press, and organizer of the first and largest Blockchain technology event at the United Nations in Geneva.