Stellar Community Fund

By LocalCoin

LocalCoin

SCF #21

$40.9K

Legacy v5.0 Activation Award

Awarded

LocalCoin enables on-chain control of financially incentivized action to help social good orgs with effectiveness and trust.

Products & Services

About

LocalCoin is a closed cycle token system designed to enable on-chain control and tracking of financial incentives in the real world. It is a product and service that manages the disbursement of funds which have restrictions on how they may be spent, comprising smart contracts on Soroban, a web app and mobile app, and eventually a payment card and seamless DAO integration.

Problems and Solutions

The LocalCoin platform solves problems faced by philanthropic, or social good organizations regarding trust and transparency of how funds are used.

The problems include: - A lack of transparency for donors into how their donations are used. - Donor resistance due to the lack of transparency, which limits trust. - A risk of funds being misused if cash assistance is distributed. - Possibility that unrestricted funds may quickly leave the community, like going to Amazon purchases, limiting their impact. - Centralized solutions put all of the burden of scaling on the centralized team. - Many of the potential recipient communities for assistance like this are wary of being tracked if they participate.

The LocalCoin platform addresses these problems by: - Providing a closed loop system. - Providing a mobile dApp that can be used by both merchants and participants to exchange the local currency for the purchase of approved items. - Enabling transactions with the local currency to be traced by recording them all on chain. - Allowing definition of flexibly defined restrictions for how the local currency may be spent, with a list of approved merchants and approved items for purchase. - Allowing for different issuances of currency to have different restrictions. - Limiting transfers to approved merchants, making trading outside the system infeasible. - Allowing merchants to redeem the local currency for USD on demand. - Eventually including ZKP technology (once available on Soroban) to preserve privacy without compromising security and auditability. (Our team has experience implementing core blockchain zk primitives, so when it comes time to include privacy in the LocalCoin product we will explore making a proposal to implement the necessary functionality if it does not exist already.) Currently zk proving times are too long to sustain a sufficiently responsive UX for our target market, but things are evolving rapidly. Across our other zk initiatives we are expecting about a one year timeframe before proving times come down enough to open opportunities beyond the current high value transactions niche. - Scaling through permissionless participation. Unlike a centralized business where all responsibility for scaling to new markets falls on the founding team, LocalCoin is an open system. As with any project built on blockchain infrastructure and an aim to run as a DAO, LocalCoin is starting with a centralized team and will evolve towards greater decentralization over time. As the processes and best practices are established for onboarding new merchants, launching new tokens in different regions, funding different sorts of campaigns, and other operational details, it will become possible to encode them in governance contracts and eventually manage all LocalCoin operations and expansion through a DAO vote approval process. In this sense the scaling becomes permissionless since anyone who wants to leverage the LocalCoin infrastructure will be free to join and deploy the system wherever they are in the world.

The intended audience for the LocalCoin platform is: - Local, social good DAOs - This seems like the ideal audience, for which LocalCoin can satisfy the need for fully on-chain governance and execution. - Stand alone philanthropic organizations. - NGOs operating in developing countries. - DAOs more generally, which may become interested to use LocalCoin once the infrastructure has been built out and user experience becomes smooth.

Competitors

There are various existing attempts to address the same challenges. Gift cards have been used (e.g. Amazon) as incentives, for example in a collaboration to clean up Guadalupe River Park in San Jose. UnifyGiving has created a product that enables individuals to give directly to homeless folks that runs on traditional payment rails and has smoothed out a lot of the friction in the system. They are doing good work, and some of what they have created can be a model for us and for organizations that use LocalCoin.

- Gift cards and vouchers may still be bought and sold for fiat at a discount to their face value. - Attempts to track usage may lead to recipient privacy infringement. Initially, LocalCoin will address this by using an in-person process, but eventually it will be possible to build privacy into the system with ZKPs. - We have not seen any other projects that are trying to address this with a decentralized approach. A decentralized, open source and open governance solution has benefits for keeping costs low, inspiring trust for donors and participants, and enabling permissionless scaling, as described above.

Revenue Model & Funding

LocalCoin will not run as a for-profit entity. The aim is to reach full decentralization with vote-controlled DAO governance. A small fee will be retained in the LocalCoin DAOfund that will be used to cover servers, maintenance, and upgrade costs. A target number for this fee is 1.5%, but it is too early to calculate this from detailed numbers since we are still only beginning to get the full picture of all the ways in which LocalCoin will be used. So far the reception by people involved in DAOs and other philanthropic organizations has been very positive, and funding through grants is expected to be sufficient to build out and transition to a sustainable state.

Stages of Development

Minimum Product (This Grant)

- This grant proposal covers design, development, deployment, and results analysis for the minimum LocalCoin product. The following details for the minimum product may change: - The Technical Architecture document specifies what will be built for the Minimum Product. - Merchants and participants will interact with the system using a mobile app. - Our team will work with our bicycle shop partner and the We 💜 SF Street Outreach group to onboard participants. - Donated funds will be used to incentivize participation in a bicycle maintenance, repair and safety program put on by a bicycle shop. - $2500 will be disbursed through the system. - One merchant partner, with whom we have already spoken, runs a bicycle shop in the Tenderloin neighborhood of San Francisco that supports many immigrants doing bicycle delivery work. - Attendees of the program will be able to spend their local currency tokens at the bicycle shop and for approved food items from local participating markets. - Settlement to USD with the merchants will take place by burning the tokens in exchange for fiat in person with the merchant. - All local currency transactions will execute on the Soroban Futurenet.

Pilot Production Deployment (First Mainnet Launch)

- Planning for a first production deployment is aimed at a local social good DAO in San Francisco. The LocalCoin service will allow a DAO to issue funds to award as incentives to participants in activities that support the DAO's mission. Use of those funds by recipients will be limited to approved products from a network of participating merchants defined in a DAO proposal. Participating merchants will be able to redeem the funds for fiat currency. - Once Soroban mainnet is live, a pilot production deployment of LocalCoin will be proposed as a supporting service for the multiple DAOs being launched through the We 💜 SF initiative sponsored by GeoBrowser (https://www.geobrowser.io/space/0xc46618C200f02EF1EEA28923FC3828301e63C4Bd/a6510b15-0e8b-4d71-b4db-64c279e21689). Already, DAOs have been started to address needs for Transitional Housing, Workforce Development, Street Outreach, and the Social Laundromat project, all of which will be able to incorporate a local currency. - The LocalCoin Pilot will focus on DAO integration and seamless local currency to fiat conversion. - DAOs will need an interface through which they can specify an issuance of local currency to be funded from their DAOfund. - They will be able to put the local currency issuance to a governance vote that will disburse stablecoin from their DAOfund to LocalCoin and initiate whatever program they wish to incentivize. - At the other end of the local currency cycle, the merchants will need a simple, low-friction way to convert the local currency to USD in their bank accounts.

Future Plans

Future plans for LocalCoin include making the system more robust for use by those for whom smart phones may not be practical, like the homeless. This will include research and experimentation with RFID systems, like the bracelet used by UnifyGiving, and the crypto payment card offered by Ammer Card. Offering it for funds disbursement by NGOs in developing countries. Plans for this extension of the project have already been put in place for distribution of funds and training classes in the remote historical village of Darche in Nepal. Village leaders are already on board and the majority of adult residents have smart phones.