Circles v2 launches, marking culmination of Gnosis co-founder Martin Köppelmann’s work in crypto

Circles v2, launching on Wednesday, might just be the culmination of Berlin-based serial entrepreneur Martin Köppelmann’s life’s work. Best known as the co-founder of Gnosis — a decentralized blockchain and development group behind some of crypto’s most-used applications — nearly everything Köppelmann has built so far appears to have led to this moment in money.

“Version two combines a new wallet we have been building called Metri, Safe, CoW Swap, it’s using our Gnosis Chain,” Köppelmann told The Block, mentioning some of the biggest products that have been built by — and some spun out of — the Gnosis developer community. “Four and a half years later in crypto, we finally think it will be possible to create a consumer application.”

According to Köppelmann, while the first iteration of Circles launched about five years ago, the idea has been kicking around his head for over a decade. Circles — both v1 and v2 — is essentially an attempt at creating “community-owned” money with a genuinely decentralized distribution schedule.

The core concept is that anyone can create a “circle,” which will then automatically mint each member one token per hour, for a total of 24 per day. The value of these tokens (each community holds a unique ERC-20 token) depends on their use — one circle could treat their tokens as a kind of IOU, while others (in theory) might exchange them for gold.

As Köppelmann wrote in a Humans of Gnosis blog: “Anyone can sign up anytime. This also means that theoretically, you can sign up as often as you want. However – everyone creates their own individual token. Always at the rate of 1 CRC/h. So if you just sign up and create new tokens that no one cares about you don’t get any advantage from it. Circles only become meaningful if you ‘connect’ to others. Connecting (or trusting) essentially means that 2 people say: I accept your Circles and you accept mine.”

Bitcoin’s spiritual successor

The project, which has earned accolades from the likes of Ethereum founder Vitalik Buterin and Uniswap Labs CEO Hayden Adams, is often thought of as a quasi-universal basic income (UBI) experiment. Free money, for anyone, no strings attached. Köppelmann also likes to think about Circles as a spiritual successor of Bitcoin, but without the supply constraints.

“Bitcoin showed it is possible to create new forms of money,” Köppelmann said, noting that about 12-13 years ago, he was as maxi as they come. “Circles is similar to why would Bitcoin has value. You can argue it shouldn’t have any value, but as soon as a group of people decides to say it has value, then it has value.”

In time, however, Köppelmann grew disillusioned with Bitcoin, seeing it concentrate among early holders and those who could invest in capital-intensive miners to suck in the new tokens minted by the network. To solve these issues, Circles flips some of Bitcoin’s hardcoded attributes on their head.

While Bitcoin hardcodes its monetary supply but allows anyone to compete to mint tokens, Circles hardcodes the distribution cycle but allows for an unlimited supply, a move Köppelmann sees as fairer. This also means that people might be willing to spend their tokens, rather than speculating on their increasing price, because everyone is guaranteed an income.

Version 2

One of the major improvements of Circles v2 is the incorporation of GnosisPay, the non-custodial, Visa-powered card and crypto payments solution.

“You can just pay everywhere where Visa is accepted,” Köppelmann said.

V2 also introduces the concept of “groups,” a collection of different circles that unite under a common ERC-20, thus improving fungibility.

There’s no natural limit to the size of a Circle or a Group. Köppelmann could imagine “one global Circles group,” though so far, most of the experimentation with Circles has been on a relatively small scale. About 100,000 people joined the v1 pilot program, Köppelmann said, with most of the successful projects worked on a “ultra-local, in-person basis.”

“If you get Circles from people that you have a personal connection with, then it’s easier to maintain this social contract that if I gave you in the past something for your Circles, then you are expected to give me something in the future for your Circles,” he said.

To help Circles communities scale beyond personal networks, v2 also introduces the ability to financially back liquidity pools. Adding a liquidity pool and an automated market maker “provides minimum guaranteed value for those Circles,” because they can always be swapped out for a different asset.

Gnosis DAO, which is technically independent from Köppelmann’s Circles experiment, agreed in 2023 to seed this liquidity program with 1.7 million EUR, in GIP-88. Köppelmann noted that, should people choose to back their own Circles financially, Gnosis would match that “every time someone backs their own personal Circles with another $100.”

“Circles is a larger long-term project, but many of the things Gnosis has been working on fit well,” Köppelmann said. “Obviously, Gnosis played a big role in deciding what Gnosis builds and we tried to build things that were already useful on their own — Safe, CoW Swap, GnosisPay, they’re all decently successful projects on their own. But they all have been built with this outlook in mind.”