SourceCred

SourceCred as Store-of-Community Value (SoCV)

SourceCred is, in a literal sense, Proof-of-Work (POW). What would happen if we just applied the Bitcoin blockchain algorithm (proven game theory) to SourceCred, swapping out mining for contributions? A thought exercise.

Bitcoin miners get paid according to the computing power they supply to secure the network, as measured by the number blocks found (a proxy for computing power). SourceCred contributors get paid according to the contributions they make, as measured by cred scores (a proxy for human labor, or “brain power”).

Bitcoin adjusts the mining difficulty every two weeks, in an attempt to keep blocks mined on average every 10 minutes. SourceCred’s difficulty algorithm adjusts every “pay period”, in an attempt to keep the amount of cred created every period constant. As with Bitcoin mining, this means that as more “brain power” (cred) is added to the network, in the form of contributions, the less Grain individual “miners” (contributors) receive. Like with Bitcoin hashing, it is expected that the amount of work performed will, over time, rise with the price of Grain.

The amount of Bitcoin miners receive per block halves every two years. SourceCred uses a super smart bonding curve (right term PhDs?), such that earlier contributors receive more grain to incentivize them, just like early Bitcoin miners (I call being the Hal Finney of SC).

Bitcoin rises in value with increasing hash power because it offers stronger ledger assurances. Grain rises in value with increasing contributions because it offers stronger “labor assurances” than traditional contracts. Similar to how the Bitcoin network attracts increasing amounts of computational power as the price of Bitcoin rises, the Grain network attracts increasing amounts of labor as the price of Grain rises. As with Bitcoin, Grain derives its value by being permissionless and trustless. If you contribute to a project, you get Grain. No interviewing. No hiring. Only review of work.

Bitcoin ledger assurances are rooted in thermodynamics–the sum total of energy expended to produce blocks. SourceCred labor assurances are rooted in community–the sum total energy expended to create human relationships. Over time, contributors will build up cred, through their contributions and relationships to other contributors (who they must continue to collaborate with to keep getting Grain). Because they have to start over from 0 cred if they leave for another project, starting over is expensive, just like starting human relationships is. As such, cred is a “friendship store-of-value (FSoV), or more generally Community Store-of-Value (CSoV) (you’re not friends with all your coworkers, assholes gotta work somewhere). This “stickiness” is, in itself, a valuable product. Incentivizing actual community-building for the long term based on economic ties is a largely unmet need in our modern society. Because for most of human history, we created relationships based on regular human interactions based on need. Economic ties. Which have disappeared. This is in contrast to some startups, valued in the billions, which make community part of their value proposition (e.g. We Work). However, they don’t deliver real community. Only a fool’s gold in the end. A relationship you make at WeWork can only exist so long as you continue paying $500/mo for a small physical office space, and take time out of your busy schedule to make an effort at connecting. Anyone in their 30s knows how that ends. WeWork is good for networking. But its promise of real community is weak. A relationship based on cred costs 0 dollars/mo to keep, and costs you potentially hundreds of dollars a month in opportunity costs to cancel.

Bitcoin’s ledger assurances are based on not having to rely on a third party (e.g. bank) to transact. SourceCred’s labor assurances are based on not having to rely on a third party (e.g. an employer) to connect. A bank can seize your funds at any time, censoring you. An employer can seize your friendships at any time (cancel you or your friend’s contract). And let’s face it, despite saying you’ll see keep in touch, you rarely do. SourceCred is friendship censorship resistant.

Bitcoin reduces transaction costs compared to gold, which is expensive to store, divide, and exchange. SourceCred reduces transaction costs compared to traditional employment contracts, which are expensive to negotiate, change, and enforce. By more accurately valuing individual contributions, contributor value over time (salary) can be more accurately (and fairly) evaluated. SourceCred also incentivizes investing in newer, riskier, but potentially more valuable projects, which over time increases the total value created. Because it guarantees contributors a permissionless way to invest (by HODLing Grain), it guarantees fair compensation for contributions. Or at least more fair than a typical complex traditional contract given to startup employees (the unfairness of which I have personally experienced).

Bitcoin prices the value of ledger assurances via trading on exchanges. SoureCred prices the value of labor assurances via trading Grain on exchanges. This allows for price discovery of Grain, which allows for fairer pricing of labor for both contributors and investors through the mechanism of price discovery. A continual ongoing negotiation that incorporates much more information than possible in traditional contract negotiations. This also provides liquidity for those wishing to exit the project, or needing to sell to pay bills. No waiting for 10 years while executives promise an IPO while selling shares on the secondary market. Protocol Labs could bootstrap the market by placing a buy order for X dollars worth of cred every month on a Decentralized Exchange (DEX) that Grain trades on. The anonymity of a DEX allows more market participants to participate in price discovery.

Bitcoin has attracted billions of dollars in investment in mining equipment and venture capital (e.g. Blockstream). SourceCred could attract investment in ventures that aim to acquire cred. Cred “mining pools” (centralized companies hiring contractors to contribute under their GitHub account) form. VCs and other parties hire SourceCred developers because they have an investment in Grain, want to see it rise, and may also want to influence the direction of SourceCred development. If SourceCred is indeed a pure Community-Store-of-Value (CSoV), or otherwise defies narrative definition (see Bitcoin), it becomes extremely profitable for those that hold it, regardless of the narrative, and defies attempts to control it. It is likely, however, that SourceCred, in addition to being a CSoV, faces the core challenge of OSS funding, control. Open source development is still funded almost entirely by for-profit companies selling products and services for dollars. Oracle pays RedHat (which sold for $32B) so its employees (under traditional employment contracts) will work on the issues relevant to its business. Currently, most companies are not incentivized to pay for open source, even if they’re making tons of money off it, because it’s free. Paying for free products while your competitors don’t is a non-starter. Here, “miners” (contributors), will have to do what they’ve always had to do. Stop working for free. The difficulty adjustment in SourceCred acts as a medium for negotiation. If a company contributes more to a project (by buying more of the project’s grain on the open market), contributions (and therefore cred) will increase. If they don’t feel they’re getting enough work (or that work is going in a different direction from what they need), they will reduce or stop their purchases of Grain, giving contributors a pay cut and either incentivizing them to work on something else, or choose to work on what the company wants. Because multiple companies will likely be using the same software and have different needs, they can bid against each other, creating free market competition for control over the repository. If SourceCred spreads, and gets used in many projects, contributors will be able to move freely between them, building cred and relationships as they go. Potentially even organizing into Decentralized Autonomous Organizations (DAOs) acting as proto labor unions that collectively bargain for the best rates. Grain becoming the currency of a new organized labor movement.

Phew! Ok that was fun. Grain is not Bitcoin of course, but it was a fun way to explore why I think SourceCred is valuable. Curious to hear any thoughts.

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