Contributors to SourceCred (or other projects using it) are rewarded by earning grain. However, flows of grain are not very predictable. This can be a problem, since people need consistent financial flows in order to budget and make rent.
Traditionally, this is solved via employment. A company promises an employee steady money (a salary), and in exchange the company owns 100% of the value that the employee creates.
In SourceCred, we’re developing a sponsorship model instead. A Sponsor can sponsor a Contributor for a particular time period (for example, the month of April, 2020). In exchange, the Sponsor receives a share of the rewards that flow to that Contributor during the sponsorship period.
A simple approach would be to have sponsors and contributors come to an agreement like:
Sponsor agrees to pay Contributor $
x per week. In exchange, for the duration of the sponsorship,
y% of the Contributor’s cred will flow to the Sponsor.
This has some similarities to income share agreements. Generally, we might refer to this as the “equity” model, since the sponsor receives a share of the upside (whatever it may be).
It would be up to the individual Contributors and Sponsors to decide on an appropriate $ amount for the sponsorship (i.e. it would be up to negotiation and market forces). However, I think projects should set a project-level cap on how high
y can go; i.e. the percentage of a contributor’s cred they give to sponsors. I feel strongly that this value should not go above 50%, i.e. contributors always keep at least half of their cred. I don’t want to see economic structures where contributors become alienated from the value of their labor.
This approach has a lot in common with “boosting”. As a recap, a booster spends grain to Boost a particular contribution; the booster then receives a fraction (currently 20%) of the contribution’s cred. If we treat “all of a contributor’s contributions in a given month” as a single “contribution”, then we can think of sponsorship as a “boost” of that contribution. However, there are a few differences:
- Sponsorship is an ongoing agreement, whereas boosting is a one-off transaction
- this is important so that contributors can have some confidence about their future income
- Boosting mints more cred, but sponsorship does not
- If sponsorship minted new cred, it would be easily gamed via “back scratching agreements” where people sponsor each other, and mint a ton of cred in the process
- Sponsorship directly pays the contributor, while boosting indirectly rewards the contribution
- Boosting creates cred, which (eventually) produces grain. But sponsorship is a direct transfer of value
- The “price” of boosting is discovered algorithmically (via a “boosting curve”), whereas the “price” of sponsorship is negotiated between the parties.
As an alternative model for sponsorship, we could consider “the debt model”. In this model, the sponsor gives the contributor a payment, in exchange for a promise of future grain. For example, the sponsor could pay the contributor $10k, with a promise that 50% of the contributor’s grain will go to the sponsor, until the sponsor has made back (say) $11k worth of grain. This was first proposed in a post about how the SourceCred Foundation could operate.
My concern with this model is that contributors may get “underwater”, where they are progressively getting deeper and deeper into grain-debt, potentially leading to “grain bankruptcy”. It could be messy and lead to a lot of stressful situations. The “equity model” could get complicated as well, but generally I think it is more forgiving, and therefore prefer it.