This is an excerpt. To hear the full interview, please click on the Soundcloud or Youtube links.
Blockchain and other kinds of distributed ledger technology have the power to significantly change the way that the world’s financial systems function.
While most economists, crypto-nerds, and investors talk about the power of blockchain to financially empower individuals, a growing number of innovators are dreaming up ways that blockchain can be used to improve the social fabric of our global society.
There’s Bancor’s collaboration with Grassroots Economics, which grants small communities the power to create their own currencies; Ono’s blockchain-based social networks rewards people for their contributions to the online world. Similarly, Sacred Capital is building a blockchain-based system of reputational wealth, wherein individuals are rewarded for their contributions to their communities, and to the world.
Recently, Finance Magnates spoke with Siddarth ‘Sid’ Sthalekar, Founder of Sacred Capital, about his company’s ambitions to reinvent the way that the world conceptualizes wealth.
Our Economic Systems are Outdated
“Post-2008-2009 crisis, I saw just how much the system needed to progress,” he explained. “When you think about it, some of these economic systems have been designed several decades (if not centuries) ago. I think we all agree that they need some new dimensions added to them, some new divisions.”
Sid went onto explain that his dissatisfaction with modern systems of finance and wealth was the reason that he found himself at the Gandhi Ashram in Gujarat. “It was during that time that I decided to experiment with my ‘fiat footprint’,” he said, a term that he coined to describe the ways that he interacted with and used fiat currency. He wanted to see “how long he could go without [needing to] access fiat, [to see] how I could sustain myself without fiat.”
”An Open Source Language for Wealth
“I think that those experiments allowed me to tap into capital of different kinds,” he said. This is how Sid discovered distributed economies and Gandhian economics. “For me, it was apparent that this paradigm of distributed economics would come alive [through blockchain technology.]”
— Shivi Dwivedi (@shivi_dwivedi) May 25, 2016
“[It was like] that feeling when you first heard about the internet and you could sense that something was coming,” he said.
Sid said that the thing that he found the most inspirational about blockchain and other kinds of distributed ledger technology wasn’t necessarily about payments. “I could see how it wasn’t about faster money and more efficient money,” he explained, “but almost like an open source language for wealth.”
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“Sacred Capital [believes] in the distributed world. Gandhi said that local economies are resilient in that they have different kinds of value, but they are only possible if there is an underlying social fabric that wraps around it. In modern terms, this is known as a reputation system.”
Blockchain and “Reputational Economies”
“In a distributed world, I can print a bunch of coins and tokens. You can print a bunch of coins and tokens–it’s not like chunks of gold, or cows, or sacks of rice, which have value in themselves. Tokens inherently don’t have value…the true value lies in what’s behind them. In this case, that’s my reputation or your reputation.”
“Sacred Capital says that in the distributed economy, value shifts to a reputational base. So, we’ve given shape to and articulated what is known as the reputational economy, and there are a bunch of rules around that.”
A reputational economy “fundamentally allows people to give shape to movements and conversations, and to access and articulate new kinds of value.”
I just published “Scaling Social Capital” https://t.co/L6Ywuew2zJ
— Siddharth Sthalekar (@SidSthalekar) March 8, 2018
Sid explained that there are four fundamental tenets of the reputational economy. “Rule number one is that reputation is linked to identity. If Sid is a really good friend or a really good dentist, I can’t hand that over to you. Whereas if I have a million dollars in my bank account, I could just make the transfer.”
The second rule is that “reputation is not fungible. If I have this reputation as a good dentist, I can’t go to an exchange and sell my reputation to someone. I can monetize it–and dentists do… but it’s not fungible in a simple, linear way.”
“Rule number three is that reputation is multi-dimensional, or you could say that it promotes diversity.” In other words, each person has their own set of unique features–”if you were to introduce me to some new friends, you would say ‘hey, meet Sid, he loves traveling, he’s a good cook’… there are qualifiers. You wouldn’t say, ‘hey, meet Sid, he’s a 95/100.’”
”Money Can be Invested, but Reputation Can be Staked”
The final rule–”and this is where it gets really exciting–this is what Sacred Capital is building–is that money can be invested, but reputation can be staked.”
In a similar fashion, reputational credibility can be lent. For example, “if I were to visit your hometown, and ask ‘what shows can I catch? What places can I eat at?’ If they’re not very nice recommendations, your reputation in my lens drops. But if I love them, your reputation in my lens rises. It’s almost like lending your credibility to initiatives.”
“So what we say is that reputation can be staked to power up or power down, much like investing.”
However, “unlike money, it is not a zero-sum game. So if you have a million dollars, you can only invest a million dollars. You can only buy a certain amount of coins or a certain amount of stocks. But with reputation, you could make those recommendations to me, to five other friends, you could go out and tweet it to a million followers. Of course, the consequences come back to you positively or negatively.”
“As humans, we’ve never really tapped into non-zero sum games for wealth,” he said.