ReSource Finance: Building Bridges to New Monetary Systems
In this episode I spoke with Ashley Buck, the founder of ReSource Finance and was also the first employee of Consensys. ReSource Finance is a decentralized mutual credit protocol and ecosystem building more regenerative economies by enabling growth without capital. ReSource is innovative in the mutual credit space because it adds a built in system for managing risk in the case of a default. During the discussion we spoke about her experience in the early crypto community, how ReSource manag...
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Transcript
Cool. Hi, everyone. You're listening to the Blockchain Socialists podcast. I'm Josh, and I'm here today speaking to Ashley Buck, who is the founder of Resource Finance. It's a really interesting project. It is, a type of it's using cryptocurrency or blockchains to facilitate, mutual credit systems. But we'll get into the specifics about that and how it differs from some of the other projects that I've talked to before on the podcast when it comes to mutual credit. But maybe before that, if, Ashley, you want to give an introduction to yourself and, regale us with the story of how you first got into crypto because it's a pretty it's a pretty interesting story. We had spoken about it before.
Sure. Yeah. And thanks, Josh, for having me on. Really excited about the book you have coming out and the type of work that you're doing to Thank you. Thank you. Explore, yeah, different perspectives on what's possible with this technology, which is something very close to my heart and really why I got into the space in the first place. So, yeah, my background, I was studying cultural anthropology because I found that the field of econ was not painting the whole picture of what's possible in terms of how humans can organize ourselves and organize our resources and build things together. And as I was studying other examples of things that have been done throughout history, different systems of meaning making, of creating value, together, one of the things that I started to come across were these alternative models like mutual credit. And I got a job at a think tank that was funded by Warren Buffett's son, Peter Buffett, who is a philanthropist who's interested in things like local economy and regenerative agriculture. And at this think tank, we were tasked to look at what are the prototypes that already exist today that we would like to see more of in the future. So naturally, from that research question, I arrived at the decentralized technology space, came across the Ethereum white paper right when it was written, and started to brainstorm around the application of scalability that blockchain technologies could bring to a lot of these new types of, credit and currency systems that were already happening in kind of these, like, isolated pockets around the world. And I also realized that it was gonna be a long time before the Ethereum white paper in terms of its conception of what's possible was actually built in terms of the technology that we need to start to actually, you know, build the infrastructure kind of where we are today. Right? So seven years ago, I went to a meetup. It was the first time that, you know, some people from the Ethereum team were presenting these ideas in New York City where I was living. And I decided I'd rather join and help build and be part of shaping the direction of that, you know, rather than being on the sidelines thinking about my project that I could build in the future. So I joined Joseph Lubin as the first person he hired to build consensus. You know, at the time, he was still part of Ethereum Foundation, and so it was unclear which, direction things were gonna go in. At that time, Ethereum was conceived as actually a dual for profit, not for profit entity. But that ended up not working out, which, you know, there's tons of stories out there about that history. So then the consensus direction types of infrastructure or decentralized applications are gonna be built on top of Ethereum. So it's a really interesting moment because we were conceptualizing an ecosystem on top of a technology that actually didn't even exist yet. So, yeah, that's kind of the story of how I got into it, just to kind of bring things back to resource, the project I'm building. So resource is the implementation of these alternative economic systems built using blockchain that I started to conceptualize back then, yet the technology didn't exist yet. So I got involved in helping shape the industry.
Yeah. That's really interesting that you were involved so early in Ethereum. I also was a part of like different, when I was when I lived in New York for about a year, I also like, joined in these like different crypto, events in groups. But, I mean, at the time, I remember like having just radically different ideas about the technology than what was sort of generally people were interested in how to go to these events a lot of the time. It would be like a lot of people, like, telling me, like, oh, man, like, you gotta check out this token. Like, I remember one of them, a guy was telling me about like, Mize Go or like one of these, like, I think now like, like layer two solutions that aren't even, I don't know if it's even existing anymore. But yeah, like how, how was it for you, like going through that process of like imagining the technology in a radically different way than it was sort of generally being thought about, I imagine, through those especially those beginning years?
Yeah. I think I described the experience as slowly realizing I was in sort of, like, a reality distortion field. Whereas in the beginning, it was very much you know, everything was new. We were all learning together. And, you know, I'm talking now in, like, 2014. Like, things were very wide open, and the Mhmm. Financialization of everything really didn't start to happen in terms of the culture of the space until the first block was launched for Ethereum. And then there was a price, and then the culture did start to shift. And, you know, I I noticed this behavior happened. I mean, it's felt like overnight, But all of a sudden, the conversation was what you're describing. Right? It became about what are the price of these assets and what can we do with these in terms of traditional finance knowledge language framing. And that was when I realized, wow, I really don't know how to, maintain the level of creativity that I had before Mhmm. And that I felt like the culture in the space had before. And in particular, the people that I started to bring to consensus and the type of culture that we had fostered, there also seemed to be sort of a bifurcation around people that were thinking about this fundamentally differently and people that were like, if we use traditional finance methods in the way that we already know them and set up business models in the way that we already know them and create sort of these speculative, futures around the fact that we have a whole new asset class that no one knows about that we can use the marketing to promote. Yeah. That became the energy that dominated the space. Right? And this is like pre ICO boom that this is all going on. So to answer your question, how is this for me, I left. And I left really because that's not the, I felt that I couldn't be creative within that environment and maintain the perspective around how do we fundamentally reconstruct economic systems using this tool available. Now, of course, that's that's sort of like an ideal direction that we're all going in. Right? Like Mhmm. That's more of a a question that we're all asking ourselves. And I think what's cool about the moment that we're in now is there are more people than I've ever seen who are wanting to ask that question. Right? And they're seeing. Right? Like, we it's not sustainable for us to build an industry with these boom and bust cycles that are not actually building things that anyone outside the space is using. Right? That's that is the problem that we're in. We have a lot of goals that are very amazing, and we don't have a lot of real technology that's been implemented to achieve those goals. However, we have a lot of amazing open source tools that we can repurpose and apply differently. So I think that we're in a moment where media and communication narratives storytelling so that we can get more people in the space who wanna apply these things differently from their previous perspectives, is super, super important. So all of that to say is I took a step back and have been waiting for this moment, and it does feel like the moment is now.
Nice. That's, I'm I'm glad you say that because I'm waiting for it to happen more and more. No. I think that's interesting that you said, god, I've met so many people who worked at ConsenSys. A lot of the they all agreed that it was, like, kind of a shit show, while it was going on. But I've also noticed, like, how different the types of people are. You wouldn't expect to have, like, been involved in in crypto world. Like, a lot of the, I guess, Ethereum people today that you consider to be like I said, some people would consider to be, like, the ones least, interested in, like, finance or in price or whatever are also people who happen to work at consensus or were people who, I know built a lot of the different, like, what are now, like, fundamental architectures of a lot of, like, Ethereum, DAOs, and things like that. It's, like, really interesting that you were a part of that. But, yeah, it's, I'm really hoping that more people come in. I think one of the things that I'm seeing is that, like, there are there are some people who come in there are more and more people who come in with slightly or at least, like, non financialized ideas about the technology. I think you see that. And also people who have been involved in the technology in the space for a while and on the financialized side finally realizing, oh, shit. It's not working, and we need to change it.
Totally. And and and to that point, I think that we have a responsibility to welcome more people and provide them the support that they need to actually be the founders and the builders. So what I've seen happening is you get those people coming in. They're not knowledgeable at the about the space. They assume that everything going on behind the scenes is meeting the expectations of this amazing vision that they're being sold. Right? And then they go to work for those companies, and then two things happen. Either they are, like, totally disillusioned, and then they leave Yeah. Which is not good for us. Right? And then or they kind of think that, oh, I guess maybe this is the way that things have to be. And then they continue to replicate the current paradigm without actually really shifting anything or doing the type of work that we act that we think is possible. So I think as a community now, one of the most important things we can do, if we are the founders and builders ourselves or like you, kind of sharing the information about what's possible, we need to make it, we need to make the pathway of starting your own project and company and funding that in this space for someone who does not come from the typical finance startup background. Because those people are gonna be the ones that I think have a better sense of how to maintain, building something in a new way. Because they're not influenced by building things in the old way. And I think that's why I've been able to continue I'm not gonna say I've been, like, successful, but I mean, I've and I've been able to continue my work going and keep building momentum because I actually don't come from that background, and I'm not as influenced by the behaviors that actually the industry in itself exist to try to transform.
It's funny. Like, there there's a certain point as well. I feel like there's a lot of people coming from either, like, they're they just, like, left their big tech jobs and just wanted to go into Web three or they, like, left, I don't know, management consulting or something like that to come into Web three. And they, like, tended to yeah. Like, they call it I call it social reproduction. You know, in, you know, Marx calls it social reproduction. They're reproducing the same types of structures that existed before. So they just like recreated this like a startup, but on the blockchain, but they're not and sort of like the thing that they were that they felt was that, oh, this is new because it's on a blockchain, instead of like interrogating what are the social relationships behind, like whether or not it's on a blockchain doesn't really particularly matter, but how like those relationships are. So I really think that if crypto wants to get away from that, there needs to be like more structures for, for facilitating people to be able to do that. I think, essentially, I mean, like, very explicitly, like, moving away from just, like, traditional tech VC type of models. And, yeah, I kind of see, like, this this retroactive public good space as maybe, like, one of the things that they're, like, it's starting to get at the seeds of trying to do that. I'm not, like, saying whether or not it's, like, very successful or not. I think there are has some upsides and downsides to it. But, yeah, I agree with the with your point.
Yeah, totally.
So maybe let's get into resource. Do you wanna explain a bit about what resource is and yeah, what makes it different from other types of, let's say, traditional mutual credit systems or the way that generally people think about mutual credit systems?
Yeah. So Resource, we call ourselves a collaborative finance protocol. It offers credit without the need for capital or compounding interest payments. We're doing that by taking the concept of mutual credit, which again has inspired a lot of the alternative economic systems that we've looked at. And we've also added some features to it that make these systems more safe and trusted to use at scale. And in particular, what that looks like is calculating the risk that any given member introduces into a system, sort of like how an insurance model works, charging specific fees for those members to use the system that's based around, you know, them and the specific types of things that they're able to contribute. And then I think even more importantly than that, is automating all of this in a way that we can actually direct the flow of goods and services within these economies in ways that are benefiting everyone. And so an example of that is like a metaphor is basically like the mycelial network underneath the plants in the forest. Right? That's actually directing the resources around within the connected groups of organisms. And it does that without really needing to know, who needs what at any given point of time. It's like a collective intelligence that allows resources and skills to move around in our system. And so we're really trying to go in a direction where we don't look at currency as something that we need to hoard so that we can keep investing it, so that we can keep getting more money. Instead, we're transitioning to this model where we're using currency to get the things that we need and also support everyone else getting the things that they need, but without needing to have some centralized entity like a government coordinating that function. And, of course, like, again, this is one of these directions we're going in. Of course, that doesn't exist today, but that's really how we're looking at building technology, with that goal in mind.
Nice. Yeah. So in case for the listener, I've I've had, you know, several people on the podcast before talk about, different mutual credit systems. So just in case they've maybe forgotten, a mutual credit system is an alternative form of monetary system, where rather than thinking of money as, like, a thing, you're thinking of money as a credit or a debt. So in a mutual credit system, I like to say that everyone has the ability to create money rather than it being created by a centralized entity. And you create sort of credit lines peer to peer. So from, you know, person to person, you know, I can have a credit line with Ashley. If I, buy something from her, then I would send her 10 credits. So then our balances would be I would be negative 10 and she would be plus 10. And we would be part of, like, the the the system, the mutual credit system, in which we I'm able to, you know, spend my credits with other people who are trusted within the network. So that's essentially what what a resource is, but it has some more, let's say, I guess I think of it when I read into it, it was kind of like a way to make a mutual credit system more resilient to perhaps the problem of like in a mutual credit system, sometimes you can have someone, they'll incur a bunch of debt, as in they'll they'll spend a lot of their credits and all these different credit lines, and they'll reach the limits of what they can do. And then they'll they might leave the system. And because they have, like, no skin in the game or something like that, then, they can basically just do that because the system is based on kind of, like, a a mutual trust. But there are ways, of course, for people to just kinda, like, get up and leave in a globalized society.
Yeah. Totally. And I think to expound upon that, so in most mutual credit experiments that have been run, they're usually run by, you know, a a local organization, for example, that's setting up a local economy. That typically that person does not have a background in finance. So here I'm gonna contradict myself a little bit from, what was said earlier that basically the person who's operating that network, right, they're making decisions about how much credit that Josh can get before he can spend within the system. And in that model, you have someone who doesn't have a background in finance or economics making that decision. You can see where those networks then are gonna run into problems. Right? They're not actually setting up a system that helps determine how much credit should the grocery store get versus how much credit should the yoga teacher get or the, factory owner. Right? They're making those decisions in kind of an ad hoc way. And at the same time, no one else has built technology that says, how do we incentivize contributions from everyone in the network to keep the currency flowing? And similar to the model of, you know, how does the tree know that it needs to send its excess phosphorus to someone who has a deficiency of phosphorus. Right? We need some sort of nudges and incentives in the system that are saying, hey. If you actually wanna keep participating in this thing, you need to make some sort of transaction. And let me let me connect you with someone that we can do that. Right? So we built that kind of a system that then is basically maximizing the flow of the currency of the credits so that they don't get stale. So what often happens in these mutual credit networks, you get someone who ends up with all the currency, like the grocery store, and then they have nothing to spend it on, right, because it wasn't managed effectively. So those are the problems that we're trying to solve. And again, we're not trying to compete with any of these existing mutual credit networks. We're actually just trying to provide a layer of technology that can be inserted within these groups that already exist all already all over the world.
Right. Yeah. I think, what's often, maybe not realized in, I guess, if you're in a country that that has, like, fairly stable, financial, services, I guess, is that in a lot of the world, a lot of money or like transactions are handled through credits where people don't immediately have money available to kind of spend money that they have. So like a lot of in a lot of places, things are like done by IOU and things are paid off as they're paid off. And they're just like community bonds that kind of facilitates, you know, ensuring that someone is going to pay eventually. But then you have also kind of like maybe more in the West of maybe like, small little villages or towns. I know like in France, you have a lot of these like kind of eco villages or little, like, towns that have their own mutual credit or, like, complementary currency system that they use internally, as a way to, like, keep wealth within their community, which is, like, fairly, to me, it's like a reasonable thing to do in, like, a globalized society where, like, your money can, like, easily fall out, and that's what happened to a lot of de industrialized cities. So like, but these people, again, like you said, they're not, they're like people who are wanting the best for their community, but they're not people who, like, understand financial risk or something like that. But if I understand correctly about resource, the way that it happens is that or what it has inside of it that's really interesting is this, network reserve. So like a lot of times, mutual credit systems, they may not have a reserve at all. They will just have, you know, you just trust the system and you'll be a part of it so people can can can leave. But here, the network reserve is kind of like, to me, it seems like a mixing of like the credit theory of money with like the whatever the current existing system is. So it almost for me, it feels like a bridge or, like, a mix of the two kind of overlaid on top of each other.
Do you see it like that kind of? Or Yeah. Exactly. And I think, you know, going back to my earlier points, we have these sort of idealized directions that we're going in. But the way to get there is not to just, like, jump off a cliff and say, oh, we're here. Alright. Like, we do need to build stepping stones, and we do need to build systems that allow us to gradually progress into a direction that's safe and trusted. And then a great example of this, a ton of mutual credits set up like this. They don't set up any kind of a reserve, and they get into situations where people have defaulted, and now the currency's untrusted, and they have no way to deal with that problem. And so the network collapses. So I think it's also just safe and fair if you're going to set up a network that you're asking people to trust, to try to mitigate some of the risks that we have when we are experimenting and building these new types of systems. So, yeah, the way that the reserve works, each network that sets up using the resource protocol, you set up a risk management system or us as a team, we set that up for you. And it'll calculate the perceived default of any member that joins the system, which then is real in real time is calculating what the reserve needs to be. Right? And that can be, like, a minimum. And then, obviously, what we'd recommend is you do something like let's just call it double what that is. So let's say that your calculated default rate is 20%, then maybe you should be operating a reserve at 40%. Right? Creating some sort of way to to give yourself a lot more wiggle room too, especially in the beginning of setting up these networks where we probably do wanna try to see how much economic activity we can, stimulate. So the other cool part about that is that reserve is on the blockchain, which means it's transparent, which means you as a community member using the system can also see that the reserve is capitalized to a certain threshold, and that can make you feel comfortable. Right? So that's another kind of maybe improvement that we can say over the existing financial system. That's also a feature then that you can imagine. If you're part of a resource network here, you're part of a resource network there, when those networks want to be able well, when members of those networks wanna be able to exchange with each other, there's a lot there's data that exists on chain that helps facilitate that transaction in a way that's trusted and fair. So that's another kind of, improvement that resource is bringing to these types of networks is making these interoperable mechanisms for people to be able to be a part of multiple networks and then still trade amongst, each other without having some sort of arbitrary exchange rate that is set by network operators who, again, probably don't didn't didn't set up a system to be able to to do that in the first place.
Mhmm. So if I understand correctly, in resource, when you're a part of the network, you are exchanging, when you're making transactions with people inside the network, you have kind of like some sort of, risk analysis, I guess, is probably done on each person to know, like, what are their what is the potential that they are going to default on, like, their, their credit lines. And so based on that assessments, they may have a higher or lower transaction fee. So per transaction, someone pays into the network reserve, so it fills it up, sort of kind of like preparing for an event of, you know, potentially someone defaulting. If someone defaults, someone may get their debts will be, or like people will have their debts made whole through what's potentially in the reserve. And that's being just sort of constantly calculated to be, to be resilient enough to where if that does happen, there is enough for it to be to not cause the system to collapse.
Exactly. And in, the first networks that we're standing up, we're working mostly in Africa. We'll run a reserve that's at a 100%. Right? So that will be something that we will gradually back off based around signs of health of the economy, rather than start from, you know, nothing in the reserve and build up. However, the idea is that eventually, a community without much fiat or existing traditional capital could use this system. And at that point, we have developed the risk management infrastructure and, you know, others in the e and the ecosystem too, that then they would be able to start one of these networks without needing to have a 100% of the reserve in the first place. That's super important, especially in places where, you have lots of people who, for example, have lots of time. We're talking about unemployment crises around the world, especially with more automation going on. Lots of time wanna contribute to things, don't have money from the current system. Can they use these types of networks to, for example, activate a dormant farm, which is a project that we're working on with a group called South Africa Harvest, where, we have one of the most or the highest unemployment rates in the world. We have a lot of people that have time. This group, South Africa Harvest, is already servicing them by recycling food that would otherwise go to waste and bringing it to places like, food banks and food kitchens. So it's basically a handout. Right? They're now thinking, well, could we use resource to take some dormant farmland, of which there's a lot, actually start to create, food and added value products, pay people that are working with these credits that they can now spend at the grocery stores where the food is being sold. So that's the kind of thinking that we're excited about and hopeful about because it sounds a little bit more inspiring than let the technology companies do everything for us and we sit at home and receive UBI. Right? It's like, what can we how can we actually use this to create things that we wanna do and build together? That's what I'm excited about.
Yeah. What makes me interested about in, mutual credit is sort of realizing that it's sort of like providing the minimal monetary infrastructure needed to, like, be able to actually utilize productive forces that are already there in local communities, but maybe just can't be used because there isn't, like, capital being invested. So mutual credit is also not like, it doesn't it's not the form of money that we have today. So it's not like the traditional form of capital that we would think about it that would be necessary in order to like jumpstart an economy and like using the rules that exist today. So it's like, it's like, yeah, existing, recognizing the already existing, like relationships and productive forces that are inherently there that can be kind of like because, like, a lot all these a lot of these places that have, like, high unemployment, they're not like it's not like they don't have resources. It's not like people are too stupid to do anything. You know? It's it's just like a lack of cash, a lack of capital.
Absolutely. And it's also even worse than that. It's not just a lack of cash or lack of capital. It's also that the credit systems that do exist in a lot of places like Africa where we're working, you know, 80% interest, a 100% interest on a loan is common. And it's just like sort of predatory lending that's happening in, places where the financial system is more developed, but it's that that's institutionalized to have that type of extractive credit. And again, this is not to say that, there's easy answers to that because the difficulty is that because of the lack of infrastructure, which again, we don't really need to talk about the causes of that. I think people people really know the the situation there. But the because there is a lack of infrastructure in the first place, it leads to higher rates of defaults. Right? And so it's a cyclical upwards upward spiral of higher rates of defaults, higher rates of interest. It's not really helping solve the problem for anybody. Right? So what we're thinking through is can mutual credit be used to lower the rate of defaults in general? Because now you can pay back by offering your time and your labor. You don't have to go work the job to get the money to then pay the creditor. And so therefore, it can be more affordable. And then just in general, we don't have compounding interest payments. So it's much more difficult to get in that, like, sick cyclical spiral. So I think that's a a huge contribution that could be made by systems like this that then can even impact the traditional finance, credit systems. Because now where, people have, like, a wallet, they have a credit score associated with that, they've demonstrated healthy behavior. They've been able to show that they are have a lower risk of default because they participated in a system that inherently was intended for that. And then you could even imagine, like, you know, aid dollars being used to support the development of these systems and infrastructure because they understand that it's actually leading to a more, like, equitable, access for services in the future. So, yeah, those are the types of things that we're playing with in emerging markets.
Hi, everyone. If you're enjoying this episode so far, be sure to subscribe, leave a review, share with a friend, and join the crypto leftist communities on Discord or Reddit, which you can find links to in the show notes. If you're enjoying the episode or find the content I make important, you can pitch into my efforts starting at $3 a month on patreon.com/theblockchainsocialist to help me out and join the nearly 100 other patrons that contribute financially, which really helps since making this stuff isn't free in terms of money or time. As a patron, you'll get a shout out on an episode and access to bonus content like q and a episodes you can submit and vote on questions you'd like me to answer, and I'll give my thoughts in roughly twenty minutes. The current bonus episodes have so far explored plenty of topics, including how co ops and DAOs relate, whether there is a socialist blockchain, a review of previous crypto events I've been to, and recently a video reaction to an episode of The Deprogramme. Of course, I'll still be making free content like this episode to help spread the message that blockchain doesn't need to be used to further entrench capitalist exploitation if we put our effort into it. So if that message resonates with you, I hope you'll consider helping out. Kirsten, what is what is kind of like your, what does the vision look like for resource if it's, like, maximally successful, you think? How does that look? Because it is this, for me, I I when I looked when I looked at the architecture, it really seemed to me like a bridge. But I imagine, like, I'm sometimes, conflicted with myself when it comes to like this, which is a difficult problem to solve, don't get me wrong. But it's like, do we create, do we create the thing that then people can jump to, you know, to like have an alternative or do we create this bridge in order to get them there? But does that bridge, like how do you prevent that bridge from like re, like, re like, almost like intensifying the already existing situation because it's a part of it, if that makes sense.
Yeah. I think that in terms of the bridge, I think about alchemizing the capital that we have currently Mhmm. And using that to kick start these new systems and also provide the safety and security that we need to get them started. But once you're part of them, sort of like how you can have, you know, multiple credit cards, you can have your mutual credit, you know, quote unquote bank account, quote unquote credit card, But, obviously, we know that there's something different. And you still have your fiat situation. But what does that do for your fiat situation? That means that you're able to cover more of your expenses, needs, income from the mutual credit system, which means that you have more in the fiat. So in so in theory, you're more abundant by being able to do that. In terms of how do you prevent the problems from the fiat world replicating themselves, I think that it's I don't think that that is the primary concern if you can't, keep if you can't convert out of the mutual credit system directly back to the fiat system whenever you want. So if you wanna continue to be part of this mutual credit paradigm that people are creating, you have to keep contributing there. You can't just exit the system and go back. So it really becomes a whole different type of, I mean, a whole different type of economy. I think the other thing is, introducing community reintroducing community and social relationships back into currency. And obviously, not going a 100% back there because we are global society too. And so we do need some level of being able to interact, not just in a peer to peer environment in our local village. Right? But I think totally I think what we have today in traditional finance of just spreadsheets that are running the world, right, that are controlled by people that don't necessarily have our best interest in mind, or we've created these systems that don't put maybe the things that we value at the center of the equation. Right? Like, relationships with people, communities that we live in that have, great services that we're able to provide, like, the best types of food grown as close as we can to us. Like, those types of things, right, that maybe people value, that's not really at the center of these equations that are running the world. Right? I think with mutual credit, we have an opportunity to say, actually, this really isn't about maximizing profit for shareholders. But then what is it about? So then we get into these questions of what do people actually value and care about? And I think then if you start to build these networks where people say, actually, what's really important to us, like, I think people in Kenya would say this hands down, What's really important to us is that we have really good schools. So those group of people because, like so just to clarify that, that's because there's not a good public education. So people have already are sending their schools or their kids to schools, within their informal settlement communities. Right? And so in that model, you may get a group of people that say, actually, for our mutual credit network, we're not as interested in the and making a profit that we're distributing to ourselves. We're much more interested in collectively reinvesting that back into our school. Right? So I think that you start to then build governance, with community and social relationships around these economies. And I think that reengages people with the idea that economies can be something that we decide what we value at the core, and we build the system to reflect that.
Mhmm. Yeah. It's yeah. I wonder then yeah. It's turning this problem of how how like, how do we create a new system instead of thinking of it as a zero or one is sort of seeing it as like a, I don't know, you're it is, I think, perhaps even arguably, rightfully, understanding it to be like a tug of war almost, between like these two things. And ultimately, it's, it probably is going to be just up to people, like, what do they value? What do they want? And the bet is that probably they want the new thing. They probably want the improved, to feel closer to their local communities, to like, I don't know, shop locally or like to have, be a part of like more circular types of supply chains. And this is like mutual credit systems generally is what I think is kind of like the instantiation of, like, the recognition. It's like the legibility of your community that you can, like, see it, that, like, you you can, like, like, this is my connection to my community through my mutual credit system rather than in, you know, a kind of, like, alienated society where even though you do have a connection to your, local community, it's just not legible, and therefore, it's very weak, if that makes sense. Yep. Exactly. And
and so then the question becomes, you know, how do we cooperate, together to build these local economic systems. And that's where I think technology is really, really helpful. There needs to be a lot of bridges, though, in terms of education, and then actual tools that make sense that aren't complicated to understand. So that's gonna be a big part of our work is developing these really simple tools that allow people to participate, know what's going on, and then also see, oh, wait. Like, maybe if we added some sort of fee that's going to this community fund and we're investing in local businesses together. Right? Like, you can imagine a lot of different applications that we just start to build on top of just the core idea of mutual credit.
So when are resource, credit cards coming out?
Yeah. So the plan right now so we're, we're launching in, Kenya, and we're getting getting starting in August, next year. So in 2024. And, again, it's a open source protocol. You can build on top of it. Right? That's the general idea. You don't need us, the team, to develop all of these types of products. But we, as the core team, next year, we'll start to build things that are get a mutual credit network started in your local community. And it'll be more like Venmo style rather than credit card. I don't think we actually need to go the the placid direction anymore. I think that the QR codes are, you know, working just fine. So that would be the direction that I mean, that's what we're doing in Kenya. That's also no one uses credit cards in Kenya anyway. It's all M Pesa QR codes. So we'll we'll be focusing more on that model. And, yeah, next year, we plan to start building the tools where, you know, you're in France in one of those local villages, and you'll you as just one community member can get a network started, and that should be pretty easy for you. Then you can rely on us as a team to develop that risk management structure and actually host the technology for you if you're not trying to do that yourself.
So, like, as far as some of the tools that are maybe necessary to be still built that you guys are building, right now includes maybe, like, different, I guess, technological frameworks for assessing risk
for your, like, mutual credit system. Yep. Exactly. And then we usually find a local partner. So, like, for example, in Kenya, there's, a group that we're working with that already has a, a bunch of data that they basically analyze from cell phones and create that into likelihoods to default, which mostly is based around, like, are you deliberately trying to fraud the system? Are you a real person or not? Then it gets into some nuances from traditional finance. We're taking those obviously with a grain of salt because, we don't want that to overdetermine what's possible in our credit system because we know that inherently there's some issues with that in the first place. So we're focusing more on the, you know, fraud or not perspective and then learning based around what those what that data can tell us. And, yeah, you could do that with any sort of partner that exists, like, for example, Plaid in, that that connects to your bank account and, you know, just tells us some general things about what we can learn from you.
How are you guys seeing that as far as, like, I imagine there are sensitive, data around, like, whether or not someone is credit worthy or, like, how much risk they are? Is that something generally you think would be, on chain or off chain?
Off chain. Entirely. Yeah. Yeah. So your behavior in the mutual credit network tied to your address, like, in terms of we're interested in, like, the privacy preserving protocols that are being developed and being able to add that. But in terms of calculating someone's risk, doing that on chain is just not possible in terms of, the computation that's needed and also probably not great to have that information about someone out there. You know, this is a whole, like, wild west too in terms of porting risk management on the blockchain. For us, getting into the system is less important than what's actually happening within the system. So we're more interested in in how do we just make sure that this is a real person who doesn't already have an account within this network, number one, and who's eligible to be part of this network. So, like, they're not a Ugandan citizen trying to join the Kenyan network, and we don't really have any framework for that. I mean, not that that's like a problem, but you know what I mean? Just to satisfy the rules of what that network, wants. And then the next thing really is about rewarding good behavior and, limiting the amount of, bad activity that someone can introduce within the system. And that's more important, right, than what you are rated as in the current system.
Sure. Sure. One of the things that I was interested in, that sort of came up while we were talking is, like, how how you were thinking about whether or not there would be interesting idea or not to have, like, governance over the reserve, as in so, perhaps maybe one clarifying thing. Is the reserve equal to the amounts or meant to be relatively equal to the amount of credit that is out there? And therefore, that determines, like, you know, the reserve is meant to be around where that total amount of credit is available. And then I guess my second question is, would it be interesting to have, like, people to be able to, as part of the system, since they're paying into the network reserve, I imagine there may be situations where there is, like, excess reserve. So why not, like, make that essentially like a I I I think of it as just like a decentralized social wealth fund, to kind of, like, vote where maybe that, like, extra reserve goes to to invest in maybe, like, different parts of the community.
Yeah. Totally. I mean, all that's possible. Like, what you can think of it as a, you know, new type of credit union. And Right. The the community who sets it up and, again, these are the tools that we'll start to build where it's like, you wanna start a network, add the 10 other people who are owners of this network with you, owners meaning, of the reserve and make decisions about how the network is set up. So we call them a network operator. A network operator could be, you know, one person and says, once the reserve reaches this certain threshold that the risk management system calculates, give me all the fees. But you could also configure the network and say, if there's any excess in the reserve, I actually want it to go into this fiat loan pool, which then is used for some of the businesses in our network that we wanna support. Or it goes towards, public goods projects, like building a road or building a school, those types of things. So, yeah, that's all totally possible. And, again, that's not something that we even need to necessarily think about because there's already tools in the ecosystem and, like, the decentralized ecosystem, right, that people can start to say, I'm gonna set up this DAO that's running the network, and we're gonna use this governance framework to make decisions about how we're gonna calculate how much we want to excess to be in the reserve. So, yeah, then going to that question. So when we are launching networks ourselves this year, we are running the reserve at a 100%, and then we will slowly decrease that based around what the actual projected default rate is while also having a buffer. You know, maybe if your actual projected default rate is 30%, you add some sort of buffer because, again, you don't there's always unpredicted things that can occur. Yeah. Then you could do things like if there is excess and you do this on sort of, like, an annual basis, maybe you distribute that to all your members. And you say, oh, actually, transaction fees are covered for the next year. Or maybe you do that for new members that are joining, or maybe you, you know, do some sort of public goods project.
Yeah. Fair. Jess, I know that you, already mentioned that you are working on introducing it in Nairobi, which is, you know, you know, it's a different economic situation than what is happening in the West, of course. But do you see like, what kinds of strategies or what place does perhaps this type of system, would it play in, and how would it be introduced in, like, the West, for example, in, yeah, wealthier countries, I guess you could say? Yeah. Totally. So,
in places like Nairobi, places where in order to get a credit line, you're gonna be paying really high interest, like a 100%. Right? So it's, not the best thing that we can come up with in terms of what's possible with finance. So people are already, dealing with this problem of lack of affordable credit and lack of jobs too, which is a function of that, but it's a function of a larger problem too. So people are already doing IOUs all the time. So we talk to people who run schools, for example. Parents come. You have to pay the school fees. It's like 40 US dollars for every three months, something like this. And the parent's like, I don't have the money today. I can pay you the money in a few weeks, or maybe I can pay you half the money in a few weeks. So the school's already functioning as a bank because they have to. If they said no, then I mean, first off, they're not providing education, and they're they really are genuinely motivated to do that. And second, I mean, that's about 50% of their clientele that we learned is paying in some form of an IOU. So then the school is maintaining that ledger. So then what does the school do? The school buys food on credit, because they don't have the money today, and the the the food place runs into the same problem. So now what do you have? You have, like, the ledger that the school is holding with all the different parents. The food place now has a ledger with the with the school, and they're recording that debt. And, actually, a lot of people are doing this in text messages within each other. So it would be common in a place like this that if you and I, for example, if I'm borrowing from you or I'm getting some sort of service and I say I'll pay you back later, we actually record that in the text between each other. So that's, like, a common practice already. So in places like this, we're really just saying, look. Everyone's already doing this to some extent. And by some estimates, there's this group called the Kenyan Financial Diaries, which is an amazing read, that's a sociologist that documents basically the exchange of money amongst 400 people over a period of three years. And it surfaces some fascinating insights that traditional economics wouldn't even, like, know what to do with and thus ignores completely. It also doesn't even know what to look for. But in those reports, you get something like 70 of someone's income each month is coming from these informal IOU service. I IOUs. It's coming from friends, family members, shop owners on credit, school on credit. That's how people are getting by. That's the major way that people are getting by, at least by the accounts of of of this report and from us working on the ground too and talking to people. So when we're talking about introducing something like resource, we're basically just saying, look. You know how you're already doing all of this? What if we as a community turn this into a type of currency where now as the school, you don't have to wait for the parent to pay you. You have the credits today. Then the food place gets the credits today, and then they have credits that they can pay, maybe even the parents of these schools to help them with the labor. Right? So we're basically saying we can all have more, access today rather than all needing to, a, manage this ourselves, deal with defaults ourselves, which also is not that pleasant, and be able to know the actual status of our income in a way that's trusted and safe rather than on all these pieces of paper and in our heads and text message streams. So that's, like, the general thinking there. On top of that, people are interested because, again, they don't have affordable credit in the first place. So if we're right that this is a more affordable, source of liquidity than traditional finance, that's gonna be interesting to a lot of people. So that's how we're thinking about it there. In terms of places like America, where I live, what we're gonna focus on is the support local kind of invest local narrative. And this is something that already is popular in America for sure, where you have even these systems which are like gift cards that you can buy as a local community member. And then they work at all the different participating local businesses. And then maybe you as a customer get some sort of discount for doing that. You could imagine that system working in a way that, imagine that you have a loan pool and you have 20 different businesses in, we'll say, Hudson Valley, New York that join that loan pool. You have community members deposit their fiat currency in there, and they get credits back that they can spend at all the participating pool of businesses right away, which they're incentivized to do because they know that they're actually helping improve the financial status of those local businesses, which are contributing to their community and contributing to the culture. And at the same time, they're getting, a discount on the purchases that they would know that they would already be making. So that's the kind of short answer of how we're gonna go about that.
Nice. Yeah. So very, very different approaches for very different economic context, which makes sense. Yeah. And then, one of my last questions, because I'm I think one of the things that I've noticed having spent some time with a lot of, people interested in alternative currencies, complementary currencies, is that a lot of them kind of do it for they do it out of, like, love for, like, alternative current, alternative economics and and alternative currencies. And so I'm wondering for you guys, how do you see resource kinda staying, sustainable over time?
Yeah. I think the of course, I could say, like, oh, we have a business model where we charge a fee for people using the software to run the networks, but that's a given. Right? The harder the the harder problem to solve or the more difficult question to answer is how do we create some a mutual credit system that actually helps grow the number of people that want to use these things because they actually are benefiting from them in a way that's not just intangible social values, but also is tangible material improvements in their lives. Right? So that is the question that the space needs to to ask for itself. I think that's answered for us in terms of building the credit allocation risk management fee system, where you can actually run these systems as a business, or at least as a nonprofit that has a model to sustain its operations. That's the major answer. So we think that that can help the space grow. I think the second is not focusing on places where mutual credit is typically focused. I mean, focusing on places in emerging markets where there is a lot more need and also has been the traditional promise of blockchain and decentralized systems in the first place. So I think with those two things, that's more important if we're successful and show that, wait. Actually, this works. It's a legitimate alternative and complement to traditional finance. Then us being able to sustain ourselves is basically, being the player who's helping to run and operate those networks for people and communities, even for, like, you know, nonprofit organizations that wanna set up a network. Like, we're exploring in South Africa harvest, you know, getting we can get contracts to help design these new economic systems, and maybe we need to build new technology because people have new ideas of how about how it could be used. So that's our long term answer.
Yeah. Farrah, I love how, you know I mean, you were in the crypto space fairly early, like, with and it oh, and especially those days, I just remember it was, like, really couched at this promise of, like, completely revolutionizing the third world or like, you know, banking the unbanked and like, really focused on like new monetary solutions, I guess. And I can imagine, like, being someone in there early and be like, guys, I thought we were doing this. And it became about a kind of financialization, and now it's kind of like a it's cool to see that you've you've gone back to like, okay, how do we actually, figure some stuff out there?
Yeah, totally.
So, yeah, I really appreciate you, taking the time to speak. Maybe just the last thing, if you want to share any, yeah, social media or profiles or places where people can keep up with you and your work.
Yeah. Sure. So for resource, it's just resource.finance. Everything that you wanna learn about the project is there, especially our docs that describe, you know, how the protocol works in detail. And then you can sign up for our newsletter or Twitter, and that's where we'll be sharing status of the project, when we're releasing different functionalities and features. And for me personally, it's Ash Tay Buck on Twitter.
Cool. Thanks so much.
Thanks, Josh.