Monday, 7 April 2014

What is cred? Why are we doing this? And what is the plan to move this experiment forward?

Cred is an IOU tracking system that can be used as an alternative to money.

Cred are “IOUs” that represent an individual promise between two people, and as such cannot be transferred. Cred can only be redeemed by providing value back to the person who you issued the cred to.

However, value can be provided indirectly through a “loop” in which you provide value to someone else, who then provides value back to the person you issued the IOU to. In this way cred can enable complex multi-party transactions, just like money. Loops can include any number of people, and are found automatically in the background by the cred software as you carry out your transactions and issue your IOUs.

Community Gatherings and Cred Marketplaces

The cred community will be gathering every other Tuesday evening. The next event is Tuesday, April 8, at the Shambhala School (Gottingen and Russell) and will start at 6pm with dinner, which will be provided by a members of the cred community, and sold for cred. The event will include a presentation on cred, community conversations, and a cred marketplace.


Our money system is not a level playing field. The game is rigged in a way that tilts the play towards specific outcomes. Exponential growth is hardwired in, and is a major force contributing to the overconsumption of natural resources and the commodification of our world. It doesn't have to be this way, and the cred system is an experiment into an alternative. We aspire to tilt the playing field back in the direction of sustainability and human values.

There are very good reasons for the economic system that we have inherited. On a comparatively empty planet, growth equals success. So the economic systems that have enabled the highest growth rate have had the greatest success. In fact, although there are national currencies and some minor differentiations between countries, we basically have a single global financial/money system. This system has out-competed all the others in it's ability to enable economic growth.

In this system, and the mindset that accompanies it, the growth of financial capital is paramount. Efficiently allocating capital in order to create more capital is the determinate of success. This system, so finely tuned to maximize the growth of financial capital, is also dependant on this growth. If financial capital should stop growing, the system will be in existential danger. It requires exponential growth not just to succeed or to out-compete alternatives, but simply to survive.

But we now live on a relatively full word. Infinite growth on a finite planet is a physical impossibility, and a financial system that depends on infinite growth is becoming a huge liability. The damage done to our planet in the name of the growth of capital has been clear for some time. And we are now reaching a point when not only is the financial system out of sync with the biosphere, but also out of sync with the day to day needs of the people to ever increasing degrees.

As counter-intuitive as it seems, efficiently empowering actual value creating exchanges between individuals and companies is no longer a priority of the financial system. There is no longer enough growth to be had in the "real" economy to keep the system going, so capital is now flowing to speculation and other non-productive activities. This is directly draining wealth from our communities. The agenda of "Wall Street," is superseding "Main Street" and the needs of the human producers and consumers in our economies.

Growth is, and likely always will be, essential for prosperity. Just as in the systems of the biosphere, growth is required for an economic system to be dynamic and adaptable. However, just as growth is not a one way street in nature, growth of financial capital must to be balanced with the consumption and "decay" of financial capital in our economies. On a finite world it can be no other way.

The cred system is designed to accommodate the realities of a finite planet, and the necessary boundaries they place on economic growth. Although growth is certainly an important part of a cred system economy, it is not the only consideration. Unlike our current system, aggregate growth of capital is not a requirement of a cred economy. Therefore, sustainability is not an afterthought to compensate for the destructive tendencies of the system, but a primary purpose of the economy and financial system.

Philosophy and Strategy

The growth bias runs deep. It affects our own thinking and assumptions about how economies work, and it is fully entrenched in all the decision making structures of our societies. The new paradigm we need is not going to arise from current structures or current leadership. It will come from the activities and experiments of individuals who are inspired to try something different.

That is where cred comes in. The cred community is made up of people who want to try something new. Although there is a big vision for what this could become, we are starting very simply and even humbly. We don't know what a sustainable economy will look like in full flower, but we know that we want to get started and see what happens. Let's build something together and learn as we go!


The cred system is currently in an initial prototype phase. The purpose of this phase is to demonstrate the feasibility of the concept, and it's potential to enable complex economic transactions involving multiple participants, transactions that would normally be impossible or impractical without money.

So far (as of April 7, 2014) there are 25 active members, and these members have used cred to carry out a total of 739 cred worth of transactions over the past few weeks (a cred is currently equivalent to a Canadian dollar). These transactions, and other live account information, can be viewed on the Cred Accounts and Transactions spreadsheet. An online marketplace is also live at

The next phase will be to expand cred to local businesses and merchants. The vision for cred is not simply to play around the edges of our conventional transactions, but actually to begin to replace dollars in some of our ongoing exchanges and business dealings. To achieve this, the cred network will need to grow to include businesses that provide the things we need in our daily lives. Food is at the top of that list, and of course there are many other possibilities.

A Note on the Gift Economy

Gifts are an ancient way of organizing an economy, and although they are under-appreciated in current economic theory, they remain crucial to the functioning of modern economies. The demand for growth of financial capital has sidelined gifts, and that is a process that needs to be reversed so that the gift can return as one of the essential elements of economic activity.

As we build the cred economy, it is important that we guard against the tendency to just turn the "extras" that might otherwise have been given as gifts into cred transactions. That is not the point. The point is to start to replace some dollar transactions with cred transactions, not to replace gift transactions with cred.

That said, in the initial experiment phase it is not a big deal if a few dollars/cred of transactions are monetized gifts. We need a low risk way to experiment with and experience the cred system. But let's make sure to remember the importance of the gift, whether it is in dollars, cred, or actual goods and services.


Cred transactions are currently done via “cred cheques” which are signed by both parties and submitted (physically or by a photo of the cheque) for entry into the transaction spreadsheet.

The next stages of development will include full online accessibility to accounts, increased privacy of transaction data, and many more features. New versions will be developed and released as time and resources allow.


Cred is predicated on the fundamental human right to create and exchange value with each other via gift and purchase. By offering an accessible and transparent framework for exchanges, cred offers a financial infrastructure firmly rooted in the principle of equality. (Unlike the current system, which has necessarily prioritized growth over equality, but that is a topic for another time.)

The principles of equality and democracy are also the guiding lights for governance of the cred system. Just as we are experimenting with a new framework for economic exchange, we will also be experimenting with new forms of democracy and collective decision making in the governance of this system.

At the event on Tuesday we will be experimenting with a process called Deep Democracy to make some collective decisions. Our conversation will be focused on questions about the funding model (see below), and we will try to make some decisions together.

Funding Model

Moving this experiment forward will require resources. Software development, community organizing, communications and outreach, and a host of other activities will all be needed. So far these efforts have been undertaken by volunteers, but that is not sustainable as the entire resourcing model for much longer.

The funding model I am proposing will be based in cred (of course!), and will also include a means to exchange cred (CRD) for Canadian dollars (CAD). I'd like to frame the community conversation and decision around two proposals.

The first proposal is that each transaction carried out in cred have a 2% transaction fee. At the end of every month (or week?), the cred that a member had issued in that period would be totalled, and a transaction from that member to the cred administration body would be created, consisting of 2% percent of that total. The rate could be adjusted by the community as necessary.

So far, at a 2% rate, the admin organization would have a total income of 14 or 15 cred. Obviously that is not enough to fund software development, or anything else. Members' cred accounts are allowed to go into negative cred, in fact that is a necessary part of a system of IOUs. But for the admin organization to go into negative territory without any checks or balances feels like it would be an unwise precedent.

So the second proposal is to limit the total negative balance that can be carried by the admin organization. This would act like a "debt ceiling," to borrow a phrase from American politics. In the cred community the ceiling would be set democratically by the community, and would be adjustable using the same democratic processes.

The details of this proposal are that we establish a 9-12 month rolling debt ceiling that would be reviewed and updated by the community approximately every 3 months, or as needed. That would give some certainty into the future resources available, and when adjustments need to be made it would allow enough time to have whatever conversation is needed without an urgent deadline.

The idea here is that during the start up phase the admin org would go into debt (in CRD) to members of the community in order to develop the system. Then, as the system expands, the admin org would come up out of debt and start to fluctuate around a zero balance during ongoing operations.

Just to make sure the possible ramifications are clear, a worst case scenario in this situation would be that if members of the cred system stopped using cred to transact, then the admin org would not be able to bring in the income to cover the initial debts, and the loss would be born by the members who accepted cred from the admin org in the start up phase. Members of the cred community who accept cred to be part of the software development, administration, etc during the start up phase would need to be aware of the situation, and only commit their time and resources at the level they are comfortable with.

I propose an initial debt ceiling that gives the admin organization "financing" of 1,000 cred per month. So in the first month the debt ceiling would be 1,000, the second month it would be 2,000, etc. That would be a total debt of 12,000 over the first year of operations. The transaction fees received during that time would provide some additional resources. This is still not enough to fund significant software development or outreach, and it may need to be adjusted in the coming months. But it feels like an appropriate level of funding to get things started and test out the concept of this funding model.

A final idea to consider is the establishment of a "foreign" exchange (FX) entity. This entity would accept CAD for CRD, and vice versa. This would significantly increase the potential of cred in a few ways. I will elaborate on this idea more soon, and if we have time and energy we can discuss it at the event on Tuesday. And if not it can remain in the background for now.

Sorry for the long-winded article. There is a lot to digest here, and I hope to see many of you tomorrow to dig into these ideas... and perhaps start to implement them!


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