SUPERALGOS PROJECT

Why We Reward Value Creation Only

The project does not reward effort, intent, willingness, or work-in-progress. This is why.

Julian Molina

Published in

Superalgos | Algorithmic Trading

6 min readDec 9, 2021

Rewarding value added to the project is a core feature of the Superalgos Project, for good reasons. It may seem counterintuitive at a glance, so I’ll try to dive deep into this topic and offer examples for clarity.

The Bitcoin Case

Let me start with a question:

Does the bitcoin protocol reward miners that fail to find the hash for the next block?

No. Only the miner that finds the hash is rewarded.

“What? That seems so unfair! After all, unsuccessful miners had to buy mining rigs too! They too had to set up the mining farm, hire and train technicians, pay the electrical power bills, and so on! Shouldn’t all miners get a piece of the pie?”

Satoshi believed the answer was no. Why? Because it’s not a matter of what you or I may perceive as fair or not. It’s about the design of incentives.

“Show me the incentive, and I will show you the outcome.” — Charlie Munger.

Satoshi figured out that, to secure the bitcoin network, competition among miners was of paramount importance. That is why only the miner that finds the hash is rewarded.

The design of incentives of Bitcoin forces miners to figure out how to do the job in the most efficient manner possible.

The network doesn’t care how much money they spend mining the next block.

As Bitcoin users, we don’t care what kind of contract they signed with the electrical company. We don’t care what kind of financial engineering they have to come up with to be profitable. We don’t care where they are located. We don’t care about the local regulations they have to deal with. We don’t care what their abilities or shortcomings are. We don’t care how they perceive themselves or how they value their work.

All we care about is that the job gets done.

What the Bitcoin design of incentives accomplishes is outsourcing the problem of securing the network, without needing to worry about how it’s done. That’s the miners’ problem.

It’s free markets doing what free markets do best: decentralized problem-solving.

The alternative sounds grim: a central committee of bureaucrats keeping a model of all the complexities behind bitcoin mining in an attempt to centrally plan when, where, how, and who gets to mine the next block.

Just figure the hypothetical discussion among committee members…

“This morning, China banned Bitcoin mining in Qinghai province;” the chairman goes “let’s move Ming’s miners to Xinjiang and let the poor guy mine a few blocks in a row for the hassle”.

“But Sir,” the third deputy general argues, “California raised fossil fuel taxes by 2.3% last month… Barry’s operation needs an urgent subsidy too!”

“Fine, let’s double the issuing rate for twenty blocks until all miners are happy.”

We Don’t Care

The parallels with the design of incentives in Superalgos are not a coincidence. Our design of incentives pursues similar goals: to crowdsource project improvements.

In Superalgos, we don’t care how much effort you put in while contributing. We don’t care how much you had to study or how many books you had to read to get the job done.

We don’t care what college degree you may or may not have. We don’t care who your friends are. We don’t care if you worked during the day or night, or what time zone you’re in. We don’t care how much time you spent. We don’t care how many doors you had to knock on, or how many phones you had to call. We don’t care who you worked with.

All we care about is the result.

The above may sound harsh and even inhumane.

“You say you are a community-centric project, but you don’t care about the lives, whereabouts, hardships, and efforts made by contributors?”

That is not the case. When I say “we don’t care”, what I truly mean is “we don’t want to have to care”.

Why?

Because a system that doesn’t need to care about how the work is done is orders of magnitude more scalable, efficient, and resilient.

Scalability

Bitcoin mining scaled from Satoshi’s single CPU to virtually 200 exahashes per second in 13 years, with zero changes in the design of incentives. Incentives are one of the most brilliant design features of the protocol.

Just imagine Satoshi and his desktop PC, and then picture a modern mining farm. The dimension of the success of the design of incentives is unfathomable.

Such is the challenge Superalgos faces.

We need to scale our collaboration from the current 80 governance user profiles, to hundreds, then thousands, and then millions.

No governance system can achieve that kind of scalability while caring about anything else than the single most important variable. Why? Because the rest of the variables that we could care about would add too much complexity to a problem that is already complex.

Just imagine if, during each distribution event, we had to consider all the nuance in the life of each contributor, and make an attempt to evenly balance rewards.

It’d be impossible to scale.

“Guys,” the team leader goes “this month John’s dog got sick with the flu and he had to work three nights in a row from the vet’s clinic; that shows great commitment… let’s reward him accordingly!”

“That’s very nice of you supreme leader,” says the team’s newly appointed secretary “but we have Karen’s laptop that froze and had to be repaired, Peter has been calling Binance support for three days and he hasn’t managed to fix the bug in the API connector yet, and Silver lost half of his net worth while testing the latest strategy… how do we go about it, Sir?”

Efficiency

Bitcoin has become the most secure monetary network because it incentivizes network security. Security is Bitcoin’s focus.

It doesn’t matter how miners approach the problem. All it matters is that the problem gets solved. Incentives reward the most efficient miner: the one that solves the problem first.

If we want Superalgos to become the dominant trading intelligence network, we need to incentivize improvements to the project. Not the effort, motivation, or willingness to produce improvements.

Improvements = Value Added

Because we reward improvements, we will get an ever-improving project as a result.

If we rewarded effort, motivation, or willingness instead, then we would get a community of vigorous, motivated, and willing individuals as a result — for whatever that’s worth.

“ The road to hell is paved with good intentions” — Proverb

Resilience

Managing and growing a collaboration of humans when there’s money involved is a tricky business. There is a reason why crypto land is plagued with scammers and unscrupulous individuals.

The fact that Superalgos rewards value added to the project is a key entry barrier for scammers, opportunists, and unscrupulous people. These kinds of characters are unlikely to invest time and effort to deliver something valuable, only to infiltrate the project and attempt a scam.

The requirement to produce something of value makes Superalgos uninteresting for lazy scammers, and it’s a built-in defense mechanism.

Good Reasons Make Good Missions

I hope the above explains this fundamental aspect of the Superalgos collaboration. Like I said, although it may be counterintuitive, there are good reasons for rewarding value creation only!

As a valuable member of the community, I’d ask you to reflect on this topic, mature the concepts, and make it your own mission to implement this paradigm with your own voting during your participation in governance.

Mastering Contributions

You just read an article in the Mastering Contributions series exploring some of the crucial aspects of the Superalgos Collaboration. To continue your journey learning about how to contribute to Superalgos, just keep reading: