I've been using Codecademy and Codewars to learn and practice, and last week I leveled up to 5 kyu in Codewars. The challenges presented on Codewars are designed to teach you fundementals of programming as you solve complex problems.
I don't find the level-up mechanic in Codewars to be particularly motivating, but it is slightly better than traditional badges in reflecting proficiency. In order to achieve a particular level, a user must complete a certain number of challenges at that level or higher. So achieving a 5 kyu level means that people can be reasonably certain that I could solve a 5 kyu challenge.
We have an informal system like this in our workplaces. When you solve enough of a particular type of problem, people start coming to you for help on those problems. This way you can "level up" in your workplace and build a reputation. But it's very difficult to quantify that reputation or transfer it from one workplace to another. There are plenty of startups out there trying to change the way we confer credentials to solve that problem, but I think ultimately we're going to need to rethink our entire education system.
We as educators need to start thinking critically about how much of education we provide is actual teaching and learning, and how much is assessment for the purposes of credentialing - and whether that is the right balance for our population.
I know Codewars has the right balance for me right now. No one but me cares what level I am, but the levels help me see my progress and choose challenges that are in my zone of proximal development. It facilitates self-direction but does not provide extrinsic motivation. But does my Codewars level mean something to an employer? Should it? Or should my work speak for itself?