Author: Francesco
Translated by: DeepTechFlow
In recent years, discussions about on-chain reputation have been raging. Since 2017, multiple projects have attempted to address this challenge, aiming to empower on-chain users by understanding who they are interacting with through a reputation layer. Today, this seems more important than ever, with various SocialFi projects and celebrities frequently launching so-called shitcoins. This article introduces the concept of on-chain reputation and its importance, focusing on projects researching this field, such as Debank and Ethos Network.
On-Chain Reputation
On-chain reputation answers a simple question: how do we evaluate the credibility of people interacting in decentralized systems? In centralized systems, third parties typically ensure this reputation (e.g., credit scores, Interpol red notices, bank accounts). Is there a way to replicate this reputation assurance in distributed systems? These efforts are not limited to a single protocol but are innovative in the space. To be applicable, this reputation system must transcend a single protocol and create a unique set of standards that can identify and establish a universal framework for cross-chain reputation on both Web2 and Web3 platforms. Any attempt that does not become a new standard will render this process meaningless.
According to a16z, “To popularize decentralized identities, we must first build a system that maps people’s relevant off-chain experiences and associations to the chain,” then “we must build mechanisms to standardize, process, and prioritize the data streams added to the chain,” and “address the inherent challenges of decentralized identity, including the lack of context in on-chain records and the issue of accessing decentralized networks.”
Currently, even blockchain explorers only record very basic inputs. Without additional context for transactions, it will be more challenging to map and allocate reputation scores to them. For example, receiving an NFT as part of an exchange should have a different weight than receiving an NFT for outstanding community contributions to a project. Additionally, in the crypto space, reputation takes various forms, such as protocol trust, lending credit scores, and project founders’ records. Only when all these factors are considered can this system be applicable to many use cases, integrating on-chain reputation factors into “offline activities” based on decentralized identity public queries.
Three Steps:
Record data on the chain
Map and interpret data
Convert to “reputation score”
Truly Standardized Reputation
In their Request for Builders, the Base team outlined how they view on-chain reputation as the foundation for success. They liken “on-chain” to the next “online,” where reputation in each on-chain account plays a crucial role. In this context, a “reputation protocol” can create more trust on-chain. They assume this might be similar to FICO (the most well-known credit scoring name) or Google Page Rank scores. Wallets can implement these standards as anti-fraud mechanisms, issuing warnings for risky addresses. We have already seen Rabby take the lead in introducing warnings about new contracts or scam tokens. Other introductions of reputation measures include blockchain analysis companies based on on-chain behavior, such as Chainalysis, and DeBank creating DeBank credit scores.
Credit scores are a “comprehensive measure of user authenticity, activity, and value.” A higher score indicates more activity and user authenticity, but in the current state, DeBank credit scores cannot serve as a proxy for reputation. Additionally, we can see the growing importance of formal identity verification, which remains a controversial topic in the crypto space. A successful reputation mechanism example is Gitcoin Passport. Gitcoin Passport describes itself as an “identity verification aggregator application.” Similar to a regular passport, users can collect stamps by verifying past activities or completing tasks and verifications from different Web2 and Web3 validators:
Holonym (KYC)
Civic (Biometrics)
Google and LinkedIn (Web2)
Guild and Snapshot (Web3)
These stamps increase the default human score, which acts as an agent for each user’s credibility. A higher human score provides more opportunities, requiring a minimum of 20 points to be considered human.
The great thing about Passport is that it preserves user privacy using a zero-knowledge approach, “creating a verifiable credential proving that users have performed specific activities without collecting any personal identity information.” Another interesting attempt to create “verifiable verification proofs” is being undertaken by Ethos Network. Ethos is developing a “credibility platform” integrated into a broader ecosystem, not limited to a single dApp. This platform can be integrated into existing interfaces (Chrome plugins, Metamask snaps) and dApps. This new social consensus blueprint is similar to proof of stake, where users act as “social validators.” Users can stake people they trust, indicating their trust in them. Bad actors can be slashed, and social consensus providers can be rewarded. Ethos introduces financial rewards and penalties to ensure:
Reputation is protected by financial security, making forging reputation costly
Reputation has value
Social interactions are easier to observe
At the same time, a balance must be found in reputation not easily being bought. On the Ethos Network, users will be able to:
Review: Develop reputation beyond providing financial stakes
Endorse: Similar to staking, users can endorse others’ ETH and earn staking ETH returns. The person you endorse will receive 10% of the earnings to incentivize validators and referrers.
Slash: If validators behave improperly, those who endorsed them with ETH can propose a slash, removing up to 10% of the wrongdoer’s staked ETH from the Ethos contract. Those who propose rejected slashes will be penalized.
Prove: Reflect authority, reputation, and influence from other sources
All these mechanisms will be transformed into a single credibility rating. While not focusing on on-chain reputation, other notable nominations in this field include:
Worldcoin: This venture capital-run giant promises to scan your iris and airdrop some WLD tokens for the inconvenience. Whether their intentions are noble or utopian can be debated. Nonetheless, they have achieved human proof through biometric scanning of user irises. While this opens up new risk avenues, it is an exciting experiment.
ENS: Translating crypto addresses into human-readable names, facilitating “on-chain messaging”
The Road Ahead
Developing a truly standardized and universal on-chain reputation system will be a long and arduous journey, encountering many challenges. Centralized solutions: The main challenge is ensuring all these systems are truly decentralized, not controlled by centralized entities like Worldcoin or Gitcoin Passport. How do we achieve on-chain reputation in a decentralized manner? Anything below this standard will cause the entire system to lose its trustless elements. Crypto reputations may be manipulated/bought. Privacy must be protected. It must go beyond single wallet attachments and be universally applicable. This implementation will be a collective effort of all participants, wallets, blockchain explorers, dApps, and networks.
Vision with Practical Use Cases
What is the ultimate vision for on-chain reputation? Here are some examples and practical scenarios where on-chain identities could be helpful:
Open CVs: Anyone can evaluate other participants’ reputations by assigning a single reputation score to each user. Additionally, each article, contribution, or community involvement will be recorded and can be used as evidence of reputation.
Celebrity token issuance: With celebrity tokens becoming a new trend, this issued data can be used to determine each celebrity’s trust profile. We have seen many of them involved in serial scams. A quick risk assessment could partially solve this issue, showing users to be cautious with these tokens.
Meme developers: This is the pinnacle time for meme developers. However, many abuse this power for pump and dump schemes or outright scams. We have seen some individuals acting as serial meme developers, continuously scamming. It is very useful for token deployers to conduct risk assessments on previous scammers for users’ safety.
KOL dump: An essential part of Crypto Twitter is KOL selling their bags while dumping on their followers. Imagine if you could rank your favorite KOLs by reputation or simply know who are outright dumpers and scammers.
Loyalty programs: Developing on-chain reputation systems will allow dApps to have deeper user interaction information, creating custom plans specifically for high-quality interactions and providing high-value rewards for protocols.
Other Existing Reputation Tools
In addition to those mentioned earlier, various tools have contributed to promoting trust and accountability.
Reputation building and tracking
Collab.Land: A NFT gatekeeping bot verifying ownership and DAO contributions.
Karma: Visibility of DAO contributions
PNTHN: Tracking DAO member reputation
SOURC3: On-chain reputation management platform
Reputation and identity verification
Pentacle: Helping users navigate protocols
ONT ID: Decentralized identifier and verifiable credential identification framework
Krebit: Users can prove their identity without revealing it, protecting privacy
Orange Protocol: Multi-chain reputation system as a verifiable credential
OutDID: ZK proofs for private identity verification
Reputation and governance
Metopia: Reputation system for governance
Astraly: On-chain reputation and reputation-based token allocation platform
Spect: No-code tools to help DAO contributors create sub-DAOs
SourceCred: Helping incentivize contributors, rewarding high-quality participation
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