Why identity & reputation matter
Identity and reputation unlock value in the protocol layer by providing trust and data. Trust allows for frictionless interactions and data allows for creating new products and services.
Transform one-off games into iterated ones
Since users of blockchain technology are anonymous and it costs very little to create a new address, the protocols for this technology are limited in how they can make sure people behave well. It is common today to use the idea of staking and to implement “slashing conditions”; this means punishing bad behavior by taking away something that the participants value (usually ETH or an ERC20 token).
Suppose there was a way to create a digital version of identity and reputation that is scarce. If this were the case, we could modify existing staking techniques so that loss of reputation as well as capital would result from misbehavior. Protocols could also reward high-reputation participants; for instance, by giving them higher income from the network (analogous to the “work token” model used in Cosmos and Keep). Participants would be incentivized to optimize for reputation rather than short-term wins; one-off prisoner’s dilemmas become iterated ones.
Sampling
In a sense, these are all generalizations of the original use-case of eliminating duplicates The most important application of sampling is in proof-of-work and proof-of-stake, which are used to determine identity. This can be used in other cases like deciding who stores a file or performs a computation in a resource marketplace. These are all variations of the original use-case of eliminating duplicates.
Rate-limiting and pricing strategies
Web services make use of rate limits and pricing strategies to attract different types of users. For example, Dropbox uses a freemium model where anyone can use the service for free up to a certain point. By relying on an identity system, decentralized protocols could do something similar. Filecoin, for example, could use a freemium model or offer lower prices for users who use the service more frequently.
We can see many applications that require identity when we look beyond the layer of protocols.
Governance
Newer schemes like liquid democracy, which provide delegation without Sybil-resistance, is based on trust and can be gameable; one can delegate to multiple, fake addresses and then vote that way themselves. Existing blockchain voting systems are based on coin-voting, where each person gets a certain number of votes based on how many coins they have. Coins are a scarce resource and provide Sybil-resistance, but also lead to plutocracy, where those with wealth have more say. Schemes like quadratic voting, which lower returns to wealth, are currently gameable; one can spread their coins across multiple addresses. Newer schemes like liquid democracy, which provide delegation without Sybil-resistance, is based on trust and can be gameable; one can delegate to multiple, fake addresses and then vote that way themselves.
Identity enables one to use these schemes.
Your reputation, based on your past behavior in the protocol or the trust of the community, could be used to determine the weight of your vote.
This post by Daian, Kell, Miers, and Juels outlines the property of “coercion resistance” which is required for secure onchain voting.
Lending
protocols that allow people to borrow money using cryptocurrency as collateral can’t trust the people participating in the transactions, and because of that they require that the people involved have full collateralization. The high cost of capital that is required for this inhibits adoption of these protocols.
Identity can change the way lenders view borrowers by revealing their real-world attributes, such as credit score, record of home ownership, or income. In addition, reputation (which may be based on borrowing history or vouching by others) can serve as a substitute for collateral.
Security tokens
Tokenization of securities such as real-estate, equity, and art provides fractional ownership, immediate settlement, and 24/7 global markets. Issuance and trade of these tokens requires compliance with security laws (by performing KYC, AML, accreditation, and other checks on the trading parties). These restrictions could be baked into the token itself (Harbor’s approach with R-Token) or enforced at the exchange level (e.g. in a DEX prior to calling the ERC 20 token’s transfer function).
Token sales & airdrops
Airdrops provide incentives for people to participate in token networks. For example, Livepeer’s Merkle Mine and Handshake’s airdrop based on open-source contributions. With identity and reputation, one would be able to design more nuanced distribution techniques.
There are many other potential applications for identity and reputation management, such as building social features into games where the popularity of in-game items affects their price, login and access control, delegative proof of stake, universal basic income, and collecting data from decentralized oracles.
Now, let’s take a closer look at what we mean by identity and reputation.
What do we mean by identity and reputation?
An identity is the smallest unit within the system. On Ethereum, these would be Ethereum addresses.
Individuals can verify information about themselves and other people. This data is classified as claims.
Identities can also build up reputation over time.
The protocols for identity, claims, and reputation should interact with each other through well-defined interfaces. The system should be modular, extensible, and have these properties:
Participants should also have financial incentives to follow these rules. A decentralized network is one where the rules are set and enforced by the participants, not by a central authority. There should also be financial incentives for participants to follow these rules.
What this means is that individuals should have ownership over their own identity, the claims made about them, and their reputation.
In contrast to Web 2 systems, a merchant’s reputation for their products on Amazon would be lost if Amazon went out of business or decided to remove them.
The system should allow users to move their data into other systems so that they are not locked in.
The resistance to Sybil attacks should be such that participants cannot gain an advantage by creating multiple identities. Furthermore, the protocol should discourage participants from abandoning their identity in order to get the benefits accorded to new entrants.
Having a decentralized identity that is resistant to Sybil attacks is a very important issue. This could involve using a function that is easy to compute once but hard to compute multiple times. Or an action which can be be performed by humans and not by machines. Proof-of-Work and Proof-of-Stake are current approaches.
Participants should be able to share data selectively with those they desire, and should be identified by opaque identifiers by default.
Democratized
In the early days of the web, there was no easy way to tell which websites were trustworthy or well-established. The web was still new and wasn’t set up to support the important role it would eventually play in society. We quickly realized that the web allowed people to express themselves in a unique way that connected them to the rest of the world. The web became a society of information.
Directories were created to help sort information on the internet into a more manageable format. Early on, websites were grouped together in what were called “web rings.” These rings consisted of websites that shared similar content and were thought to be of high quality. Search engines were then created to help index all of this information and make it easier to find. These engines used algorithms to filter the content and find only the most relevant results based on what the user was searching for.
The first web was open and available to everyone, but it had some serious issues. It was very difficult to filter all of the information and find the quality content. Search engine optimization (SEO) became a game where the rewards were very high for those who could get their content to show up in the top results for popular keywords. To be good at finding the results that mattered, you had to learn boolean algebra. Collecting and crawling all of the websites was the primary way to get information, but some content was still left behind. If the author wasn’t good at SEO, their content might not be indexed correctly, which could create an artificial censorship.Search engines help us find content that is relevant to what we are looking for. They are more efficient than directories because we can be more specific in our search.
Web 1.0 lacked a method for reliably sharing quality content, but it made it possible for anyone to create, distribute, and make money from content. It was a first try that changed the way everyone in the world gets information. The next step was improving distribution.
Distributed
The original text discusses how web 2.0 platforms are designed to allow users to share content easily and create a sort of reputation signal based on how popular the content is. The paraphrased text explains how these new platforms were developed with engagement such as likes, retweets, and upvotes in order to help personalize content that can now be delivered to users without them having to put in a lot of effort.
The following text discusses the advantages and disadvantages of platforms such as Reddit, Facebook, and Twitter. These platforms have helped to standardize the way that Application Programing Interfaces (APIs) are used, making it easier for developers to create content and make it accessible to a wider audience. However, the content that is created for these platforms is often different from the content that is created for traditional websites and blogs. This can make it difficult for someone who is responsible for delivering information to understand how best to use these platforms.
The goal of the group was to have relevant conversations and share interesting topics, but instead they became aware of how their actions represented their reputation, honesty and accountability. Although there were more ways to access content than there ever had been with completely centralized platforms, they concentrated their effort towards a handful of platforms that had mastered distribution. The products weren’t just the platforms anymore; the products had become the publishers and the source for reputation on the web. Naturally, most users started manipulating the algorithms to paint the picture they wanted seen, not what was really happening or was important.
Web 2.0 created a new way for us to view content and our relationships with each other became a key part of how we consume information. We no longer have to go out and seek information, but instead we have too much coming at us all the time. We trust our friends, but not the sources our friends use, which creates a problem in determining the reputation of content. Social signals don’t tell the whole story about the reputation of content, but they do provide a new way to connect all of the people on earth.
Decentralized
In a world where misinformation is easy to find and trust is in short supply, we need to focus on creating a system that allows for the objective sharing of information. This system should be decentralized, so that it cannot be biased, and should include an incentive system to encourage people to contribute to the common goal. The next stage of the internet will be about reputation, not just what is new and relevant.
The next stage in the development of reputation systems is beginning, with all indications pointing to blockchain technology forming the foundation. This new stage will allow for the delivery of easily curated but uncensorable information. We are also working with data sets and information that are ubiquitous but not overwhelming. The key to connecting this new stage of the web with accountability is immutability and reputation. This participation and ownership will push towards a new culture, rather than succumbing to the vanity that was unearthed during the distribution phase. We are making the web free again.
We’re working together to create a web that can be verified, where we can develop new technologies that emphasize the importance of the individual. This is what makes reputation in this era different; it depends on the individual, on the work that goes into a particular action, and on having systems in place to measure that. It’s not about the platforms where information is distributed or the channels where it is found. It’s about the individual who sends it and the value of their efforts.
The next stage of reputation will come from individuals rather than platforms. The source of a person’s reputation will be tethered to them instead of the site they post on. This decentralization will allow messengers to become less dependent on platforms for their audience, revenue, and growth. There will be a new economy where reputation is aligned directly with the creators.
There are already platforms that enable coordination and allocation of intrinsic or extrinsic “capital” to achieve shared goals. With blockchain-based networks, we want to incentivize participants towards some predictable outcome that is beneficial for every network participant. It’s not just about the group, but also about the network participant themself.
The most exciting thing about this next era of permissionless innovation is that it doesn’t depend on a central authority. It’s not dependent on a host, network, publisher, or platform. This era of reputation is not built and dictated by a set standard of link share clubs or opaque algorithms. It’s adjustable, adaptable, managed, and maintained by your preferences. We no longer need to be strictly driven by how a single platform categorizes, aggregates, and rewards. We can rely on each other to index this information now in a way that benefits all of the participants.
It is important that we understand the values of this new era of permissionless systems as they pertain to the individual. The biggest value that this brings is the opportunity of interoperability, which separates it from prior mechanics in democratized and distributed systems. This new era means that all the work someone puts within a single network can now be collected and used beyond that network. As an example, let’s look at the media landscape:
The main sources of revenue for media are subscriptions and advertising. These two means fund the growth of media on the web and are platform specific. That means, when someone subscribes or advertises to something, they do so on the platform rather than the individual. The platform holds the reputation, and the individual leverages the platform to build their own audience and value. An example is the writer relationship to the Washington Post, the photographer’s relationship to Getty Images or a musicians relationship to Spotify. There are many. These reputation based systems are prominent in democratized and distributed eras but begin to fail in the decentralized phase. Here’s how it works:
The value of advertising and subscriptions for creators is currently determined by the platform they are using, even though they all want to be able to control their message directly. Their reputation is tied to the platform, as dictated by the decentralized nature of the internet. However, this balance is shifting in the current era of reputation.
The creator’s reputation is now the value. Instead of advertising or transaction with publications like the New York Times, Spotify, or Getty, it’s about transaction with the creator wherever they are. This is possible because reputation is aligned with the individual.
The end result is a huge change in the opportunities available to creators, and the limitations placed on the companies currently working to represent them. It’s no longer necessary to give up control to centralized systems; instead, you can take ownership of your value and your reputation. In this case, reputation is now attached to individuals instead of platforms or granting organizations. You and your work are what are reputable, and that is reflected throughout the entire web ecosystem, regardless of the platform on which it is found.
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