In recent years, discussions about on-chain reputation have been rampant. Since 2017, numerous projects have tried to address this issue, aiming to empower on-chain users by providing a reputation layer to understand who they are dealing with. 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 area, such as Debank and Ethos Network.
On-chain reputation answers a simple question: how do we evaluate the credibility of individuals interacting in decentralized systems? In centralized systems, third parties usually ensure this reputation (such as 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 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 make this process meaningless.
According to a16z’s perspective, “to popularize decentralized identity, we must first establish a system that maps people’s relevant off-chain experiences and affiliations 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 problem of accessing decentralized networks”.
Currently, even block explorers only record very basic inputs. Without additional context for transactions, it will be more difficult 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 after considering all these factors can the system be applicable to many use cases, incorporating on-chain reputation factors into “offline activities” based on decentralized identity public queries.
Three steps:
1. Record data on the chain
2. Map and interpret the data
3. 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 the reputation in each on-chain account plays a crucial role. In this context, a “reputation protocol” can create more trust on-chain. They speculate that this may be similar to FICO (the most well-known credit scoring name) or Google Page Rank scoring. Wallets can implement these standards as anti-fraud mechanisms, warning against risky addresses. We have already seen Rabby take the lead in introducing warnings about new contracts or scam tokens. Others introducing some reputation measures include blockchain analytics companies based on on-chain behavior, such as Chainalysis, and DeBank, which creates DeBank credit scores.
A credit score is a comprehensive measure of a user’s authenticity, activity, and value. A higher score indicates more activity and user authenticity, but in the current state, DeBank credit scores cannot serve as proxies for reputation. Additionally, we can see that formal identity verification is gaining importance, which remains a controversial topic in the crypto space. A successful example of a reputation mechanism is Gitcoin Passport. Gitcoin Passport bills itself as an “identity verification aggregation application”. Like a regular passport, users can collect stamps by verifying previous activities, 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 a proxy for each user’s credibility. A higher human score provides more opportunities, with a minimum of 20 points required to be considered human. The greatness of Passport lies in its preservation of user privacy, using a zero-knowledge approach to “create a verifiable credential, proving that a user has performed specific activities without collecting any personal identity information”. Another interesting attempt to create “verifiable verification proofs” is being carried out by Ethos Network. Ethos is developing a “credibility platform” integrated into a broader ecosystem, not limited to a single dApp. The platform can be integrated into existing interfaces (Chrome extensions, Metamask snaps) and dApps.
This new social consensus blueprint is similar to proof of stake, where users act as “social validators”:
– Users can stake on people they trust
– Bad actors can be slashed
– Social consensus providers can be rewarded
Ethos introduces financial rewards and penalties, ensuring:
– Reputation is protected by financial security, making forging reputations costly
– Reputation has value
– Social interactions are easier to observe
At the same time, a balance must be found in reputation that cannot be simply bought. On Ethos Network, users will be able to:
– Review: develop reputation beyond providing financial collateral
– Guarantee: similar to staking, users can stake their ETH on others and earn staking ETH returns. Those guaranteed will receive 10% returns to incentivize validators and referrers.
– Slash: if validators behave improperly, those who staked ETH on them can propose slashing, removing up to 10% of the violator’s staked ETH from the Ethos contract. Those who propose rejected slashes will be penalized.
– Validate: reflect authority, reputation, and influence from other sources
All these mechanisms will be converted into a single credibility score. Though less focused 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. Nevertheless, they have achieved human proof through biometric iris scans. While this opens up new risk avenues, it is an exciting experiment.
– ENS: Converts cryptographic 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 to ensure that all these systems are truly decentralized, not controlled by centralized parties, such as Worldcoin or Gitcoin Passport. How do we achieve on-chain reputation in a decentralized manner? Anything below this standard will render the entire system devoid of its trustless elements.
Cryptographic reputation can be manipulated/bought
Privacy must be protected
Must go beyond single wallet attachments and have universal applicability
This implementation will be a collective effort of all participants, wallets, block explorers, dApps, and networks.
Vision with practical use cases
What is the ultimate vision for on-chain reputation? Here are some examples and real-life scenarios where on-chain identities could be helpful:
– Open CVs: Anyone can evaluate the reputation of other participants by assigning a single reputation score to each user. Additionally, every article, contribution, or community involvement will be recorded and used as proof of reputation.
– Celebrity token issuance: With celebrity tokens becoming a new trend, this issuance data can be used to determine the trust profile of each celebrity. We have seen many of them engage in serial scams. Quick risk assessments can partially address this issue, showing users to be cautious with these tokens.
– Meme developers: This is the golden age of meme developers. However, many abuse this power for pump and dump schemes or outright scams. We have seen some individuals act as serial meme developers, continually engaging in scams. It is very useful for token deployers to conduct risk assessments on users who have been involved in previous scams.
– KOL dumping: A significant part of Crypto Twitter is KOLs shilling their bags while dumping on their followers. Imagine being able to rank your favorite KOLs by reputation or simply knowing who is a serial dumper and scammer.
– Loyalty programs: Developing an on-chain reputation system will allow dApps to have deeper user interaction information, creating custom plans tailored to high-quality interactions and providing high-value rewards for the protocol.
Other existing reputation tools
In addition to those mentioned above, various tools have already made contributions to promoting trust and accountability.
Reputation building and tracking
– Collab.Land: A NFT gatekeeper robot that verifies ownership and DAO contributions.
– Karma: Visibility of DAO contributions
– PNTHN: Tracking DAO member reputation
– SOURC 3: On-chain reputation management platform
Reputation and identity verification
– Pentacle: Helps users navigate protocols
– ONT ID: Decentralized identifier and identity framework for verifiable credentials
– Krebit: Users can prove their identity without revealing it, protecting privacy
– Orange Protocol: Multi-chain reputation system as a verifiable credential
– OutDID: ZK proof for private identity verification
Reputation and governance
– Metopia: Reputation system for governance
– Astraly: On-chain reputation and reputation-based token distribution platform
– Spect: No-code tool to help DAO contributors create sub-DAOs
– SourceCred: Helps incentivize contributors, rewarding high-quality participation.
