Why a Decentralised Reputation-Based Society is a Sensible Approach

In the past, when you required some work done, you would ask a local craftsman to do so. You were confident that you could trust the craftsman as it was a small village and any betrayal by him or her would result in loss of business. On the other hand, the craftsman knew he/she could trust you as when you would betray the craftsman it would mean that no one in the village wanted to work for you again. It was a system that worked very well. Unfortunately, with the internet turning the world into a small global village, that system pretty much disappeared. As a result, it has become increasingly difficult to trust someone you do not know.

What is reputation?

To understand the challenges we face with reputation, it is important to understand what reputation is and how it is created. Reputation, or image, is a certain opinion about that person, company or device. A reputation is created over time, based on a set of criteria. It is a mechanism of control within societies and increasingly also among connected devices. It is important to know that reputation exists on multiple levels, ranging from an individual, organisation, communities to countries and cultures. Nowadays, even connected devices are developing a reputation, which provides insights on their trustworthiness.

Reputation is not only developed by your behaviour, quality of work and if you or an entity keeps a promise, but also by a concept I call shadow reputation. Shadow reputation refers to the reputation of those you interact with (the people, companies and machines in your network). Dealing with trustworthy entities will increase your reputation. The other way is also the case, dealing with untrustworthy entities, for example criminals or hacked devices, will negatively affect your reputation. You can compare this as ‘having the wrong friends’ and when you become too closely-linked to ‘the wrong friends’, it will directly affect how people view you and as such have an impact on your reputation. This Shadow Reputation is intrinsically linked to who you are and how others identify you.

Reputation and shadow reputation are increasingly becoming important due to the global village we live in. However, trusting people on the internet whom you do not know has become notoriously difficult. After all, on the internet, nobody knows who you are and whether or not you can be trusted.

Four problems with online reputation

And that is a shame, as it limits the opportunity to do business and to benefit from this global village that we have created. Therefore, we need a new system and we have already seen the first examples of such a system; ratings and reviews. By now, most of us are familiar with ratings, whether it is your Uber rating, your Airbnb rating, your eBay rating or your Amazon rating. In the past years, pretty much any large internet platform has introduced ratings and reviews and the system gives us at least some confidence. However, there are also plenty of problems with such a, centralised, reputation system:

1. The platform is centralised, so anyone, whether hackers or administrators, could adjust ratings and reviews at a click of a button;
2. It is quite easy to perform fraud and have your friends give you positive ratings or give your enemies negative ratings, even if you have not used their services;
3. The ratings are non-portable: if you have a five-star rating on eBay and then want to do business on Amazon, you have to start from scratch;
4. The ratings only give you some level of confidence; they are not correlated with any revenue potential. However, in the offline world, if you would be a five-star artist you could probably ask more money for your work than if you were a three-star artist. Online, it does not work like that.

Reputation is especially important with the Internet of Things coming our way. Just as humans should be able to trust each other, connected devices have to trust each other as well if they want to perform transactions. After all, doing business with a malware-infested connected device is bad for business. But how can you determine and ensure the reputation of a connected device? And how can we create a system that incorporates all aspects of reputation, without invading our privacy?

Sesame Credit is Not the Solution

A solution for the above problems could be to simply build a meta reputation platform that monitors everything that you do and calculates a unique score that will affect your online and offline activities. Sounds scary? Could be, but it is exactly what China is developing: Sesame Credit, which will dramatically impact Chinese society and invade the daily lives of Chinese citizens in a variety of ways. It is a system that will make social (online) trust a major aspect of Chinese citizens as everything that one does contributes positively or negatively to the social score. For example, an individual who buys diapers could have higher scores than a person who spends money on entertainment, since diaper transactions would be perceived as being more responsible.

A person’s social score will directly affect a person’s dealings with the government or businesses online and offline. As such, a positive score could result in preferential treatment, such as skipping long lines at the hospital or access to loans. However, it also results in penalties for breaking social trust, such as denial of public office consideration or loss of welfare and social security. Although sesame credit will undoubtedly create a more trustworthy society, it also is a massive privacy violation and it remains a centralised service; if the Chinese government would like to demote a citizen, it could simply change the sesame score and the citizen is left with all corresponding problems.

Decentralised Reputation using Blockchain

A solution to the above problems would be to develop a decentralised reputation system, using blockchain or another distributed ledger technology. Such a blockchain-based reputation system would solve all four problems as mentioned earlier:

1. It is decentralised, which means that a person’s reputation becomes immutable, verifiable and traceable, as becomes anything that is recorded on a blockchain. As a result, the provenance of reputation becomes visible and transparent and anyone can understand how a certain reputation came about. In addition, since it is immutable, no central governing body can adjust your reputation.
2. Only users who have used your service or bought a product of you can leave a review. In addition, such a review can only be left once. Such verified reviews are already commonplace on Amazon, which are marked differently from other reviews, but Amazon remains a centralised platform.
3. Reputations become portable and owned by the individual, organisation or thing. Since the reputation is decentralised and immutable but controlled by the user, it becomes possible to take your reputation from one platform to another. All of a sudden, you could take your Uber reputation to Lift and directly make a fair revenue;
4. Reputations can be linked to your ability to make revenue. The higher your reputation, the higher the quality of the product or service you offer, the more money you could ask for that service. A five-star Airbnb host could make more money than a four-star Airbnb host, governed by smart contracts so that users have a monetary incentive to perform better.

You could argue that the above would violate privacy as much as Sesame credit does. However, that is not the case since with a decentralised reputation system the user remains in full control. As such, the user, organisation or device can determine who has access to the reputation score and who does not.

Reputation-Based Startups

With dscvr.it, we are working on a reputation-based collaboration platform, where the reputation of the user, organisation or thing determines how much money the user can make. Within our platform, the reputation score will allow users to earn a fair revenue for their work, based on the quality of their work and their reputation. dscvr.it, however, is not the only blockchain startup working on this. The following platforms are working on decentralised solutions to solve our global reputation problem:

INK Protocol

Ink Protocol aims to become the new reputation and payment system including a new marketplace. Users earn a public reputation for every completed transaction on the marketplace and sellers can take their reputation with them from one marketplace to another. To ensure only credible reviews, buyers can only give feedback once a transaction is completed. It is powered by the Ethereum blockchain and XNK is their, ERC20 compatible, token.

Chlu

Chlu aims to solve finding reputable business, products and services by solving the reputation problem. With Chlu, customers can only leave a review if they made a payment to the business and every payment can be verified through their blockchain approach. Companies can choose to share their reputation or not, however, once chosen to share a reputation all positive and negative reviews are made transparent. Anyone can use their reputation system, with no central authority controlling the platform.

Bloom

Bloom is a blockchain-based credit scoring, identity attestation and risk assessment platform. They are focused on those customers who cannot obtain a bank account or credit score. They aim to prevent identity theft by creating a global, federated identity and enable cross-border credit scoring to determine an individual’s default risk.

Monetha

Monetha aims to build a universal trust and reputation system that is transparent, transferable and self-executing. Such a reputation system should boost global commerce and offer buyers certainty when making a purchase. For every transaction, claim or dispute, smart contracts will automatically adjust trust levels and update a user’s reputation.

Final Thoughts

A decentralised reputation-based society makes so much sense. Despite all the positive things the internet has brought us, it has also significantly lowered trust levels among individuals, organisations and connected devices. In the past, personal relationships were strong enough to create a system were good behaviour was rewarded and bad behaviour punished. With the internet, that system no longer functions as it should be. However, distributed ledger technology offers us a chance to fix reputation once and for all. Probably it will take some time before we have developed a decentralised reputation system, but it is worth the wait, as it will result in a more trustworthy and better society.