Pseudonymous Reputation

January 18th, 2021

How do you build a pseudonymous reputation that is not tied to any particular platform and portable across platforms? The only satisfactory answer today is building a reputation based on your on-chain history.

There are three components of a pseudonymous economy: identity, reputation, and dispute resolution. This essay will focus on reputation.

Building a Pseudonymous Reputation

As soon as you create an address, you start building your on-chain reputation associated with that address. Any transactions you sign contribute to your on-chain reputation. As the Rabbithole manifesto states, this can include the following:

  • Staking in Synthetix
  • Minting synthetics in UMA
  • Voting on proposals in Aragon
  • Supplying liquidity in Balancer
  • Creating digital goods on Rarible
  • Indexing data in The Graph
  • Curating data on Ocean Protocol
  • Transcoding video on Livepeer
  • Perform a job in Keep3r Network
  • Creating strategies for Yearn

Whenever you participate in a cryptonetwork, you demonstrate your understanding of how it works and your willingness to be a contributor. When hundreds of contract interactions aggregate over several years, the reputation of a pseudonymous participant can be understood.

Benefits of On-Chain Reputation

Reputation is useful to gauge the credibility of any participant in a cryptonetwork but particularly pseudonymous participants like:

  • Pseudonymous founders of DeFi protocols
  • Pseudonymous users of cryptonetworks
  • Protocol politicians, i.e. those who want to be delegates of a network
  • Pseudonymous issuers of social tokens
  • Pseudonymous backers of someone’s token

We have already seen pseudonymous participants unlock benefits based on their on-chain history.

  • Uniswap issued 400 $UNI governance tokens to any address that traded on its platform before September 1, 2020. At the time, these tokens were worth about $2,000. Today, they're worth about $3,500.

  • ARCx, a cryptonetwork that helps users unlock liquidity and earn yield with their cryptoassets, allowed only certain users to participate in its liquidity mining scheme in the early days of the project. It called these restrictions “Know Your Farmer”, which limited users to those who had previously engaged in liquidity mining or showed some other productive on-chain history like minting an NFT. The goal was to build a community that had some previous experience in the space and was genuinely interested in using the protocol rather than just farming and dumping.

Learning and Tasks

Coinbase Earn rewards users for learning about and answering a set of questions on different cryptonetworks. Rabbithole takes this a step further and rewards users for participating in cryptonetworks via specific on-chain transactions.

We have still not fully explored the possibilities of directed, collaborative work. Balaji Srinivasan asks if we can get to Mars faster if Elon Musk can direct his 40 million followers to do something productive. Elon could assign tasks to his followers, who get rewarded in return with $ELON tokens.

Learning and completing tasks will help build your on-chain reputation. You should be able to just apply to a job or bounty with your address or ENS name, which should generate your on-chain resume and validate if you are qualified. Learning and earning will open doors to more learning and earning.

Subjective Reputation

So far, I’ve covered seemingly “objective” reputation based on one’s transaction history. But on-chain reputation is inherently subjective due to two reasons.

First, a user’s reputation score will be different based on who is evaluating it. Protocols will assign a different reputation score to different transactions based on their priorities. Compound might assign a higher weight to on-chain voting while Superrare might assign a higher weight to minting NFTs.

Second, not all important elements of reputation can be captured via on-chain transactions. Other users in the system need to validate elements of one's reputation that can’t be validated from transactions. Transitive trust might be useful; if x trusts y, then x will also trust users trusted by y. Step one is building our on-chain reputation to give us more value than our web 2 social graph. Step two is using our on-chain reputation to build a web 3 social graph.

SourceCred is a tool for communities to measure and reward value creation among members. It offers a useful framework for what a subjective reputation system can look like. Here’s how it works:

  • The community sets the criteria for value creation; e.g. number of likes received for Discourse posts or number of emojis received for messages on Discord
  • The community’s SourceCred instance computes a contribution graph, which sets a score for everyone on the graph
  • The scores function as a leaderboard
  • Rewards can be distributed to members based on the scores

Here, members within the community play an active role in determining the reputation of other members.

Problem with Pseudonymous Reputation: Can’t Evaluate Intent

A big component of reputation in the real world is intent. In the legal system, murdering someone by mistake (e.g. hunting accident) is rightfully treated differently than pre-meditated murder. Intent is hard to gauge in a pseudonymous world. This makes it difficult to resolve disputes involving exploits, collusion, and bribery in cryptonetworks. Transitive trust and a social graph based on on-chain reputation partly help but they don’t entirely solve the problem.

Implications of Pseudonymous Reputation

A protocol can select users based on their on-chain reputation. A community can select members based on their on-chain reputation. A country can select citizens based on their on-chain reputation. We can have a digital nation-state with pseudonymous citizens selected based on criteria that the state optimizes for. Immigration policy could simply be a tailored proof-of-work, i.e. a specific set of tasks to be completed on-chain.

If on-chain history becomes part of reputation, we could have a marketplace for addresses with a positive transaction history. While real identity can’t be (easily) traded, pseudonymous identity can. Someone could spend years building a pseudonymous reputation and then exit by selling their address.

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