Blockchain Based Reputation System

Use Lightweight Contracts to increase trust and implement blockchain based reputation

Trust — Noah Buscher — Unsplash

Since the creation of the Nxt asset exchange back in 2014, we have been fighting a war of attrition against scammers. Due to the simplicity and excellent usability of the Nxt platform, issuing an asset is a simple and inexpensive process. The drawback? For every legitimate asset issued, we have a scammer (or many) which attempts to trick users into buying their fake tokens instead of the legitimate ones. Furthermore, when an asset is issued, there is almost no possibility to verify the identity and credibility of the issuer.

Reputation System

What we need is a reputation system for asset issuers, currency issuers, or sellers of marketplace goods, to prove their reputation of doing something right before we trust them to stand by their commitments regarding tokens they issue on the asset exchange or monetary system or goods they sell on the marketplace.

Alas, this is easier said than done. We learned the hard way that a decentralized reputation system is simple to manipulate, and when you increase its complexity by an order of magnitude you only gain a bit more protection against scammers. In computer science terms, building a decentralized reputation system is NP hard while hacking it is only P hard.

The Solution: A Hybrid of Centralized and Decentralized Reputation Management

On the other hand, the internet is full of excellent centralized reputation systems. Amazon, Ebay, Alipay and other e-commerce sites track the performance of their sellers and use feedback from their buyers for assistance. Tripadvisor, Booking and Airbnb use feedback of known travelers that have actually made transactions using their services to track the reputations of tourist service providers.

Since these systems are centrally managed, it is much more difficult to trick and fake reputation. Social networks might be simpler to game, but still, when one has 5K+ followers on Twitter, it is somewhat unlikely that this guy disappears without a trace or scam people of their tokens.

If we can use a decentralized app to tap into these centralized reputation systems and use their data as a trust anchor, we can let users leverage their well known reputation on these centralized systems to build trust in a decentralized blockchain i.e. Ardor and Ignis and later NXT.

Contribute to the Solution

One of the coding challenges Jelurida has published recently, as part of our Ardor Online Hackathon 2018, deals exactly with this challenge. The challenge is running from 22 October through 06 December for developers anywhere.

Closing Thoughts

I believe lightweight contracts can be used to provide a bridge between well-established centralized reputation system and the low fee high availability of decentralized applications. Solving the reputation problem will open the door for real world entities to use our asset exchange monetary system, and marketplace without paying excessive fees to centralized systems, while mitigating the risk of being scammed.