What is the Reputation Economy?

And why we should build it

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Blockchains/DLTs are birthing distributed social networks, where reputation is stored in an immutable fashion. A few initiatives are already underway to leverage this for P2P lending, or to accelerate distributed workforces.

But a much larger change is afoot. Reputation’s true potential extends beyond facilitation of monetary activity.

A big piece of this future is due to fall in place with Holochain’s activation. Holochain’s agent-centric approach will push down the cost of storing reputation radically! The result is an eco-system in which reputation thrives without monetisation pressure, and can actually evolve into an economy in itself.

What does that mean? And what are the benefits of creating a wealth system that is based on reputation?

The key to this begins with understanding how it’s different from material based wealth or money. Reputational Wealth has interesting characteristics:

1. It’s Endogenous

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Inextricably linked with your identity

Reputational wealth is inextricably linked with your identity. For example, if you’re a dentist who is highly regarded in the community, you can’t sell this reputation to another unqualified individual. Your reputation, is linked with you personally. Similarly, if you’re an Uber driver with a 5 star rating, or an incredibly funny comedian, you cannot sell this reputation to another person.

In other words, reputation is ‘endogenous’. This is unlike material ‘things’ — you can sell a dozen apples in exchange for oranges, or dollars, or bitcoin etc.

2. It’s Contextual

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Can be utilized across eco-systems, but contextually

A dentist can use their reputation as currency for things that are contextual, or, related. A dentist lending credibility to a brand of toothpaste makes sense, but not if they’re recommending which movie to watch this weekend. Again, money is different since material capital can be used to buy anything else that has material value: a house, a car, a table, and office and so on.

This might make reputational wealth seem tedious, but there’s beauty in this contextuality: more on this soon!

3. Thrives with Multi-Dimensionality and Diversity

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An open source approach to reputation helps piece together a fragmented, contextual view of reality.

Reputation thrives when many agents try and describe a particular behaviour as per their context. That means each app/eco-system, when given the freedom to design reputation leads to a better description of human potential.

Let’s take an example: Uber may choose to define punctuality with a binary scale, while Grab/Lyft/Didi might choose a spectrum. A local taxi union may choose a negative to positive scale, while some may only choose whole numbers to issue stars, or badges.

By designing reputation as an economy we encourage different networks and groups of people to piece together a fragmented snapshot of reality. In this way, human potential is measured with respect to an underlying context. As a person, I might be considered punctual by my group of friends, but may not be punctual as per the standards of the city of Singapore.

This open approach is critical while designing reputation systems. It actually helps prevent dystopian situations where culture is defined and dominated by a handful of institutions.

4. A Non-Zero Sum Economy

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Not bound by the same rules of materiality. Which means you can potentially stake reputation from one eco-system into countless others.

If a dentist stakes their reputation on a brand of toothpaste, and if this product is highly regarded by consumers, then BOTH, the reputation of the toothpaste and the dentist rise. Similarly, if I port my driving reputation in Uber to Lyft’s eco-system, and if I perform well in Lyft, it should result in a rise in reputation in both eco-systems. The reverse is also true if I perform poorly.

What’s interesting is that this economy isn’t bound by the zero-sum-ness that money has. If I have a thousand dollars, and give you $500, I’m left with $500. If I have 10 apples, and give you 3, I’m left with 7. Not so, in the case of reputation. An event in one eco-system can ripple across countless others and vice versa.

Unlike the material economy, reputation can’t be spent but it can be staked — and this is the key to building a fascinating new economy!

But before it gains status as an economy, we need to ensure network effects for this form of wealth. These network effects will be enabled contextually through feedback loops, which are part of the ‘Reputation Interchange’.

Think of the ‘Reputation Interchange’ as an exchange, but for reputation.

What can we do with a Reputation Economy?

Traditionally, the only scalable form of validation we’ve had was money. Your skills as a credible doctor, or teacher, or insightful entrepreneur could only be rewarded through one economic system. This has limitations, of course, since not all forms of value have a corresponding material imprint.

Through the reputation economy, we now have a formal economic language for value. For example, human potential can actually be validated well through an economic system that is endogenous, contextual, diverse and non-zero-sum. The fact that I may be punctual, or funny, or a good Uber driver can actually be validated through reputation scores, without always receiving monetary benefit.

This has remarkable possibilities for social networks. Founders of communities can now start rewarding their members using multi-dimensional wealth. Content platforms can now allow a user’s context decide what content they view as opposed to a centralised algorithm. Institutions can now open source their reputation systems, to invite a wider bandwidth of information. Conversations, movements, incubation and ideation networks, open-source projects can now validate their contributors through a non-extractive currency that thrives on resonance.

The possibilities are endless. The potential, only just being discovered. But these are some of the use cases that are emerging as part of the New Economy!

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Use Cases for the Reputation Economy

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Stay tuned for detailed posts about the Reputation Interchange: it’s benefits, how it functions and how we enable contextuality.

Read updates from our recent AMA with the Holochain community.

For more about the organisation, visit: https://www.sacred.capital

To follow our progress, join our chatrooms: https://engage.sacred.capital

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Sacred Capital

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