Reputation Economy 101

Can distributed economies really give shape to value that is worthy of the 21st century? It’s a question several people have been asking.

But before we dive into answer the question, we must realise that the distributed economy works vastly different went compared to the traditional economy. The latter, was developed in an era of industrialisation, where the emphasis lay in building material capital. It also had the benefit of centralised authorities that could enforce adherence to a code of conduct.

Of course, there’s no such recourse in the distributed economy. Perhaps that’s the reason Gandhi said - distributed economies only thrive when there is strength in the underlying social fabric.

We can only interact with peers when there is an underlying reputation system supporting all our interactions. It’s not just about recording and scoring all our activities, but also allowing us to scale, port and leverage our social capital to initiate new ventures. In such an environment, tokens, or coins, or material capital become a ‘derivative’ of one’s reputation. So clearly, the crux lies in these reputation systems and how they function. It’s important to see just how starkly different they are from regular ‘money’. Here are the 4 basic tenets of reputational wealth:

  1. It’s linked to identity: this is pretty straightforward. If I use less plastic, or volunteer at an organic farm or am considered an ideator in my network, my reputation is firmly linked to me. It can’t be exchanged with a friend of mine.

2. It’s NOT fungible: What does this mean? The fact that I’m a strong ideator can’t be ‘bought’ by someone else. Sure, my strength in ideation can get me money, but I can’t sell it in return for money. That would be absurd.

3. Multi-dimensional and Diverse: Think about this — we don’t rate our friends using one uniform scale i.e. from 0 to 100. If we did, we’d have dystopian situations like we did in that Netflix episode where everyone has a ‘social credit score’. In fact, when we engage with people we’re newly introduced to, it’s always better to have multiple data points. I might be a food lover, a good speaker, a cyber security expert— they’re all records of my reputation. We can’t ‘add’ up all these individual reputations to present one meta score for Sid like a 65 out of 100. In fact, you might say he’s a 4 star cyber security expert, a 65/100 food lover, a ‘fantastic’ speaker and more. In fact, the more diversity you have in categories and scales, the better it is.
That’s vastly different from money, where everyone’s net-worth can be summed up in one scale i.e 5mn USD, or 150mn USD and so forth.

4. Reputation can be staked and ported: Does this mean we can ‘invest’ reputation and create a portfolio? Well, no, but it’s kind of like ‘lending your name’ or credibility to different intentions. If I ask you for movie recommendations, you’re lending your name to the 5 films that you love. If it turns out that they’re not great, your reputation in my lens drops, and vice versa. In this way, staking reputation on other initiatives can bring us a corresponding increase or decrease in reputation.

What’s interesting here is that my reputation isn’t a ‘zero sum game’. If I had a 100 dollars to invest across 10 new organisations, I’m limited by this number. I can’t make commitments for 500 dollars. But with reputation I could lend my name to innumerable initiatives, it’s just that I have to be prepared for the consequences of my actions!

So how will all of this be enabled? Over the last couple months, we’ve seen some projects like Holochain gain traction in enabling reputation as a form of wealth. How? Their agent-centric approach allows for reputation to be stored immutably for tremendously low costs. This means reputation as an economy can come alive without too much pressure to ‘monetise’.

So what is Sacred Capital’s role in this fascinating new economy? While we will have protocols in place to allow reputation to be captured and ported, it will only receive meaningful value when two things fall into place:

1. Taxonomy i.e building relationships between the varied kinds of reputation. Is my reputation established while ‘saving the birds of Kuala Lumpur’ related to sustainability? Or is related to my love for food?

2. Inter-portability i.e. how does my ‘save the birds of KL’ score translate to sustainability. Is a 4 star rating equivalent to 75 in sustainability?

This is where Sacred Capital comes in. Through conversations on our platform, and by establishing precedents of who stakes what for which initiative we’re going to be able to derive intelligence for both taxonomy and inter-portability of reputation. Think of us as the inter-change, not an exchange, for reputation.

In the past we’ve only been able to influence value at scale with money, but now, we now have countless levers at our disposal. That means individuals and entrepreneurs such as you will be able to initiate distinct conversations, shape movements, and explore new dimensions of value creation. All of this because you can port, scale, leverage and stake reputation to birth new kinds of networks!

Sacred Capital

Sacred Capital Blog

Siddharth Sthalekar

Written by

Founder: Sacred Capital

Sacred Capital

Sacred Capital Blog

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