Despite these challenges, we believe on-chain reputation will unlock a wide array of use cases. Some of these uses are explored below, but many are beyond our ability to imagine yet. By moving identities on-chain, we could upend archaic financial processes and provide equitable access to capital, re-architect how talent is matched with projects, and provide entirely new paradigms for recognizing and compensating labor online.
Traditional financial systems make it very hard to shape — or even access — one’s own credit history. The portability and accessibility of decentralized identities, on the other hand, could allow us to significantly disrupt how our reputations are used within our current financial systems. For example, on-chain reputations could enable an internet-native credit score that would unlock a variety of financial use cases, including issuing loans, performing tenant checks, or establishing credit.
Moreover, on-chain systems are easily portable across borders and applications, unlike current credit scoring systems. Here especially, however, there needs to be strong consideration of how users might be able to add context and curate their permanent public histories to avoid undue prejudice. It would be important to circumvent the digital equivalent of getting evicted, hindering your ability to obtain future housing.
In the realm of talent sourcing, decentralized identities promise “open CVs” based on fine-grained records of professional activities and accomplishments. This could allow for a fuller picture of someone’s past work and provide more granular insight into their skills and contributions.
Though recording and storing professional activities at this level would be complex, the aggregation of such activity on-chain would be much faster to assimilate and act on than static user-generated professional profiles, such as those on LinkedIn.This opens up use cases around facilitating talent matching. Imagine a version of Behance in which a designer’s portfolio is populated based on automatically tracked and verified projects, thus enabling direct, blockchain-mediated recruitment.
Additionally, there’s a whole class of applications based around the use of reputation to incentivize new forms of creation or contribution. Currently, it is difficult to decipher who is a subject-matter expert and to recognize and reward them. With decentralized identities that track contributions across the internet, we will be better able to gauge how early someone was to a topic or trend and how much value someone is contributing to a subject matter. Startupy, for instance, incentivizes experts to contribute startup knowledge and gain an internet-wide reputation in specific domains.
The wealth of information stored on-chain could even upend markets as big as search and discovery. A range of matching algorithms will be enabled by the openly queryable nature of decentralized identities; whereas previously, matching algorithms could only be developed by whoever had access to our data. Additionally, until now we’ve only been able to measure how much value people associate with content based on basic engagement metrics, such as how much time they’ve spent on an app or whether they clicked “like.” If we had a better understanding of people’s willingness to pay for distinct pieces of content, we would have a better perspective on magnitude of engagement or interest.
Furthermore, if every piece of content on the internet were truly composable or remixable, it could be possible to gauge which content inspires further creation, or is the most meme-able. This would offer a new way to surface content, similar to TikTok’s system. Finally, and perhaps the most disruptive of all, people could become the new platforms for discovery — especially is incentivized through token models.
Derived on-chain reputations will bring about massive opportunities for business and society. But as we traverse this new territory, we will be forced to consider the implications of permanence. Inevitably, we’ll need to find a balance between what is ephemeral and what should be forever.
If we progress toward an internet in which our identities are tied to us instead of being scattered across siloed spaces on the web, we’ll get closer to how things work in the physical world: our online possessions will belong to us and we’ll be able to take our full, authentic selves across cyberspace.
This is the second installment of a two-part series on reputation systems in web3. Read part one here.
Acknowledgments: Thanks to Mike Bodge, Chase Chapman, Joey DeBruin, Abigail Fradkin, Default Friend, Jonathan Glick, Andrew Hong, Jihad Esmail, Nir Kabessa, Metadreamer, David Phelps, Brenner Spear, Danny Zuckerman, Curtis Roach, and Andrew Wang for their input and insight into this topic.
Disclosures: Jad Esber is an investor in a number of NFT and DAO projects. Scott Kominers provides market design advice to a number of marketplace businesses and crypto projects, including Novi Financial, Inc., the Diem Association,Koodos, and Quora.