Decentralizing the Balance of Power with Reputation Tokens

Increasingly, we are seeing reputation scores and reputation tokens being introduced on blockchain networks. If this concept proves successful, it could change the business landscape substantially.
Trust is an important aspect of doing business. And this plays into the hands of large companies who can invest in their brand and build a reputation around it. But that doesn’t make for a level playing field. It’s very difficult for an individual to prove their reputation to people they don’t know or have never met.

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The inclusion of reputation scores and tokens in projects is evolving in numerous ways. Some blockchain projects explicitly build the entire network around a reputation token while others give each user a reputation score.
Uprightly, for example, is a system that allows users to review any platform they interact with. Augur is a prediction market that gives each user a reputation score based on their previous predictions. The higher the score, the more they can charge for access to their predictions. Another project, Chlu, allows users to rate products and services.
Bitnation is challenging the whole idea of nation states by allowing users to establish virtual jurisdictions with their own rules. Central to the structure of the network is a system of reputation tokens which are awarded not just to users but smart contracts and legal codes too. This rewards those who improve the quality of the entire network, creating more value for all users.

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There are other examples where reputations within very specific industries are being managed using reputation scores. Overstock is investing in a company promising to see excessive online gambling curbed using blockchain technology. RepuX, an artificial intelligence market, gives reputation scores to datasets to be used to train algorithms.
If just a few of these projects are successful, the impact on economies and the business environment will be substantial. In the current environment, millions of people with both ideas and talent never get to achieve what they could because they can’t prove their worth. Economies are top heavy because business tends to flow to large corporates that can afford to invest in their brand.
This, in turn, gives these large corporates the pricing power they need to defend their position. And that leads to capital being wasted on corporate overhead.

Source: Pexels
If individuals can prove they are talented, reliable and trustworthy through a system of reputation tokens and scores, the entire economy can become far more efficient. Rather than rewarding corporations with large balance sheets, the economy will be able to reward individuals and platforms with the strongest reputation. Work and capital would flow to the people best equipped to do the job. Capital wouldn’t be wasted on dishonest brand building.
A network effect could evolve around a better economy, incentivizing more people to improve and protect their reputations, rather than chasing a quick buck.
Of course, this is all the whole point of decentralized organizations. They operate as meritocracies where the networks reward individuals based on the contribution they make rather than their balance sheet, social status or demographic. However, for this model to work, this whole idea of reputation needs to succeed. At this stage, it’s too early to say whether or not it is succeeding – but it’s an aspect of the industry that crypto investors should be watching carefully.


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