The rise of blockchain technology is revolutionizing the way we interact online and creating a new era of decentralized systems. In the web2 world, user reputation is solely at the mercy of centralised organizations and UGC (User-Generated Content) that doesn’t actually belong to users. Web3 brings the concept of reputation based on participation, ownership and the portability of a digital identity. With the continuous growth of the crypto industry, the demand for innovative reputation systems that are native for web3 users has never been higher.

TL;DR

• A digital identity is a way to represent a person online. A decentralized reputation is a system of trust and credibility linked to a person’s wallet that is based on their on-chain activity, recorded transparently and publicly on a blockchain.

• A web3 reputation has significant advantages over web2: ownership, composability, portability and verifiability.

• Use cases: CV, DeFi, Loyalty Programs, Airdrops, Gated Access, Security.

• A decentralized reputation potentially solves the trust problem and motivates individuals to make well-informed decisions that have lasting effects.

Web3 identity is centred around the idea of using your wallet as a profile. It is based on your on-chain activity with all transactions being transparent and public. This implies that any action linked to the wallet can serve as valuable data, forming a permanent and timestamped record of achievements, contributions, interests, and other unique traits. In contrast, web2 profiles can be easily censored or deleted. Reputation in decentralized world is represented by a variety of entities like trades, token transfers, interaction with different protocols and blockchains, contributions to DAOs, holding NFTs, SBTs(Soulbound tokens), VCs(Verifiable Credential), POAPs, etc.

Unlike traditional reputation systems, web3 offers several significant benefits:

Ownership You own your data. Your digital identity is controlled by your private keys and wallet access. This means that credentials cannot be altered, deleted, or suspended by a third party.

Composability and Portability Your private keys give you access to your earned credentials, allowing you to transfer them from one community to another. For example, if you have a high score in one game, the score could be transferred to another game; if you have 100k followers on one social media platform, you can bring your followers to another platform.

Verifiability All actions are recorded on the blockchain and are publicly accessible, making it easy to verify the authenticity of your credentials. The public and open nature of blockchain technology makes on-chain assets inherently verifiable.

There are a few other key principals that web3 reputation system is based on. It should be:

Decentralized No single entity holds control over the reputation scoring algorithms or rules. This ensures a level of fairness and impartiality in the reputation scoring process.

Private As users control their data, they can choose to share this data with third parties or they can opt for selective disclosure by only sharing a portion of their data. In some cases, they may also choose to prove their reputation through zero-knowledge methods without actually sharing any data.

Pseudonymous Users can choose to disclose their “real” names or not. You can build a reputation for your digital identity (or multiple identities) without doxxing yourself. This makes the system resistant to Sybil attacks and helps protect users' privacy.

Subjective A reputation system is subjective, meaning that the perception of trust or social weight from the verifier to the owner is defined by the verifier themselves.

Reciprocal The reputation of the person sending you their credentials is as important as the reputation of the person receiving them. This makes the act of giving the credential just as significant as the act of receiving them.

As we transition to a more decentralized web, actions you take from your wallet will play a crucial role in defining your online presence in the future. For instance, if you express an opinion about a DeFi protocol and there's a record that you’ve actually used it, people are more likely to trust your word. Similarly, if you are vocal about a particular project, your opinion will hold more weight if you've invested your own money in that token, and everyone can verify it.

Web3 domains: @ens.eth, @UnstoppableDomains

Proof of Attendance/Participation: @POAP, @GitPoap, @Sismo (ZK Badges)

Education: @RabbitHole, @ThirdAcademy, @Layer3

Credential-as-a-Service (CaaS): @Galxe, @Noox, @Gateway

Web3 Socials: @Farcaster, @Lenster

Right now there are very few services like Chainstory that can effectively analyze user activity and their credentials, while presenting the information in a clear and visually comprehensible way. Hence further development in this area is absolutely necessary for the growth and adoption of web3 reputation.

A few more great projects that are worth to be mentioned:

@Disco - a self-sovereign identity platform designed for the metaverse;

@Gitcoin Passport - a sybil resistance solution that helps you gate access to your project or community in a privacy-preserving way.

*Here is a list of the Twitter accounts of projects that were mentioned. Please send me a DM if you think I’ve missed something

https://twitter.com/i/lists/1621771984840577024

Moving reputation on-chain unlocks a variety of new use cases. It could transform outdated financial procedures and ensure equal access to financial resources, transform the hiring process and create new methods for recognizing and rewarding online communities.

CV Your web3 reputation can serve as a digital alternative to a traditional resume, providing a secure and verifiable way to showcase skills, accomplishments, professional experience (projects, contributions, publications, conferences, etc.). This allows for a more accurate representation of a professional background compared to a traditional resume.

DeFi With a strong and trustworthy on-chain reputation, you can use undercollateralized loans or margin accounts. Moreover, on-chain systems are easily portable across applications, unlike current credit scoring systems. This could enable a web3-native credit score that would unlock a variety of financial use cases.

Loyalty Programs & Conditional Airdrops The era of chaotic airdrops is over; teams are now approaching token distribution more strategically. Rather than sending tokens to a huge number of wallets, the focus is on incentivizing active users and early adopters. The primary goal of tracking reputation is to target and retain human-managed wallets. For example, if you have used a certain platform or service extensively in the last 6 months, you might receive a unique SBT that provides a 10% discount on fees for future use. This approach aligns the interests of the project with its community, and creates a more engaged and invested user base.

Gated Access  The idea is pretty simple; Imagine you are launching a private beta testing for your product and you want to limit access to only OGs. To be eligible for the testing, these users need to meet certain criteria. The requirement could be that a user is Ethereum Merge contributor, has staked at least 10 ETH on Lido, and the connected wallet is at least 5 years old. This would ensure that only a small group of carefully filtered individuals gain access.

Security With projects like Stelo, you can view information about a specific address before sending tokens to it. This information, such as the number of transactions made, NFTs stored on the wallet, and past interactions, gives you a clearer picture of the address and its trustworthiness, providing a higher level of security and could potentially reduce the occurrences of scams and fraud

Human identity is a delicate thing, and the creation of an accurate model to represent a person through their digital identity comes with a unique set of challenges and problems. One of the key issues is the lack of privacy. By creating a digital reputation that is easily accessible, it becomes possible for others to view and abuse personal information. Another big topic worthy of discussion is developing a falsely negative reputation, which can occur if someone's reputation is tarnished by incorrect or malicious information that cannot be deleted or updated. These challenges highlight the importance of careful experimentation and consideration in the development of new reputation systems to find the right balance between the trade-offs of privacy and the benefits of having a verifiable, on-chain reputation.

A decentralized approach to reputation has the potential to solve one of the most persistent challenges of our time - trust. The rise of the pseudonymous economy has further emphasized the need for a secure and reliable reputation for digital identities in the crypto community. A web3 reputation function as an economic mechanism that leverages both social and financial capital to design an incentive-compatible system. This results in a system that not only assesses reputation but also encourages positive behaviour.

The development of new social systems is a challenging and complex task, but it’s well worth it. It seems the key to successful implementation is to continue experimenting and testing new solutions and models. As the technology and our understanding of the concept matures, web3 have the potential to change forever the way we interact and transact online.

The rise of blockchain technology is revolutionizing the way we interact online and creating a new era of decentralized systems. In the web2 world, user reputation is solely at the mercy of centralised organizations and UGC (User-Generated Content) that doesn’t actually belong to users. Web3 brings the concept of reputation based on participation, ownership and the portability of a digital identity. With the continuous growth of the crypto industry, the demand for innovative reputation systems that are native for web3 users has never been higher.

TL;DR

• A digital identity is a way to represent a person online. A decentralized reputation is a system of trust and credibility linked to a person’s wallet that is based on their on-chain activity, recorded transparently and publicly on a blockchain.

• A web3 reputation has significant advantages over web2: ownership, composability, portability and verifiability.

• Use cases: CV, DeFi, Loyalty Programs, Airdrops, Gated Access, Security.

• A decentralized reputation potentially solves the trust problem and motivates individuals to make well-informed decisions that have lasting effects.

Web3 identity is centred around the idea of using your wallet as a profile. It is based on your on-chain activity with all transactions being transparent and public. This implies that any action linked to the wallet can serve as valuable data, forming a permanent and timestamped record of achievements, contributions, interests, and other unique traits. In contrast, web2 profiles can be easily censored or deleted. Reputation in decentralized world is represented by a variety of entities like trades, token transfers, interaction with different protocols and blockchains, contributions to DAOs, holding NFTs, SBTs(Soulbound tokens), VCs(Verifiable Credential), POAPs, etc.

Unlike traditional reputation systems, web3 offers several significant benefits:

Ownership You own your data. Your digital identity is controlled by your private keys and wallet access. This means that credentials cannot be altered, deleted, or suspended by a third party.

Composability and Portability Your private keys give you access to your earned credentials, allowing you to transfer them from one community to another. For example, if you have a high score in one game, the score could be transferred to another game; if you have 100k followers on one social media platform, you can bring your followers to another platform.

Verifiability All actions are recorded on the blockchain and are publicly accessible, making it easy to verify the authenticity of your credentials. The public and open nature of blockchain technology makes on-chain assets inherently verifiable.

There are a few other key principals that web3 reputation system is based on. It should be:

Decentralized No single entity holds control over the reputation scoring algorithms or rules. This ensures a level of fairness and impartiality in the reputation scoring process.

Private As users control their data, they can choose to share this data with third parties or they can opt for selective disclosure by only sharing a portion of their data. In some cases, they may also choose to prove their reputation through zero-knowledge methods without actually sharing any data.

Pseudonymous Users can choose to disclose their “real” names or not. You can build a reputation for your digital identity (or multiple identities) without doxxing yourself. This makes the system resistant to Sybil attacks and helps protect users' privacy.

Subjective A reputation system is subjective, meaning that the perception of trust or social weight from the verifier to the owner is defined by the verifier themselves.

Reciprocal The reputation of the person sending you their credentials is as important as the reputation of the person receiving them. This makes the act of giving the credential just as significant as the act of receiving them.

As we transition to a more decentralized web, actions you take from your wallet will play a crucial role in defining your online presence in the future. For instance, if you express an opinion about a DeFi protocol and there's a record that you’ve actually used it, people are more likely to trust your word. Similarly, if you are vocal about a particular project, your opinion will hold more weight if you've invested your own money in that token, and everyone can verify it.

Web3 domains: @ens.eth, @UnstoppableDomains

Proof of Attendance/Participation: @POAP, @GitPoap, @Sismo (ZK Badges)

Education: @RabbitHole, @ThirdAcademy, @Layer3

Credential-as-a-Service (CaaS): @Galxe, @Noox, @Gateway

Web3 Socials: @Farcaster, @Lenster

Right now there are very few services like Chainstory that can effectively analyze user activity and their credentials, while presenting the information in a clear and visually comprehensible way. Hence further development in this area is absolutely necessary for the growth and adoption of web3 reputation.

A few more great projects that are worth to be mentioned:

@Disco - a self-sovereign identity platform designed for the metaverse;

@Gitcoin Passport - a sybil resistance solution that helps you gate access to your project or community in a privacy-preserving way.

*Here is a list of the Twitter accounts of projects that were mentioned. Please send me a DM if you think I’ve missed something

https://twitter.com/i/lists/1621771984840577024

Moving reputation on-chain unlocks a variety of new use cases. It could transform outdated financial procedures and ensure equal access to financial resources, transform the hiring process and create new methods for recognizing and rewarding online communities.

CV Your web3 reputation can serve as a digital alternative to a traditional resume, providing a secure and verifiable way to showcase skills, accomplishments, professional experience (projects, contributions, publications, conferences, etc.). This allows for a more accurate representation of a professional background compared to a traditional resume.

DeFi With a strong and trustworthy on-chain reputation, you can use undercollateralized loans or margin accounts. Moreover, on-chain systems are easily portable across applications, unlike current credit scoring systems. This could enable a web3-native credit score that would unlock a variety of financial use cases.

Loyalty Programs & Conditional Airdrops The era of chaotic airdrops is over; teams are now approaching token distribution more strategically. Rather than sending tokens to a huge number of wallets, the focus is on incentivizing active users and early adopters. The primary goal of tracking reputation is to target and retain human-managed wallets. For example, if you have used a certain platform or service extensively in the last 6 months, you might receive a unique SBT that provides a 10% discount on fees for future use. This approach aligns the interests of the project with its community, and creates a more engaged and invested user base.

Gated Access  The idea is pretty simple; Imagine you are launching a private beta testing for your product and you want to limit access to only OGs. To be eligible for the testing, these users need to meet certain criteria. The requirement could be that a user is Ethereum Merge contributor, has staked at least 10 ETH on Lido, and the connected wallet is at least 5 years old. This would ensure that only a small group of carefully filtered individuals gain access.

Security With projects like Stelo, you can view information about a specific address before sending tokens to it. This information, such as the number of transactions made, NFTs stored on the wallet, and past interactions, gives you a clearer picture of the address and its trustworthiness, providing a higher level of security and could potentially reduce the occurrences of scams and fraud

Human identity is a delicate thing, and the creation of an accurate model to represent a person through their digital identity comes with a unique set of challenges and problems. One of the key issues is the lack of privacy. By creating a digital reputation that is easily accessible, it becomes possible for others to view and abuse personal information. Another big topic worthy of discussion is developing a falsely negative reputation, which can occur if someone's reputation is tarnished by incorrect or malicious information that cannot be deleted or updated. These challenges highlight the importance of careful experimentation and consideration in the development of new reputation systems to find the right balance between the trade-offs of privacy and the benefits of having a verifiable, on-chain reputation.

A decentralized approach to reputation has the potential to solve one of the most persistent challenges of our time - trust. The rise of the pseudonymous economy has further emphasized the need for a secure and reliable reputation for digital identities in the crypto community. A web3 reputation function as an economic mechanism that leverages both social and financial capital to design an incentive-compatible system. This results in a system that not only assesses reputation but also encourages positive behaviour.

The development of new social systems is a challenging and complex task, but it’s well worth it. It seems the key to successful implementation is to continue experimenting and testing new solutions and models. As the technology and our understanding of the concept matures, web3 have the potential to change forever the way we interact and transact online.