With the recent advances in decentralized identity, I would like the revisit an interesting reputation system and present it here.
Grosso modo, the idea is to use market forces to accurately price identity forgeries. In other words, how much does it cost to create a fake for a given identity system.
With smart contracts we can enforce the rules for market participation. The rules are mostly to protect forgers so that they actually use this market and don’t retreat and form a separate black market. Prices are computed by the clash of forgers VS identity providers and the rules must be fair to minimize market distortion.
In practice, a smart contract would manage memberships for each providers. The providers control admittance and could require paying a fee. Each provider set a stake amount required for entry and also a price that is strictly higher than the stake. Members can either exit the system with their stake or “destroy” their membership and get the price value, gaining extra utility.
The stake and price must be adjusted continually by providers. Competition to attract users amongst providers push prices higher while forgers push prices down by stealing stake.
To assess a user reputation, a verifier would have to sum the prices of all membership of providers the verifier trusts.
Previous attempts at building this system resulted in very poor UX due to the lack of a good identifier. Ethereum address were unpractical to use. VLADs are the perfect identifiers for this system since they are global, unique and never changes.
Original idea →How Upala works
I omitted many details and many others are up to debate. WDYT?