REPUTATION ECONOMY
Sacred Capital's Reputation Inter-change serves as the economic backbone for the distributed world. 
 
Until Q2 2019, we will be building a community of Reputation Economy Architects to bring this paradigm alive. ​To join this conversation, join our chat room on the link below.
Why build a formal economy for reputation? What would this enable?  

Distributed ledgers are enabling people to create their own designs for economies. Think of these as their unique designs for wealth. The reputation inter-change is an economic backbone for this distributed world. By allowing one form of wealth to be ‘staked’ for another, we enable the inter-portability while maintaining the essence of the original value.

 

Think of the inter-change as social fabric, not a platform. The intention is to model the surface of a liquid such that ripples of any activity are felt in the relevant circles. This is achieved through a process we call ‘Contextual Chaos’ and is built on the tenets of the Reputation Economy (see here).   

 

What could this truly enable? In the past local economies and non-material forms of wealth had a couple of issues – they didn’t have the benefit of immutable ledgers and their value was limited to the original Through this, we could see new forms of value benefitting from a formal economic language. It implies that we can validate, measure, scale and amplify subtler forms of capital – social, cultural, intellectual.eco-system.

Why is this possible with Distributed Ledgers? And in particular Distributed Data Realities?
 

Distributed Data Reality(DDR) means there’s no central and single view of the data which is traditionally maintained in a database (in case of cloud services) or in a distributed ledger (in case of Blockchains like Ethereum). DDR takes an agent-centric approach in which every agent (a user or an app) maintains a copy of its data and it is synced across the network whenever needed through techniques like broadcasting or gossiping.

 

Distributed Data Realities refer to a shift AWAY from:

  • One single view of what is ‘true’, i.e. data. There can be multiple repositories of information that capture what is true in their own relevant neighbourhoods.

  • Everybody having a copy of all the information all the time. Not everyone needs to know what is occurring at all points of time. So unlike Blockchain/Cloud-based storage, there is no central resource that captures what is going on.

 

In Central Data realities, there are huge resources spent on maintaining this data snapshot. When we move to DDR, it becomes really cheap to maintain a snapshot of what is going on locally. When this data record becomes cheap, it then shifts the scales in favour of stuff that may or may not work (resilience over efficiency). It encourages people to experiment and create different versions of value, even if they may not bear fruit.

 

This fundamentally suits reputation, since the lower costs of maintaining this data reputation as opposed to having a centralised, single view of reputation. For eg, we introduce people in social circles in diverse ways - i.e. my friend Neil is a food/travel enthusiast, a technologist and a long-time cyclist. Not as a 95/100 as dictated by an over-arching score for our social circle. doesn't put pressure on reputation to be monetised. Also, you’re much better off having diverse definitions of

 

How do we define reputation?

 

A reputation is essentially an act of people evaluating each other based on a set of specific rules. These specific rules can be called a ‘context’. For example - Neil is a 4 star home chef as judged by residents of his neighbourhood. 
 

The context or set of rules is important because Neil is not a 4 star chef in absolute terms. He is ONLY a 4-star chef in this framework.

 

This framework, or set of rules, or context are agreed upon in advance and important to know when evaluating Neil externally. These rules can be laid down by the head of the collective, or the group that votes to set rules, or two people agreeing upon it among themselves. These rules constitute what we call an app, or organisation, or collective etc.


 

Why is it important for users to have agency over Reputation?


While the governing council may frame the context for the reputation, the actual reputation should be available for users to use as they see fit. As per the tenets of the reputation economy, users may choose to ‘stake’ this reputation on other initiatives - and in doing so suffer or benefit from the consequences.

 

What is the role of the interchange?

 

The interchange helps in three ways:

 

  • Negotiating Read Access: It allows app-creators to pick up and import reputations from other apps that have subscribed to the interchange. Doing so without the inter-change would require negotiating read access in some cases which Sacred Capital's norms pre-negotiate. 

  • Contextual Chaos: When a user agrees to stake reputation from one eco-system into another, a feedback loop is required to ensure the consequences of this staking 'ripple back' into the original app. Sacred Capital's inter-change ensures the ripple back can play out in a standardised and appropriate manner i.e. 'contextual chaos'. These norms are held within the interchange and are a standard that all app creators and users have to comply by.

  • Negotiating Write Access: The feedback loops mentioned above ensure that staked reputation receives both positive and negative benefits. The interchange ensures these write permissions are negotiated on behalf of the apps.

The Reputation Interchange: How does the rippling/staking work? 

 

The Reputation Interchange is an application that utilises Holochain and enables reputations to port within different ecosystems, applications and users. For example, the creator of an Application A would like to amplify certain characteristics of a user which are not captured within their ecosystem. The Application A then asks its users to port the required reputation, which is captured by Application B, into App A. The communication between the two apps and porting of the different reputations is done via the interchange application.

 

The reputation that is captured by an application due to the activities of its user within its own ecosystem is known as internal reputation.

 

When an application wants to amplify certain characteristics of its users which are not captured within its internal reputation, it asks its users to import reputations from other ecosystems. The value that gets added to an internal reputation due to the reputations from other ecosystems is known as the external reputation of the user.

 

When a user imports one reputation into another, say Reputation B into Reputation A, he has to stake some value of Reputation B into the import. Staking is the % of Reputation B that is imported into Reputation A.

 

Changes in the internal reputation of a user are captured in 2 ways,

 

 

1. Stake Forward:  Stake forward captures the changes to a user’s internal reputation when he imports reputations from other ecosystems.

 

The formula for stake forward :
 

Reputation R0 imports Reputation/s Ri
               ∞
R0* ( 1 + ∑( % Ri staked in R0  * ( n0i / n0 ) * ΔRi ) , n0i ⊆ n0
              i = 1

R0 = Earned reputation
Ri = Imported reputation
n0i = Number of users in R0 who are also a part of Ri
n0 = Number of users in R0

 

The impact of the stake forward formula on the importing reputation is a function of the number of users of the imported reputation in the importing reputation, the weight by which the reputations staked, and the changes in the value of the imported reputation. 


 

2. Ripple Back: In order to maintain sanctity around the act of importing one reputation into another, there needs to be a way in which reputation ripples back to the originating app. This change in the internal reputation of the originating app due to the changes in the importing app is captured by ripple back.

 

The formula for Ripple back :

 

                ∞

Ri * ( 1 +  ∑( % Ri staked in R0  * ( n0i / n0 ) * ΔR0 ) , n0i ⊆ n0

                i = 1

 

R0 = Earned reputation

Ri = Imported reputation
n0i = Number of users in R0 who are also a part of Ri

n0 = Number of users in R0

 

The impact of the ripple back formula on the imported reputation is a function of the number of users of the imported reputation in the importing reputation, the weight by which the reputation is staked, and the changes in the value of the importing reputation. 

 

Through this process, we ensure that feedback loops are structured and appropriate i.e.staking and rippling is effective only where there is relevance. This relevance is decided primarily by the users staking their reputation. While entrepreneurs may propose a structure, this proposal has merit only if users respond with a affirmative action. Therefore, the strength of the ripple back is a function of not only 'how many' people vouch for it, but also who in the network vouches for it, and if they are relevant for you. We think this is critical for the reputation economy - it is fundamentally a ground-up approach.  

Stakeholders in the interchange

 

1. App-entrepreneurs: What are the benefits/trade-offs that they have to work within?

 

Import Reputation: Traditionally, app entrepreneurs have had to rely on only one form of capital for scale i.e. material capital. But through the interchange, they can tap into the benefits of scalable cultural, social and intellectual capital. By simply 'importing reputations' entrepreneurs can prioritise certain community members over others. This is of particular importance to communities that are designed as movements or conversations. Relevant voices can be amplified from day one, while tuning out what could be considered noise. 

 

Export Reputation: One of the only tangible benefits entrepreneurs could offer their beneficiaries in the past was material capital. Through the interchange though, an entrepreneur could offer their users other kinds of benefits. For eg, a high rating as an established home-chef, or a nuanced thinker on socio-political issues. It could even be a high rating for showing up for your ride-share on time on a regular basis. 
By placing reputation like punctuality, or cooking skills, or nuanced thought process on the inter-change, entrepreneurs open up the possibility of incredible network effects playing out, thereby offering users extremely tangible benefits. 

Pre-negotiated Read/Write Access: Entrepreneurs could attempt to collaborate with other app owners for their reputation to be accepted in other eco-systems. However, this would involve negotiations on a case-by-case basis, which can prove tedious in the long run. Sacred Capital ensures pre-negotiated contracts are in place for network effects to play out. 

 

With regards to trade-offs, of course, an entrepreneur is open to the risk of their users staking their reputations into other eco-systems. This could result in the consequences of these actions flowing back into their apps, but this is critical to putting reputation at stake. 

 

We also insist that entrepreneurs accept and become comfortable with the Distributed Data Reality. In essence, this requires them to think of themselves more as templates, and not data warehouses. While we're exploring how centralised apps can leverage the reputation economy, it is critical that their reputation layers are built on DDRs. 
 

2. Users: What can and can’t they do? Why should they subscribe to the interchange?

 

For an end user, the reputation interchange seamlessly allows staking reputation to different apps. Think of it as a decentralised marketplace with a variety of apps subscribed to it, which expose their reputation calculation strategies. When a user downloads a new app, the user is asked to connect his SC reputation interchange account. It helps sync the reputation data back and forth between apps easily.

Most importantly, this system allows individuals to access the broader spectrum of wealth which is now being made possible due to distributed ledgers. Instead of relying only on material capital for our well-being, we can now tap into the benefits of subtler forms of capital i.e. social, cultural and intellectual. The result, access to a formal economic language for non-zero sum wealth (In other words, wealth which is by definition not inclusive or exclusive - anyone can earn it without someone having to 'trade it away')

Reputation Economy Architects

 

To put in motion this economic paradigm, we will be bringing together a community of ‘Culture Modulators’ i.e. people who are interested in helping entrepreneurs design and deliver fascinating new economy possibilities.

Currently the community is being built on our chat rooms, but over the next few months we will put in place a formal structure to capture varying skill levels of architects. Participation in this community is an opportunity for potential architects to earn a reputation in our Programmatic Collective and also shape our future path.

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