A Novel Framework for Reputation-Based Systems


  • Paradox: easily transferable reputation (liquidity) = less meaningful reputation (signal)
  • Solution: reputation points (cannot be traded) + liquidity coins (can be traded)
  • Users receive non-tradable reputation points (= for signalling) that pay dividends in the form of a tradable liquidity coin. Demand for liquidity coins makes having many reputation points desirable.
  • 3 parameters for dividend design:
    1. the “size” of overall dividends (how many coins are issued across all users?) [n.b: doesn’t have to be asymptotically bound],
    2. the “supply” of dividends (how regularly are coins issued?) [n.b: preferably regularly],
    3. the “distribution” of dividends across users (how does coin receipt relate to point ownerships?) [n.b: linearly = 1:1, convex = favours the rich, concave = favours the poor]
  • (ideally) dividend design satisfies: marginal value (to platform) = marginal value (to user) [n.b: this favours early contributors, but early contributors != most valuable to the platform]
  • Two improvements Down pointing backhand index
  • Two improvement Electric light bulb:
    1. depreciating points over time can help, or
    2. points can be zero-sum, i.e. users maintain/lose points as a function of their engagement relative to others
  • but (!) don‘t overfinancialise it: (after all) it “should” be product-market fit that motivates users to use the platform not profit, i.e. optimise for engagement (=users) not profit generation (= speculators)