A Novel Framework for Reputation-Based Systems

To identify and reward the users who have contributed value to the platform—a form of signaling, which those users can parlay into public reputation.

Yet these two roles are in opposition to each other. A token needs to be exchangeable in order to be liquid. But the more liquid a token is, the less effective it can be as a pure signal of reputation.

We propose a two-token reputation system, whereby one token, which we call “points,” serves as a non-transferable reputation signal. A second token, “coin,” is a transferable asset dispensed to holders of points on a regular cycle. Effectively, points spin off dividends in coins that can be used as tradable currency.

Social capital shouldn’t be bought—but that doesn’t mean it can’t generate liquidity

For platforms where participation functions like employment, as with gig or creator platforms, the optimal strategy would be to distribute coins to point holders at a regular interval: for example monthly, or even daily. That means the users who make valuable contributions, thus maintaining a certain point level, receive a stable income.

-To identify and reward the users who have contributed value to the platform—a form of signaling, which those users can parlay into public reputation.

To provide a form of compensation that enables contributors to liquefy some of the value they have created into an exchangeable currency.

Drawing on our knowledge of economic theory and game design, we argue for a reputation system design based on a pair of tokens—one for signaling reputation and the other for offering liquidity—which could serve as tangible representations of meaningful contributions.

This presents a paradox: if a token can be transferred easily, then those without reputation can simply purchase it, which reduces the token’s ability to serve as a reputation signal.