A history of how we improved debt memory, forgot about repute, and how blockchain might be the answer. we invented out of necessity. As CEO describes in his discussion on , . Our ancestors did not find a way to trade fish for clothes or equate medicinal knowledge to bread, but instead kept track of debts to one another and tried to balance things fairly. We would remember who gave us meat from the buffalo hunt, who supplied us with fire wood, and who helped us when we were sick. It was of some of these things, so we simply remembered and tried to be honest and fair about our indebtedness to one another. Some people were never repaid and others fought over what had actually occurred. Money is a technology Xapo Wences Casares “Bitcoin is better than gold” barter never actually existed impossible to equate the value We kept track of it all in our heads. ; an internal database of behaviors, of compliments, niceties, and grudges. On the positive side, charity, gratitude, courage, and wisdom were earned and recognized, making these attributes beneficial to everyday life in society. . We also could remember what others had done to us If you were a liar, a thief, or an asshole, this too was known to all. You couldnt hide it . This became so successful that we see it deployed in every society on Earth. Different tools were used over time, and today the economic system has grown into a complex machine, with trillions of value exchanged annually in handling its complexity. The difference between debt and reputation are the ledgers we created For debt, we created money. Reputation, however, was left back in the stone age. Photo by on Daniel Fazio Unsplash Village Reputation Imagine living in a village of 500 people, in a place where everyone knows you when you walk down the street. because of the proximity and low numbers of people. The characteristics we transcribe upon heros in our novels were revered and pursued because they were . Violators of our communal trust had to work extremely hard to rid themselves of their stigmas. The village had benefits in creating a sense of trust and transparency publicly visible , even without violence …, they would have been social pariahs Their lives would be living hell I imagine this inevitably led to more physical confrontation than we see today, and even murder, and that this also made people less likely to commit some sort of transgression, for fear of retaliation. Or maybe people lived dangerously from day to day. Either way, you couldnt hide your social behavior because you lived in a small social bubble. People didnt need identity cards, didn’t need money, didn’t need anything to prove who they were or what they could contribute. . And they knew it intimately. People around them not only knew who they were, but they also knew their ancestry In a time when personal security was at its lowest, . Progress would be impossible if people could not sleep safe, knowing that their neighbor was an ally. An individual’s vulnerability went hand and hand with the importance placed on maintaining a good reputation. trust in reputation had to be at it’s highest Today we live in cities with millions of people. It’s easy to pass people all day that you’ve never met and never will know. We encounter strangers everyday in our business and treat them all equally (at least I hope we do), despite whatever past they have, because we can’t possibly know it. On the train reading this, you could be sitting next to someone that regularly spends time helping the homeless, or someone that helped get a mortgage approved that shouldn’t have. During the Financial Crisis of 2008, multiple countries had to bail out banks and saw none of them go to jail….except one. Iceland. In this , Ian Welsh brings up . interesting discussion of size and democracy why Iceland’s small size helps deliver justice “Iceland is too small for the bubble to work. Politicians in Iceland could not avoid the Icelanders they would have been impoverishing if they bailed out bankers, and let ordinary people go bankrupt. The people who taught their kids, prepared their food, whom they say on the street every day would be people they had f****’d over. , even without violence (Iceland being a very peaceful society), they would have been social pariahs. Everyone knew them, and given the population size, would recognize them, and in that small a country, would probably eventually see them and be able to treat them as they deserved.” Their lives would be living hell To solve the problem of living in larger and larger cities, we created identification. This technology helped us prove who we were(albeit loosely since all it does is confirm the name matches the face, and even then, its only confirmed on a government issued document that can easily be forged). However, this did not bring with it the value of reputation. The business of counterfeiting currency is well documented, but if done right, counterfeiting reputation can make you millions. Confidence Men Stories There are multiple stories of impressive cons. , pretending to be a Parisian official in charge of selling the “decaying monument” for scrap metal to the highest bidder. Victor Lustig sold the Eiffel tower twice , the inspiration for “Catch Me If You Can”, had over 8 identities, successfully impersonating a pilot, a doctor, and even a U.S. Bureau of Prisons Agent. Frank Abagnale The most recent confidence man that got caught was . By pretending to be the heir to the famous Rockefeller fortune, in his lifetime of reputational scamming. Considering that this was done in modern times, it’s insanely impressive. Christophe Rocancourt, aka the Phony Rockefeller he was able to make over $40 million He wasn’t breaking the law; he was lying and people fell for it . We don’t always hear about these crimes, and when we do, it seems farcical that anyone fell for them. There are also other stories that we don’t think of when we consider reputational infractions. Would Bernie Madoff or Reed Slatkin be able to perform their ponzi schemes if we had better reputation ledgers? , inside the reputation ledger we call prison. Here is a list of 10 more stories How could you not know this person was lying? The only reason we all know not to trust Bernie Madoff anymore is because he’s locked behind bars Prison:Our Current Reputation Ledger The only semblance of a reputation ledger is the penal system; and it’s amazingly limited. When used for background checks, mismatched data gives . Some records don’t accurately depict conviction results and . This system only records crimes, and in most cases, only if they are found guilty. criminal records to the wrong people that have the same name acquittals are rarely updated A system like this does little to promote better reputational dynamics. In the case of the conmen like the Phony Rockefeller, the penal system would never have kept track of his schemes because . There is no crime for not keeping your word and no memory of it beyond your own. he wasn’t breaking the law; he was lying and people fell for it As we move towards an increasingly interconnected system, we will need to have better data for better decision making. and reputation go beyond the criminal. Rewarding the behavior we expect and seek in our interactions can and utilization, because of the golden rule: . The benefits of keeping track of reliability lead to better efficiencies Time is money Photo by on Luca Bravo Unsplash What might the future look like My nephew has a soccer game this weekend. and sends me a smart contract. It calculates the likelihood of me flaking out based on my previous attendance score and suggests I stake $10. my flaking out would represent a rarity. Of course it’s a priority for me to see him play and I sign it. Greg’s nephew sends him a contract that’s set at $200. He doesn’t sign it, but still tells him he’ll try his best to be there on time. . He wants to make sure I attend It’s low because I usually attend; Greg isn’t nearly as reliable or punctual as I am I realize I need to get going for my doctor’s appointment across town and request an Uber. for my drivers, Uber gives me access to the instant response fleet. I’m downstairs right when my driver is arriving. My friend Greg has to wait 5 minutes before finding drivers because , he usually makes the driver wait a few minutes during pickup. Because I’m always on time he has a lower reliability score When I arrive at the doctor’s office, I get to go straight in because . The doctor doesn’t need to put a buffer in for the likelihood I’ll flake and I’m guaranteed instant accommodation for my immaculateattendance. My friend because he habitually cancels his appointments last minute. I’ve always been on time Greg has to prepay $50 per visit Later, I’m interviewing candidates for a new designer position I need for my company. My candidates are and are all on time for their interviews. , and my reputation log shows that past employees have always liked working with me. Greg’s situation is worse; . willing to give me trial work for free I’ve always paid my bills on time he needs to pay upfront for any work requested None of this is publicly accessible information. . The systems we interact with use zero-knowledge proofs to share my scores for different algorithms. and not enjoy the benefits, but the incentives the free market gives me for participating in reputation aggregation far outweigh the perception of privacy I would earn. This is true even for Greg the consistent flaker. No one owns this data I can choose to opt-out Where Blockchain Comes in The Bitcoin blockchain has unlocked the discussion of money all over again. Hopefully it will create a step towards self sovereign wealth. But what about reputation? for that. The “village reputation” model is impossible in today’s globalized world and the . We never created an adequate tool existing reputation models are weak and flawed It seems intuitive that and that violators of our agreed moral codes should have to work harder. But if this tool is needed, why didnt we create it? Some things are made for profit, and . The few background check systems we do have are not big businesses and they are using the same inconsistent prison data mentioned before. And if the system were made, it would suffer from the same problems we see in centralized systems; the cost of failing in reputation management would be too high for any private company to bear and we would always be suspicious of their scoring methods. I should be rewarded by society for a lifetime of integrity a tool like this doesn’t have high profit potential Blockchain is specifically useful here for the issues we mentioned in creating this system. Transparency and decentralization would create the trust required for a system like this to exist. Incentive models would help solve the monetization issue surrounding reputation ledgers. I’d like to leave you with a few questions to ponder: Can a decentralized system be built before it’s centralized counterpart? What value can we apply to reputation? Can a reputational ledger exist without an incentive model? Should we even strive to bring the benefits of the village back? Would you want this? Thank you for reading and I hope you enjoyed this article Feel free to add me on Linkedin , follow my twitter there → , and send me a here @xldean . New article ideas are always appreciated! Telegram

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