In a world dominated by government regulations, every aspect of life has an agency assigned to watch over its continuing success. Theft, fraud, and bankruptcy are all dealt with through the appropriate criminal and civil courts.

Food and workplace safety have their respective permits and bureaucratic agencies watching over them, and the violent, substance abusers, and the criminally negligent have a court system to contend with.

However, such antiquated structures still leave much to be desired, as they can imprison the innocent, neglect the guilty, and miss important information that is highly pertinent to safety. In short, legal structures, and their regulatory bodies, leave much to be desired in safeguarding a populace from harm.

Word of mouth reigns supreme in the non-governmental world

However, in certain areas, the legal systems provided are either undesirable, or inapplicable, to a degree where the local community finds alternative methods of maintaining the social order and protecting against undesirables.

The method? Word of mouth, tried and true, as old as human communication. Without a system in place to judge an individual’s trustworthiness, the community decides this through a distributed network of orally-transmitted bits of information who is safe to do business with and who is not.

“That guy’s bad news, don’t give him your money” gets passed around, and those with similar experiences verify the reputation, while “Oh no she’s solid, she worked with my cousin and did a great job” calms one’s uneasiness when forming a new business relationship.

The more corroborations each story gets, especially by trusted community members, the more solidly they remain in place, while gossip by the local town hater is unlikely to be taken seriously.

A simple blockchain reputation system

Building a reputation system facilitated by a public distributed ledger would be possible using a simple, Bitcoin-like solution. The system would allow community members to log “reputation points” on the records of their friends and neighbors. Each such transaction would require other community members to sign on, or “confirm,” and would consist simply of a written log of the claim.

That way, anyone seeking to do business with a yet-untested community member would simply view that member’s public record (as well as the public record of each person logging reputation entries or confirming them) and make a judgment call as to whether or not that person is trustworthy.

A more involved blockchain reputation system

If such a reputation system arises via blockchain, it will likely be more complicated than the example presented above. While there’s no telling what that system will look like, here is a hypothetical example of one possibility.

The community would be issued tokens, able to be expended to leave either positive or negative reviews, as well as backing reviews left by another community member. Tokens would multiply over time at a rate consistent with the member’s total score (with a score far enough into the net negatives not generating any new tokens) and only if the member leaves at least 50% positive reviews.

Each review would affect a member’s total score, but would be linked to the reviewer’s score in two ways: the reviewer with a higher score would carry more impact, and the community support behind that review would affect the reviewer’s score.

Therefore, a respected member’s review will carry more weight, but even the aforementioned respected one can lose their good score by taking a stand not supported by the community.

The requirement for a net positive in reviews ensures that the community does not devolve into petty negativity and marginalizes perpetual haters. Employing a score system reflects that members who have earned a good reputation will be much more likely to have their opinions respected, while staking that score to community approval of reviews allows members to literally risk their reputation.

This allows the respected to fall from grace when deserved, and the marginalized to rise in respect when presenting valued information to the community. A score low enough to stop generating new tokens represents complete ostracism.

While a form of blockchain-based reputation system can help a community to operate smoothly, it can by no means overcome its inherent human element. A tool is only as effective as its user, and even the best reputation system in the hands of bad people will not ultimately be effective.

Still, for communities that live and die off the distributed network of their members’ shared knowledge, a digital enhancement of traditional word-of-mouth can help maintain societal harmony.