How the Dether reputation system works

Trust in a trustless system

When we talk about ratings and reputation systems, we often think about disgruntled diners on Yelp, or five-star Uber drivers who get you where you need to be on-time. On an individual level, these systems are essential for peer-to-peer business activities, as they allow individuals to establish a reputation to gain trust with potential clients.

But rating a restaurant server on their friendliness, or a driver on their punctuality is much different from rating the trustworthiness of a user with whom you’re going to carry-out a cryptocurrency exchange — especially in a trustless, decentralized system.

Because the idea of trust is a subjective concept, a reputation system should comprise multiple, in-context factors, not just the idea of a positive or negative exchange experience.

Why does Dether need a reputation system?

Having a reputation system when peers interact with each other is important. It becomes crucial when people actually meet in person in order to exchange someting of value. The real challenge behind a reputation system in a decentralized world is to make it as trustless as possible, while still basing it on people’s opinions.

The best way to understand Dether’s need for a reputation system is to take an example of a trade on Dether.

A trade example on Dether: Denis and Nadia

Denis has been interested in crypto for two years and he travels a lot due to his job. Every time he travels to a new country, he always comes back with a lot of souvenirs and gifts for his relatives back in France. Next month, he’s travelling to Algeria for six weeks, and he’ll have to exchange Euros for the national currency, the Algerian dinar. As the fees taken by the foreign currency exchanges have been rising the past six months, he would like to trade some ether for Algerian dinars.

When he lands at the Houari Boumédiène Airport in the Algerian capital, Alger, he goes on Dether to trade ether for Algerian dinars.

Denis creates a Dether Wallet (D-Wallet) within seconds and transfers 2.5 ethers to it

He discovers ether buyers near him on the Dether map. He quickly sees that Nadia is also currently located at the airport, and that she would like to trade the sufficient amount of dinars that Denis needs for ether. None of them have access to each other’s personal data. Pseudonyms and avatars are being shown on the Dether app.

Denis and Nadia chat anonymously together in order the agree on a price and a safe meeting point at the airport. They decide to trade 2.5 ethers for Algerian dinars with a 3% profit rate that goes to Denis.

As Denis has saved 2.5 ethers in his D-Wallet, Nadia can verify that he has it before he meets up with Nadia in front the coffee shop at Gate 3.

When they meet, Denis scans Nadia’s wallet QR Code to transfer the 2.5 ethers to her wallet, and Nadia gives the cash to Denis.

When the trade is done, a pop-up displays on both of their phones that allows them to evaluate the transaction.

As it went well for both of them, they both get a better personal rating on their profile on the Dether map that will help them for their next trade.

How does Dether’s reputation system work?

Dether reputation system is based on three elements:

The number of transactions and volume of ether bought/sold on the app by the user

The KYC (Know Your Customer) process

The comments left by another user regarding the transaction

These three pieces of information assist buyers in decision-making, allowing Dether to distinguish between all of the tellers displayed on Dether Map.

The volume a user generates as a seller or buyer over an account history will play a role in his or her reputation. Frequent transactions over a long period of time will improve trustworthiness, as opposed to one or two large transactions.

A user’s real-life identity will also be a factor. The early stages of the project will rely on centralised KYC, but the Dether aims to fully support decentralized solutions, like uPort, in the long term.

After valid transactions, buyers and sellers may leave reviews for each other. Dether will store the actual reviews on IPFS and anchor them to on-chain smart contracts for lookup and authentication.

What if fraud conspirators attempt to carry-out frequent, high-volume trades to increase reputation and loyalty point generation? Dether plans to add weighted factors to decrease the reputation point between two addresses trading together multiple times and empower the community with abilities to report and arbitrate.

With these factors in place, we intend to deter malicious sellers who are intent on ripping off or stealing buyers.

Towards a decentralized trading escrow system

In order to facilitate peer-to-peer transactions, Dether aims at integrating a decentralized trading escrow system.

This system will enable buyers and sellers to digitally trade online with the security that buyers are receiving the cryptocurrency they bought and that the seller gets paid in fiat currency. Although Dether aims at giving power back to the unbanked, we will also want give the opportunity to those who have account to digitally buy and sell crypto in a peer-to-peer and decentralized manner while stile staying at home.

Dether will integrate various online methods of payments, such as PayPal or bank deposits, to facilitate peer-to-peer transactions from fiat currency to cryptocurrency, without having to meet the seller or the buyer. Decentralized courts like Aragon or Kleros will be added to Dether, playing the role of a trusted third party in charge of securing the transaction.