Web3 — Building trust in ‘trustless’ communities

Actions speak louder than words in building member, community or brand reputation

While the definition of trustless is “not deserving of trust,” in web3 it means something completely different. Trustlessness in the blockchain and crypto space simply means you do not need to place your sole trust in strangers, institutions or third parties in order for a network or marketplace to function. Instead, trustless crypto systems rely on encrypted code and smart contracts to work and achieve (machine and/or social) consensus.

“Trust is the glue of life. It’s the most essential ingredient in effective communication. It’s the foundational principle that holds all relationships.” — Stephen Covey

Establishing trust between members is one of the foundational pillars of communities and critical to their successful scaling and vibrancy. Member and community trust is not a static concept, but grows over time as a result of accumulated experiences and interactions, and requires constant nurturing by repeatedly demonstrating, rather than stating, one’s values and qualities. Web3 communities and DAOs rely on ‘trustless’ principles in order to optimise for authentic and meaningful connections. The underlying protocols that steer community governance and member reputation are encoded on the blockchain in smart contracts.

Trust builds on reputation and identity. In a web3 world, one’s identity is a combination of on-chain and off-chain credentials. As in the ‘real world’, identity and reputation are made up of both assigned as well as perceived attributes. Unique identifiers and validated credentials authenticate one’s online identity, while one’s actions, affinities and connections contribute to how he/she gets perceived by peers and the community. In web2, identity and reputation is ‘rented’. It is not owned by the user, but instead is controlled by any platform’s proprietary identity and reputation models. Hence, it’s not portable or transferable. The identity you’ve built and the reputation you’ve earned is largely lost once you decide to leave a web2 platform.

In web3, your identity becomes sovereign. You become the sole owner of your identity and associated credentials, autonomously controlling how you present yourself and what you expose to whom. As such, your on-chain identity becomes both composable and portable as a flexible passport to unlock access and experiences in the ever expanding metaverse. The blockchain will function as a personal ledger of time and archive of credentials, aggregating your on-chain contribution history, interactions and transactions, as well as all relevant off-chain credentials. Instead of relying on manufactured or self-declared identities, the immutable and censorship-free nature of the blockchain will provide a privately controlled, but publicly accessible record of one’s identity, credentials and reputation.

In addition, web3’s trustless foundations are optimised to work with pseudonymous identities, attributing transactions to users without requiring them to identify themselves. Pseudonymity refers to the use of a chosen ‘fake’ name, allowing users to be identified to some degree but within parameters that they can control and without having to give up their legal names or full identities. Fake does not imply being inauthentic. Pseudonymous users can still establish meaningful relationships, build reputations, and cultivate trust. But they do so on terms that they set themselves. Pseudonymity also allows users to take on separate identities to fit the fluid and multi-faceted nature of our social and professional connections. The fragmented pseudonymous profiles we invest in become portraits of ourselves and the context we participate in; each separately branded identity tells people what to expect and how to interact. Together with decentralised identifiers (DID), they allow us to expose crypto verified credentials and to interact based on zero-knowledge proof (ZKP), validating accuracy & reliability of stated credentials or identifiers without revealing underlying details or our full identity.

Whereas meatspace requires you to be linked to a central identity, in the metaverse we can be known in some communities and unknown in others. We now have a choice of contextual masks, allowing us to transform while we teleport from one Discord server to another. Our Decentralized Selves: Creating in a Post-Identity Future — ZORA ZINE

Whereas web3 adds some level of portability and transferability, one’s reputation is comprised of fragmented units of contribution across multiple platforms, communities and projects. As such, reputation remains highly contextual and community specific. Community reputation is a reflection of proof-of-skin, a social consensus mechanism that recognises any form of skin in the game and meaningful contribution to a given community or project, and that rewards participants for doing so. Reputation scoring and rewards in web3 communities typically rely on a two-token reputation system, whereby one token (aka reputation points) serves as a non-transferable reputation signal to recognise ongoing member contributions. A second token (aka community coin or token) is a transferable liquid asset rewarded to holders of points on a regular basis. To maintain incentives for ongoing contributions and engagement, reputations points depreciate or expire over time, while reward coins are permanently vested. In short, reputation tokens are non-fungible, non-transferable, and ‘burnable’. What’s important is that reputation can’t be bought but earned, based on how much value (impact > activity > presence) you’re creating for the community.

By serving as a virtual and community bespoke currency, reputation tokens represent a great way to measure skin-in-the-game and involvement in a community and are a great way to quantify social reputation; they offer a lot of granularity in how we quantify and measure experience, reputation, and achievements online. https://eliotc.substack.com/p/the-future-of-reputation-score-will

Reputation is a multi-way street. Members accrue reputation from interacting with one another. Communities build reputation through the overall quality of member reputations, as well as strong community management. Reputable communities will be admired for their consistency in purpose, clarity in communications, competency in capabilities and resources, and for their caring and inclusive culture.

Brand and creator reputation will be reinforced by the collective agency of fans and by the symbiotic relationship they form with their communities. They need to lead by example, set the tone, be authentic and get personal. To drive a positive-sum game, not only will brands and creators need to actively engage their community, but also recognise and reward their members for the value they contribute. The more brand and creators transition to a community-first culture, they more reputation and trust ends up being a shared quality and responsibility.

As a result, web3’s ownership economy becomes as much of a credential economy: sharing access and ownership based on earned reputation within a community context of mutuality and agency. However, there is still a long way to go until we get there. Reputation still plays a minor role in obtaining access to opportunities, with most of it still gated by one’s wallet value and ability to get in early. And there are gaps at the infrastructure layer to enable fully decentralised and privately controlled identities. But increasingly, web3 opens up to the promise of universal basic equity, providing anyone with a level playing field to build up their reputation and strengthen their credentials, purely on the merits of their contributions. In a future where crypto wallets will store all of our credentials and possessions, they will hold the keys to our sovereign, yet pseudonymous identity, and serve as our reputation vault to unlock access to experiences and wealth in the new pseudonymous ownership and credential economy.

“Show me your wallet and I will tell you who you are”

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