Force Insights| Why Reputation-Based Systems is important to the DAO?
(The picture comes from Dodocodes.com)
One of the earliest words describing DAO appeared in Vitalik Buterin’s 2013 Ethereum white paper. In April 2016, The DAO was born. This project was hoped to become a venture fund for the Ethereum community and manage it decentralised. Community members jointly invest in DAO and vote on other community behaviour.
In 2021, various types of DAO have been established, but the core reasons for their establishment are the following: Ease of capital formation, Shared upside, and Transparency.
As we know, DAO is one of the easiest ways to pool funds managed by a group. It is much simpler and cheaper than setting up a traditional investment company.
Since the DAO is built on a public blockchain, it can run cross-border funds with collaborative functions.
In the past few months, DAO has raised funds to collect NFTs, build software, create social clubs, produce music & art, promote carbon removal, etc., on a global scale. In addition to just building in public places, DAOs can also communicate, join, trade, and govern in public places. It helps produce meaningful and different interactions and behaviours.
To understand how to play the actual value of DAO, four stages are as follows: Summoning Adventure, Ownership distribution, Governance, and the Incentives & rewards.
Whether it is a “token weighted voting” decision-making or the distribution of tokens, the reputation system will become the decision-making standard in the DAO and Web 3.0 communities.
It recognizes and encourages high-quality contributions from participants, including content creation, review, community building, and gameplay. However, this model has inherent flaws and unfairness, and a complete reputation system is needed to create a fairer DAO project.
For example, the higher the value and liquidity of the tokens obtained in the community as the reward , the worse the effect as a pure reputation signal. To illustrate this point, if tokens are used as credible signals of reputation quality, their transaction value will be very high.
However, once the tokens are traded, we cannot distinguish whether a community member has obtained tokens because of a good reputation or only obtained through trading. So It is an apparent loophole in the reputation system in this situation.
The current reputation system has helped DAO achieve community governance and incentives, such as identifying and rewarding users who value the platform.
They can use this method to enhance the public reputation and enable contributors to convert some of the value they create into convertible currencies.
Although the reputation system still poses specific challenges in DAO, it will still promote decentralized autonomous communities to bring enormous opportunities for the next Internet.
