Why Your On-Chain Reputation is a Liability, Not an Asset

Immutable transaction history creates a permanent, public ledger for extortion and targeted attacks. Once a high-value address is doxxed, it becomes a permanent target for phishing, social engineering, and physical threats. This is the antithesis of privacy-first finance.

• All past interactions are forever linked to your identity.
• Sybil resistance fails when attackers can simply target the high-value, known entity.
• Protocols like Tornado Cash are band-aids, not solutions, for this core data permanence flaw.

A static reputation score cannot capture growth, context, or rehabilitation. A single failed venture or exploited protocol permanently taints associated addresses, locking out capital and talent from new opportunities. This creates a brittle, unforgiving ecosystem.

• Early mistakes are forever penalized, stifling experimentation.
• Cross-chain or cross-protocol activity fragments reputation, preventing a holistic view.
• Systems like Gitcoin Passport attempt aggregation but still rely on immutable underlying data points.

The future is disposable, time-bound reputation proofs. Instead of a permanent ledger, systems should issue verifiable, expiring attestations for specific contexts (e.g., "qualified for Protocol X's round 12"). This resets the attack surface and allows for reputation evolution.

• Ethereum Attestation Service (EAS) and Verax provide the primitive for revocable, contextual stamps.
• Reputation burns after a set period or event, forcing continuous re-proving of worth.
• Shifts power from permanent surveillance to continuous, consensual verification.

Every transaction, from a failed DeFi yield farm to a politically-sensitive donation, is a permanent, linkable record. This creates systemic risks:\n- Doxxing & Extortion: A single on-chain link can deanonymize a $10M+ portfolio.\n- Censorship Vectors: Protocols like Aave or Compound can blacklist addresses based on history.\n- Reputation Lock-In: Bad actors (e.g., Tornado Cash users) are permanently tainted, blocking access to mainstream DeFi.

Prove a property (e.g., "KYC'd", "Holder of X NFT") without revealing the source. This shifts the paradigm from identity disclosure to credential verification.\n- Selective Disclosure: Use a zk-SNARK from Sismo or Worldcoin to prove you're human, not which human.\n- Portable Reputation: Build trust across chains/apps without a centralized registry.\n- Break Linkability: A credential for Uniswap governance is cryptographically separate from one for Aave borrowing.

Vitalik's Soulbound Token concept, as implemented, creates non-transferable, permanent records. This is a feature, not a bug, until it's used against you.\n- Unforgivable Debt: A defaulted credit-SBT from a protocol like Credix could permanently block future credit.\n- Social Scoring: Projects like Gitcoin Passport could evolve into mandatory, non-erasable social scores.\n- No Right to Be Forgotten: Mistakes are etched on-chain, contradicting GDPR and basic privacy norms.

Credentials must have built-in expiration and user-centric revocation. This mirrors real-world credentials (e.g., a driver's license) that can be renewed or revoked.\n- Time-Bound Trust: An attestation from EAS (Ethereum Attestation Service) can auto-expire after 1 year.\n- User-Controlled Revocation: Burn a credential's validity key to instantly invalidate it, breaking the SBT permanence trap.\n- Context-Specific: A work credential on Orange Protocol doesn't leak into your personal financial identity.

Proving "uniqueness" (1-person-1-vote) currently requires sacrificing anonymity. Solutions like Proof of Humanity or BrightID create centralized biometric databases.\n- Biometric Centralization: Worldcoin's orb creates a single point of failure for ~5M+ iris hashes.\n- Correlation Attacks: Using the same proof across Gitcoin Grants, Optimism Governance, and Apecoin DAO creates a super-profile.\n- Exclusion: Fails for users without specific hardware or in censored regions.

Use advanced cryptography like CL-signatures or device-level biometrics to prove uniqueness without a central database.\n- Device-Bound Uniqueness: A Secure Enclave or TPM can vouch for a single user without revealing who.\n- Decentralized Attesters: A network of Iden3 issuers provides redundancy, avoiding Worldcoin-style centralization.\n- Privacy-Preserving Aggregation: Protocols like Semaphore allow you to prove you're a unique member of a group without revealing your identity.

Your protocol's governance is a target. Sybil attackers with cheap, fragmented on-chain identities can outvote legitimate stakeholders, as seen in early DAO exploits. Reputation systems that rely on simple token holdings or transaction volume are trivial to game.

• Attack Cost: Often <$1k to manipulate votes
• Defense: Requires proof-of-personhood or soulbound tokens

Transparency creates a honeypot. A rich, persistent on-chain history makes you a prime target for targeted phishing, wallet-draining scams, and physical-world extortion. Your DeFi yield farming success is a public ledger for adversaries.

• Data Leak: Full financial history exposed
• Solution: Mandatory use of privacy-preserving primitives like zk-proofs or Tornado Cash-like mixers

Your reputation is not yours. When you connect your wallet to a new dApp, you're not just signing a transaction—you're exposing your entire transaction graph. Protocols like Uniswap, Aave, and Compound become data oracles for your risk profile, leading to unfair collateral calls or denied access.

• Vector: One dApp's data poisons another's logic
• Mitigation: Modular reputation with explicit, revocable attestations (e.g., EAS, Verax)

Your past is used against you. Lending protocols like Aave and Compound use on-chain history for underwriting, creating a permanent record of failures. A single liquidation from a Black Swan event (e.g., UST depeg) can permanently degrade your creditworthiness across all integrated protocols.

• Punishment: Historical data creates unforgiving legacy debt
• Fix: Time-decayed reputation or context-specific scoring

Account abstraction democratizes attacks. Paymasters and bundlers in the ERC-4337 standard can sponsor transactions for users, masking malicious intent. A "good" reputation wallet can be a front for a paymaster-funded attack, bypassing traditional gas-based spam filters.

• New Vector: Reputation laundering via sponsored gas
• Requirement: Bundler-level reputation scoring and staked paymasters

The only sustainable fix is cryptographic proof, not data. Builders must design systems where users prove desirable traits (e.g., "I am not a Sybil", "I have >$10k net worth") without revealing the underlying data. This is the core promise of zk-proofs and projects like Sismo, Worldcoin, and Aztec.

• Shift: From data exposure to proof of property
• Outcome: Portable privacy and un-gameable systems