Why On-Chain Reputation Must Be Separable from Identity

Tying reputation to a public identity (e.g., an Ethereum address) makes it a target for exploitation. Attackers can probe and drain value from high-reputation accounts or manipulate governance.

• Sybil-resistance is not Sybil-proof: Systems like Proof-of-Humanity or BrightID verify identity but create a single, hackable target.
• Reputation becomes a liability: A wallet with a 5-year history is a honeypot for phishing, extortion, and social engineering attacks.

Reputation siloed to a single chain or protocol is worthless for the multi-chain future. Users cannot leverage their DeFi history from Ethereum when using a new app on Solana or Arbitrum.

• Fragmented user graphs: Projects like Lens Protocol attempt social graphs but remain chain-bound.
• Kills innovation: A new lending protocol cannot underwrite based on a user's proven Aave or Compound history, forcing them back to over-collateralization.

Full transparency destroys utility. No individual or institution will expose their complete financial history and relationships for a marginal yield boost.

• Zero privacy for maximalists: Projects like Aztec or Zcash provide transaction privacy but completely anonymize, destroying reputation.
• The enterprise barrier: Institutional adoption is impossible if every trade, partnership, and treasury move is a public signal for front-running.

The fix is to separate the proof of reputation from the underlying data. Use ZK proofs to attest to a property (e.g., "credit score > 700") without revealing the score or identity.

• Selective disclosure: Protocols like Sismo and Clique issue ZK badges for on-chain actions. Users prove they hold a badge without linking wallets.
• Composable privacy: A user can prove a history of successful loan repayments across five chains to a new lender, revealing nothing else.

Reputation should be a transferable, non-fungible asset. Allow users to delegate their reputation score to a fresh burner wallet for specific, time-bound interactions.

• Burner wallet utility: Use a high-reputation main wallet to vouch for a disposable wallet for a single governance vote or OTC trade.
• Risk containment: If the burner is compromised, the core reputation asset in the main wallet is untouched and can be revoked.

Adopt the W3C Verifiable Credentials standard off-chain, anchored on-chain. This creates portable, context-specific reputations that are user-held.

• User-centric model: Unlike a protocol's internal score, a VC is owned by the user. They choose when and where to present it.
• Real-world bridge: A credit score from Experian or a professional license can be issued as a VC and used trust-minimized in DeFi, via oracles like Chainlink.
• Revocable & updatable: Issuers can update status without exposing the user's entire transaction graph.

EigenLayer abstracts node operator reputation from their validator identity, allowing it to be ported across AVSs (Actively Validated Services). This creates a reusable trust marketplace.

• Key Benefit: Operators with high slashing-avoidance history command premium yields across multiple protocols.
• Key Benefit: New AVSs bootstrap security instantly by leasing established reputation, avoiding the cold-start problem.

Protocols like Ethereum Name Service (ENS) and LayerZero spent millions sybil-hunting for airdrops, punishing users for privacy (e.g., new addresses). This conflates identity with contribution.

• Key Benefit: Separable reputation (e.g., proof-of-participation NFTs) allows anonymous yet provable contribution history.
• Key Benefit: Enables retroactive funding models (like Optimism's RPGF) to reward behavior, not wallet clustering.

These protocols issue verifiable credentials (VCs) for on/off-chain actions (Gitcoin donations, GitHub commits) that are separate from your wallet. Reputation becomes a composable asset.

• Key Benefit: Users aggregate proofs (ZK badges) to access services without doxxing their main identity.
• Key Benefit: Protocols can set granular, interoperable policy (e.g., "needs 3+ governance badges") without vendor lock-in.

Farcaster's Frames and ERC-7281 (xERC20) conceptualize reputation as a soulbound token that can be burned to signal exit. This aligns incentives without permanent identity linkage.

• Key Benefit: Users can "cash out" reputation for one-time benefits (e.g., premium access), resetting their trust score.
• Key Benefit: Prevents reputation ossification and allows for graceful degradation of influence, unlike permanent social graphs.

Maker's new constitution issues non-transferable Reputation Tokens to governance participants, separate from MKR holdings. Power is earned via contribution, not just capital.

• Key Benefit: Decouples governance influence from financial speculation, reducing plutocratic capture.
• Key Benefit: Creates a meritocratic layer where expertise in specific SubDAOs (e.g., RWA) is recognized and portable within the ecosystem.

Separable reputation is the missing primitive for under-collateralized lending (like Goldfinch) and sybil-resistant social feeds. It turns subjective trust into objective, composable capital.

• Key Benefit: Enables creditworthiness based on on-chain history without KYC, unlocking trillions in latent credit markets.
• Key Benefit: Social platforms (e.g., Farcaster, Lens) can filter spam algorithmically using proof-of-personhood and contribution graphs, not just token holdings.

Immutable, fused reputation creates unforgiving systems where a single mistake or malicious act permanently taints an address. This stifles user growth and creates perverse incentives for Sybil attacks, as users are forced to burn identities rather than rebuild trust.

• Chilling Effect: Deters experimentation and legitimate use for fear of permanent record.
• Sybil Proliferation: Forces users to generate new wallets, fragmenting their own history and network.
• Governance Capture: Early adopters or attackers can cement permanent, unassailable influence.

When reputation is your identity, any meaningful participation requires full pseudonymity sacrifice. This exposes users to physical, financial, and social risks, creating a massive adoption barrier for both individuals and institutions.

• DeFi Leakage: High-value positions linked to a public reputation become prime targets for exploits and extortion.
• Regulatory Overreach: Fused systems enable perfect compliance surveillance, threatening censorship-resistant design principles.
• Social Fragmentation: Reputation becomes a tool for exclusion based on off-chain attributes or associations.

Fused systems create walled gardens of trust that cannot interoperate. Reputation from Aave governance cannot inform a lending decision on Compound, forcing protocols to reinvent the wheel and users to rebuild credibility from zero on each chain and application.

• Fragmented Capital Efficiency: Collateral and creditworthiness are not portable across the stack.
• Protocol Risk: Each system's reputation oracle becomes a central point of failure.
• Stifled Innovation: New applications cannot bootstrap trust from existing, proven user graphs.

Reputation scoring inherently requires an oracle to interpret on-chain actions. A fused system centralizes this truth-defining power, creating a single point of manipulation, corruption, or failure. This contradicts the decentralized ethos and introduces regulatory attack surfaces.

• Censorship Vector: A compromised or coerced oracle can unilaterally blacklist any identity.
• Manipulable Metrics: Actors can game specific, known scoring algorithms (e.g., Galxe, RabbitHole).
• Legal Liability: The oracle operator becomes the legally accountable "issuer" of reputation.

In fused systems, valuable reputation (e.g., a Curve veCRV lock) is also a liquid financial asset. This creates a fundamental conflict where the incentive to sell for profit directly undermines the governance legitimacy the reputation was meant to signal.

• Meritocracy Erosion: Governance power is for sale to the highest bidder, not the most aligned.
• Short-Termism: Holders are incentivized to monetize reputation during hype cycles, not steward long-term.
• Vampire Attack Amplification: New protocols can directly purchase the governance influence of incumbents.

Permanent, fused reputation punishes early adopters who experiment with novel or risky protocols. If a protocol fails or is deemed "toxic," its users are permanently marked, disincentivizing the frontier exploration that drives the ecosystem forward.

• Risk Aversion: Users wait for social consensus before interacting, slowing adoption of genuine innovation.
• Association Stigma: Participation in a hacked or controversial protocol (e.g., Tornado Cash) becomes a scarlet letter.
• Developer Friction: Builders must consider the permanent reputation impact of their beta products on users.

Current identity solutions like Proof-of-Personhood (Worldcoin) treat identity as a binary, non-transferable credential. This fails to capture nuanced reputation and creates massive inefficiency.

• Sybil farming drains ~30%+ of airdrop value from legitimate users.
• One-person-one-vote models in DAOs are easily gamed, delegitimizing governance.
• Reputation is locked to a single identity, preventing its use as a composable asset.

Treat on-chain reputation (e.g., governance power, credit scores, airdrop eligibility) as an SFT (Semi-Fungible Token) or soulbound token that can be delegated or rented.

• Enables reputation markets where experts can rent voting power without selling keys.
• Allows reputation bundling for undercollateralized lending (see Goldfinch, Maple).
• Creates a liquid layer for trust, separating it from the fixed identity layer (Ethereum Attestation Service).

The infrastructure opportunity isn't in verifying humans—it's in creating the reputation graph. This is the missing data layer for DeFi and SocialFi.

• Projects like Spectral, ARCx, and Cred Protocol are building credit scores, but lack a universal graph.
• The killer app is a reputation oracle that protocols like Aave, Compound, and Uniswap can query for risk and reward calculations.
• This creates a positive-sum ecosystem where reputation accrues value across applications, not just within one protocol.

Invest in the infrastructure that enables reputation to flow. The winners will be protocols that standardize attestations and make the graph queryable.

• Ethereum Attestation Service (EAS) and Verax are early primitives for issuing attestations.
• The indexing layer (like The Graph for reputation) is a massive white space.
• Avoid verticalized apps that silo reputation; bet on horizontal, permissionless base layers.