Reputation Lockup

The primary objective is to prevent Sybil attacks by requiring a costly, verifiable commitment. By locking capital, users prove their economic stake in the network's success, making it prohibitively expensive to create multiple fake identities for manipulation. This creates a cost for acquiring governance power or reputation scores.

Lockups are typically defined by a duration (e.g., 1-4 years) and an amount. The reputation or voting power granted is often proportional to the product of these two factors (e.g., token amount * lockup time). This aligns long-term incentives, as users who commit for longer periods gain greater influence.

Locked assets are not freely tradable. They are often subject to:

• Vesting Schedules: Reputation or rewards accrue and unlock linearly over time.
• Slashing Conditions: Malicious or non-participatory behavior can result in a penalty, where a portion of the locked assets is forfeited. This enforces good actor behavior.

A core feature is converting locked capital into enhanced voting power. Protocols like Curve Finance (veCRV model) and Balancer (veBAL) use this to grant boosted rewards and multiplied voting weight to long-term lockers, ensuring governance is controlled by the most committed participants.

Real-world implementations demonstrate the model's utility:

• Curve Finance: Lock CRV to receive veCRV, which controls gauge weights for liquidity mining rewards.
• Frax Finance: Lock FXS for veFXS to govern the protocol's monetary policy and revenue distribution.
• Gitcoin Grants: Early rounds used token lockups to weight community voting for quadratic funding.

The ultimate goal is to solve the principal-agent problem in decentralized governance. By requiring skin in the game, the protocol ensures that decision-makers are those most impacted by long-term outcomes, reducing short-term speculative governance and promoting sustainable development.

A reputation lockup prevents Sybil attacks by requiring a user to stake their accumulated reputation points. This makes it economically irrational to create multiple fake identities, as the attacker's valuable, hard-earned reputation is at risk of being slashed for malicious behavior. It transforms reputation from a simple metric into a bonded asset that aligns incentives.

Locking reputation is commonly used to grant voting power in decentralized governance. The amount of locked reputation often determines a user's voting weight, ensuring that participants with more skin in the game have greater influence. This design aims to promote long-term, thoughtful decision-making over short-term speculation.

The primary risk of a lockup is slashing, where a portion of the locked reputation is permanently burned. Conditions triggering slashing are protocol-defined and may include:

• Voting against the majority or a malicious proposal
• Providing false data to an oracle
• Engaging in protocol-exploitative arbitrage This penalty enforces accountability but must be carefully calibrated to avoid excessive centralization of power.

Designing the lockup period involves a key trade-off. A longer lockup period (e.g., 30-90 days) enhances security and commitment but reduces liquidity and flexibility for users. Protocols often implement an unbonding period, a delay after initiating an unlock, during which reputation is still locked and slashable, preventing last-minute malicious acts before exit.

A critical design tension exists between security and decentralization. While lockups secure the system, they can also centralize power among early adopters or wealthy users who can afford to lock large reputations. Protocols must balance this with mechanisms like quadratic voting or time-locked boosts to encourage broader, more equitable participation.

Reputation lockups are increasingly integrated with other DeFi mechanisms. For example, locked reputation can be used as collateral for under-collateralized loans or to access premium vaults with higher yields. This creates a reputation-based financial layer, but also introduces new systemic risks if the reputation oracle or slashing logic is compromised.

A foundational DeFi mechanism where tokens are temporarily immobilized in a smart contract. This is distinct from reputation lockup, which freezes a non-transferable score. Common purposes include:

• Vesting schedules for team tokens.
• Staking to secure a Proof-of-Stake network.
• Providing liquidity in yield farming pools.

A mathematical curve that defines the relationship between a token's price and its supply. Users "bond" or lock capital to mint new tokens. This creates a form of commitment capital, analogous to how a reputation lockup requires a user to commit their standing to participate, establishing skin-in-the-game.

Non-transferable NFTs that represent credentials, affiliations, or achievements. They are a key primitive for constructing on-chain reputation. A reputation lockup often applies to a portfolio of SBTs or a composite score derived from them, preventing users from gaming systems by temporarily freezing these attestations.

The defense against Sybil attacks, where one entity creates many fake identities to gain undue influence. Reputation lockup is a direct Sybil-resistance mechanism. By requiring a user's established reputation to be locked and unusable elsewhere, it drastically increases the cost of attacking governance or access-gated systems.

A core design challenge in reputation systems. Locking reputation increases user commitment but reduces the liquidity and flexibility of that social capital. Protocols must balance lockup duration and penalties to deter bad actors without discouraging legitimate participation from reputable users.

A punitive mechanism where a portion of a user's staked assets or locked value is confiscated for malicious or faulty behavior. In a reputation lockup context, slashing could involve reducing a locked reputation score or imposing a cooldown period for violations of protocol rules, aligning incentives with honest participation.