Impacts of reputation in corporate, professional and social contexts - Shrey Jain

On-chain reputation can heighten traditional reputation mechanisms through the verifiability, immutability, and permanence features that come with it. This article examines the social arenas on-chain reputation may plausibly be important within: corporate; individual social; or individual professional. In each case, we comment on the affordances that on-chain reputation yields by showing the changes we can expect to see in our relationships and the future of work.

Reputation types

Reputation is an opinion about an entity (individual or organization) typically as a result of social evaluation on a set of criteria, such as behavior or performance. Reputation has the ability to influence relationships, markets, organizations, institutions, and communities at different scales [Reputation as Social Control in Present China]. With the advent of the internet, the ability to showcase professional and social reputation to a widespread audience has increased dramatically.

Off-chain reputation (reputation that is not stored on the blockchain) is dependent on institutions and individual people housing information which has led to an incredible amount of mis/disinformation. Off-chain reputation increases the amount of trust that we put on other actors. These challenges and problems have made a compelling case to explore the utility of on-chain reputation.

The work being done to make on-chain reputation a reality is vast [On-Chain Identity Landscape]. The categories of on-chain reputation to date have been broken down into: endorsement; ownership; governance; bounties; data rails; proof of humanity; profiles; and aggregators. In this article, we focus on the key stakeholders that will be impacted by the outcomes of on-chain reputation systems. We find these three key stakeholders to be: individual professional reputation; corporate reputation; and individual social reputation.

Reputation in Web3 protocol design

In general, the attention given to social symbolism and prestige related aspects of individual strategizing is far less than the traditional mechanisms of analysis that depend on treating individuals as strategic decision makers and tractable measures of costs and outcomes. The latter method is a popularized way of designing Web3 protocols whereby users are treated as rational agents who compete non-cooperatively. We argue that we need to be indexing more heavily on the use of signally theory in Web3 protocol design.

Signal theory provides a way to articulate idealist notions of the intangible social benefits that may be gained through symbolic representations of self with more materialist notions of individuals as self-interested but socially embedded decision makers [Signaling Theory, Strategic Interaction, and Symbolic Capital]. We provide examples of where signal theory, as it relates to on-chain reputation, can change the way we think about existing protocol design in the decentralized finance (DeFi) and decentralized governance (DAOs) settings.

Individual Professional Reputation

Current professional identities, in the form of resumes, personal websites, and LinkedIn, still cause recruiting teams to spend on average 49 days to interview a candidate and spend on average $25k per technical hire.

Why does it take so long and so much money to hire currently? Is it because we have a lack of trust in the information presented to us? If we had all the information that is submitted via an application (resumes, personal websites, essay questions) verified, publicly viewable, immutable, and permanent, can we expect a radical change in the way people hire and the quality of teams that are built?

Upon speaking to various recruiters in both Web2 and Web3 ecosystems, we found that on-chain professional reputation is unlikely to change behavior in the hiring process. The fundamental problem with hiring today in the technical space is not trust, but rather the workforce itself.

The climate of venture capital today has motivated many technically competent people to become founders. The volume of funding into early-stage venture projects is incredible. If all the best builders are starting teams, there is a deficit in the number of people who want to work for teams today. Thus, causing the core problem many recruiters are facing today: there is a lack of talented Web3 engineers.

In an attempt to recruit for multiple Web3 teams today, we found the following trends with Web3 recruitment:

The best technical talent does not need to natively understand Web3 tech stacks. Being a strong Web2 engineer does translate well to Web3. Web3 teams favor hiring experience in Web2 over less talent but understanding Web3 tech stacks.
The best hires came from “day one” talent. These are the people who are lurking in Discord channels initially, start to do some work for the DAOs (writing content, submitting PRs, hosting Twitter spaces) with no financial or reputation rewards expected. Oftentimes, these are already working a full-time job and want to get exposed to Web3. Eventually, these individuals turn into full-time hires.
The best use case for bounties today is for onboarding. There is simply too much friction for the engineering managers and technical teams to have a bounty board represent all the technical work that needs to be done for the team. Bounties, as used in Web2, are a great mechanism for hiring talent for “backlog” or “imagination” tasks.
Bootcamps and educational material need to start to start to be more domain specific. A “Web3 Intro Bootcamp” does not go into enough depth to make an individual useful to teams independently. Very similar to how bootcamps, courses, and learning material evolved in Web2, we need to create very specific educational content create better funnels from learners to builders.

Recruiters aim at maximizing the following metrics: time to fill; quality of hire; interview to hire ratio; offer acceptance rate; cost per hire. Having professional reputation on-chain is unlikely to drastically impact any of these metrics for recruiters. What will lead to outsized returns is an adjustment in the venture capital market, and better funnels for engineers to transition from Web2 to Web3 or directly to Web3 from undergraduate / high-school programs.

In Web2, professional reputation systems for hiring and recruiting is an estimated 100B industry as of 2022, largely driven by the creation of tools used to transform professional reputation data into potential hires. What remains unclear in the current system is that identity fraud (the core affordance that on-chain reputation changes) is a large problem in hiring within technology communities today.

The data generated on Web2 platforms is generally trustworthy and representative of an individual's professional background to the extent that the individual wants their professional reputation to be showcased. People who are more transparent and open tend to have more information, backlinks, and peer verifications on their professional profiles (LinkedIn, GitHub, resumes, websites, etc.).

People who are less transparent or do not rely on professional reputation tools to get jobs, show less interest in sharing that information. The current system provides that agency to an individual and enables them to have the ability to retract information that was previously shared.

Clearly having your professional background, as granular as you want it (transactions, votes, code written, tasks completed etc.,) is not a piece of data that will shift behavior in recruitment. So what is the value of having someone's professional reputation on-chain? We speculate that on-chain reputational will yield incremental changes in the following domains:

Individual professional on-chain reputation supporting on-chain enterprise reputation
On-chain professional reputation being used to unlock Web3 specific opportunities (ex., bounties within DAOs, voting on domain specific proposals, invited to specific pods within DAOs, public good funding matching pools)
On-chain professional reputation will be an additional metric individual within DAOs will use to choose who to delegate tokens to.
On-chain professional reputation can support KYC compliance or adding an element of trust to anonymous identities.

Enterprise Reputation

Reputation of an organization is characterized by three categories: personality (what the organization really is); identity (what it says it is); image (what people say it is). For organizations, defending a reputation is nearly as important as building it.

Reputation within most organizations is dependent on three things: the people within the organization; reviews of the organization; and the quality of the products produced by the organization. In this section, we highlight how companies adopting on-chain identity is going to shift the way they interact with companies and the people within them.

For many organizations, the reputation is dependent on the people that make up the company. The visibility that companies and the public has towards the reputation of the employees is relatively opaque. By having each individual within the company have an on-chain identity (social or professional, likely mixed), companies are better calibrated to understanding the image the individuals within the company are projecting.

Does this sound like an unlock for companies to have more visibility on employees' personal lives? That visibility is dependent on the employee sharing personal information transparently and associated with the wallet address connected to the company. This is very similar to how we currently operate with public / private accounts and the quantity of information that we share on these accounts.

The impact that recommendations and reviews of companies have is tremendous. When we think about the impact that Amazon reviews, mainstream media companies, or notable figures who comment on specific products have on the success of a product financially, it is tremendous. However, today the reviews of these products are siloed to the distributors of the products.

The context I am given in product reviews on most platforms are uninformative. But let’s provide an alternative example with a successful implementation of on-chain reputation embedded into reviews. Let’s say I am a hardware engineer who has a strong following on LinkedIn. The following I have built on LinkedIn does not transfer to my Amazon account and my Amazon reviews are only treated relative to people reviewing products on Amazon. If I had more context specific, or relatable recommendations (provided by people I already follow), the influence it would have on my decision making for products would likely change greatly. ** **

The number of scandals we have seen with products in the domains of medical or social, whereby the company advertises a product does ABC action when in fact it did XYZ. The ability to verify a company is releasing a product that executes the advertised actions will heighten the transparency we build between customers and companies. This is not yet possible at scale with existing computational limits, but in the future, with the innovation in zk developer tools, this will be exciting. Some very preliminary explorations with zk proofs and machine learning can be found here.

The impact for traditional investing is also interesting as we have added an entirely new data primitive for investors to make decisions based on previously anecdotal symbolic information. We get more transparency in the interactions we have with companies. Instead of depending on social media and quarterly earnings reports, we get more “live” information from the company.

Social Reputation

The amount of time we spend on Web2 social is incredible. The donations we are making with our data is also incredible. The reputation we build socially on one platform does not transfer across platforms (LinkedIn, Twitter, Instagram, TikTok, etc.). ** **

Although you may have 5 different accounts, you are still the same person continuously donating information to these platforms. Web3 social creates a way for you to have agency in what you wish to continue donating and what you want to own. Your data can start acting as an individual labor force.

The inception of social media was aimed at connecting humans. We ended up becoming more lonely, disconnected, and misaligned in our actions than ever before. This is not necessarily causal of social media innovation, and may be completely independent of technology, but Web3 social, if implemented carefully does have the ability to heighten connectivity.

The trust we have on social platforms today is non-existent. When people go on Facebook marketplace or dating apps, there is an assumed lack of trust in the other actors on the network. Our current way to increase our trust is the ability to see more information about an individual: connected accounts; mutual friends; etc. The quality of this trust is only heightened.

Okay, so Web3 may make us less imaginative of a killer when we are selling our couch or going on a date. What other areas may Web3 social yield transformational unlocks? By moving away from siloed information on professional, social, and culture platforms, we start to migrate to a personal brand platform represented by your wallet. The intersection of this information will enable social platforms to connect people who are working towards similar goals and with people who may have never have been expected to be in the same social graph.

One concern with on-chain reputation being embedded in the social interactions is that they are designed to be dependent on verification instead of trust. This means that we are designing for a culture that is antithetical to the primacy of community. Have we lost so much faith in each other that we need our identity and reputation systems to be completely trustless and reliant on verification? We need to think carefully about where we are radically financializing human behavior and the downstream outcomes that this radicalization will have.