By Margarita Vznuzdaeva
September 21st, 2018

Reputation counts

Reputation counts

By Margarita Vznuzdaeva
September 21st, 2018

It is nothing new that good standing is a real key to success, especially, in the blockchain world, where many deals revolve around trust, possible risks, and networking. I spoke with Alexander Nikolaev about the ways worldwide community can earn its reputation with the help of his newborn startup Forseti.

Having been granted 20,000 Swiss Francs by Crypto Valley Association as the winner in the “Early Stage” category this Summer, Forseti reputational protocol is now in its early stages of development. By the end of July, the company has already kicked off its collaborative partnership with Thetta DAO network. As Alexander mentioned during the conversation, the next partnership, that is about to be entered into, is life insurance blockchain company integration. Forseti team has also met with representatives of Thomson Reuters Incubator and has been thinking of submitting an application for the information technology lab.

Forseti team as a winner on the Crypto Valley Conference in the Early Stage Category

At the beginning of our meeting, I asked Alexander about the essence of Forseti reputational protocol and its practical need for the market.

Alexander Nikolaev, CEO, cryptoeconomics researcher

It is an attempt to make reputation a digital category for blockchain based apps and blockchain community in general. We want to make reputation a future source of trust. In the past, living in small tribes, people knew everything about each other. If you were a good blacksmith, it was well-known. Reputation was publicly accessible and no false step could just get past. Influenced by social development, the appearance of cars and newspapers, people began to unite into bigger communions. It became impossible to know every men’s reputation. There is such a thing as Dunbar’s number that limits the number of social contacts, making an average number of people one might know about 150. So, the “trust peer-to-peer instrument” shifted onto the shoulders of government, banks, courts and etc.

AN:  This period of institutional trust was quite long, but everything has changed with the Internet and informational technologies. Internet has helped us communicate with more people and given the opportunity to share information, so right now our world has been moving towards peer-to-peer economy. Bitcoin was preceded by sharing economy.

If in childhood our parents tried to protect us from getting into a stranger’s vehicle, today we have Uber, BlaBlaCar, Airbnb as a kind of “trust guides”. Using these services, you show your trust and confidence in a company. Bitcoin helped to create “Uber without Uber” a peer-to-peer interaction system with no mediator.

What we bring is reputation, because this category still isn’t implemented in blockchain and it is needed for peer-to-peer systems to exclude any third parties.

Alexander also added that the original purpose of the project is mostly business-to-business oriented. Forseti target audience is blockchain-based apps and businesses. From its founder’s point of view, reputational protocols can be useful for freelance stocks, insurance, data delivery, and information monitoring businesses.

AN: We are an infrastructural project not focused on the end-user; our aim is to conquer the blockchain market making all decentralized applications (such as decentralized freelance exchanges or prediction markets) to use our protocol.

I asked how was using the protocol beneficial for the apps.

AN: First of all, it is absolutely free of charge, our project is open sourced for everyone. We have monetization, but we don’t charge any fee`s from businesses that use our protocol. Second, there is no need for companies to invent this product by themselves. Many D’ apps say they want to integrate something similar to our protocol in their products something similar to our protocol, but there is no need to reinvent the wheel, we’ve already done everything instead of them! Moreover, with Forseti reputation is owned by people, not by any app. For example, if something happens to Amazon, all the reputational things will be left and buried there. We say we return reputation back to people, because when person enters to the app, he already has a reputation, its linked to his private key. It is a personal decision for a D`app to take or not to take it into account, but with us the application will get not only users, but users with some history behind the back.

I made an analogy with the system of opinions, but Alexander underlined there was a huge difference between it and Forseti.

AN: Every action in Forseti is connected with transactions. So, when a deal is made, it is estimated by an expert community. This means that as instead of depending on opinions you can match a concrete action with received reputation. In comparison with the opinions system, everything in our protocol is audited and every user has an identifier. For example, eBay, Craigslist and Amazon have their own ranking systems, but they aren’t audited and there have already been several scandals connected with falsified assessments. Blockchain, on the other hand, makes it possible to see the “user’s route”: which communities have this person previously been a part of and what have they done. We claim reputation should be built on community’s opinion and it cannot be achieved independently. For example, you are a web developer and you are a part of the web developers community, that gives you reputational scores according to the quality of your work.

Talking about the use case (a possible scenario of the protocol system practical implementation), Alexander explained it via a simple example, involving a web developer.

AN: For example, there are a web developer and a customer who needs a webpage made. They both have a smart contract on a freelance exchange and if everything is realised well, the customer receives a turnkey site and the developer gets their money. But if something goes wrong, for example, if the customer isn’t satisfied with the result, it isn’t clear what to do in such a situation, because smart contracts can’t evaluate the quality of work. So, here we are: we have experts, they have a certain reputation, with those who can help resolve the ongoing dispute among them. You don’t go to a traditional court, you come to the web developers’ community. And they are motivated to solve the problem for their own reputation’s sake, that will depend on the quality of their work. Moreover, the companies can organize their experts into separate communities or they can join different pools. As I have mentioned before, it is an opened system, and we also aim to make communities compete with one another.

During the conversation about possible collaboration with Thomson Reuters, Forseti founder has made an assumption that media could become a part of the reputational network as well.

AN: If we speak use case on behalf of fake news, it might be interesting for the media and its employees. A media has a reputation, a journalist has a reputation that depends on what they publish and the way communities react.

Alexander explained Forseti use of the Ethereum platform as a favour of the market. Most number of apps is Ethereum-based, and the platform itself is the most advanced.

AN: We don’t have an aim to extend all the blockchains as the dictates of fashion. If it is needed for business, we will connect our system to other blockchains.

I asked Alexander if it slows down the processes or not from the point of blockchain developer. He recognized that blockchain wasn’t very developed at that stage and it was quite complicated for an end-user to enter that sphere.

AN: Namely, it’s the integration processes that takes a long time. Currently, the scalability problem isn’t fully solved, there are also issues with decentralization. There is scalable EOS, but it has problems with decentralization; there is Ethereum that still fights the scalability problem.

Blockchain is an eternal part of our system, because our product was developed and is continued being developed for the blockchain world needs. It is still incomprehensible for common men and the end-user. It is likely that the first blockchain based app for ordinary people will appear in at least three years.

It is always interesting to find out startup’s future plans and the following steps to be made towards its development. Alexander shared them openly.

AN: Now the thoughts are about niche marketing. We keep on working and telling about or project sparingly because our aim is to attract blockchain projects, those who understand how it can be used for the benefit of business. The plans are developers number expansion, as well as finding analytics and marketers.

Bearing in mind Forseti’s success in the Crypto Valley with a capital contribution made by the team itself, I asked if there were any attempts to attract venture funds. Alexander replied that because of the “blockchain-to-blockchain” business orientation, it was rather difficult to bring the startup essence for the people from venture sphere.

AN: We have tokens that will drive the platform, therefore we are more oriented towards those who understand blockchain specifics and crypto enthusiasts.

It was impossible to leave without asking about the possible monetization of the business.

AN: The ultimate goal of the project is not just to resolve disputes, but to earn money through their resolution. According to the economic motivation of the games theory, the community should grow to be more trusted, make more people involved and, as a result, earn more. To create a community in the protocol you will need to freeze some tokens as a collateral. The more tokens you have, the more your trust charge is. The riskier your actions are, the more you cherish your money, resolving disputes. If during the dispute a big amount of money is at stake, the arbitrator should freeze a part of his tokens as well, as a liability insurance. As much as the number of tokens and the greater volume of arbitrators are limited, the more communities appear and become demanded, and the higher is the tokens demand and price.

Alexander also gave a comment on the token sale saying Forseti plans to make a private round without any crowd-sale, this measure is an attempt to avoid speculators.

AN: We will sell our tokens as an access to the actual protocol provided by our project. We are looking forward to those who are interested in our service rather than speculators. Later there we will have special programs, competitions, and airdrops; tokens will be distributed among users to give them an option of creating communities and to motivate them. These will undergo further action testing with some assets freezing. As you probably already understand, we want to attract people not with our marketing budgets, but with our approach to the technological side of the coin.

And maybe in the nearest future, a new form of blockchain based law will appear with multiple expertise and pluralism of opinions in the decentralized community. Sounds up-and-coming, doesn’t it?