onchain-points

I've just had a conversation about points, and it seems there has been some serious confusion between monetary points and reputation points. Quick 🧵 on the differences between the two. 

Let's start here:

Reputation points should not be spendable.

Took my curiosity on a hike, came back with a startup, and a stray cat.

When reputation is tokenized, its transferability can obscure whether tokens were earned or bought, undermining their integrity.

Even if it’s prohibited to transfer reputation tokens between users but allowed to be used for services or in-app interactions, it will still unfairly penalize active users and blur the distinction between valuable contributors and token hoarders, undermining again their integrity.

To avoid this, a two-token system is suggested: “one token, referred to as 'points,' acts as a non-transferable indicator of reputation. A second token, 'coin,' is a transferable asset given to point holders on a regular basis.

Essentially, points generate 'coin' dividends, which can be used as tradable currency. Moreover, since coins are distributed to point holders, they also reflect the underlying reputation."

The above is a quote from the great article 👇 by @skominers

@a16zcrypto • Harvard/HBS • 🧩 • QED

An example of this approach is the Eigenlayer points system, which incentivizes liquid staking. 
These points are neither transferable nor redeemable. (as far as we know)

It's important to distinguish between monetary points that can be directly spent, such as those from credit card cashback programs. Credit card points encourage increased card usage by offering a percentage back on transactions, promoting competition among cards based on their rates.

In contrast, reputation points are intended to help platforms understand their community, identify power users and those making meaningful contributions, and establish a hierarchy. This system also serves as a filtering mechanism to determine access and rewards.

Such objectives cannot be achieved if reputation points are spendable.

Which is why it’s important to understand and differentiate between the two points type: Monetary and Reputation.

The above is a quote from the great article 👇 by @skominers 

https://a16zcrypto.com/posts/article/reputation-based-systems/#:~:text=We%20propose%20a%20two%2Dtoken,points%20on%20a%20regular%20cycle