Bitcoin Forum

I've been thinking a lot about Decentralized systems and how Bitcoin enables us to conduct business globally and online. We have systems in place such as the WoT and the trust rating on this forum, which are both good rating systems but they have their downfalls. The problem with rating systems is that they can be manipulated rather easily for anyone that is wanting to put in the work, time, and effort. Also the trust system is built "freely", so no one really needs to invest or spend any amount of money in order to gain trust of other users. The people who have absconded with the most amount of money in the land of Bitcoin are unfortunately the people that we have trusted the most. The trust system works until it doesn't work, which is usually when the good guy turns into an evil villain and begins to scam, steal, and loot. We've seen this numerous times throughout Bitcoin history: Mt. Gox, Pirateat40, Inputs.io, WeExchange, BFL, on and on and on. The thing that most of these large heists have in common is that at one point they were very trusted and reviewed individuals / establishments. They received good trust ratings and reviews which snowballed then led to everyone blindly trusting these entities with large amounts of funds, which is never good and is not needed in the world of Bitcoin.

The beautiful thing about Bitcoin is the ability to create trustless transactions by using multi-sig escrow (2-of-3). There is no excuse why any service should be fully trusted in this day and age of Bitcoin, especially with large amounts of funds because it's no longer necessary. Multi-sig solves many problems, but unfortunately it doesn't solve the problem of reputation or identity.

It has became way too easy and profitable for scammers, shills, and trolls to be able to create new aliases out of thin air. After a couple of weeks they have padded their feedback, created fake history, and voila! They have a new "trusted" identity.

I recently was testing out Open Bazaar and I was very surprised by the feature of "Proof-of-Burn" for merchants. It allows a merchant to "burn" or "destroy" Bitcoin in order to prove their intent and legitimacy of doing business. This is also what Counterparty did when it created the XCP and distributed it. I believe we should start having users or online identities start "burning" coins in order to solidify their intentions and/or good will.

For example, Let's say that I "burned in" my identity for 1 Bitcoin (roughly $370 USD). It doesn't make sense for me to rip someone off or destroy my reputation for less than that. This definitely will set a barrier for evil-doers. Anyone with good intentions has no problem on establishing their identity and "burning" their funds in order to show their good will and commitment. You can also gauge the level of someone's commitment by looking at the amount of BTC they have "burned" into their identity. Someone who has burned 10 BTC into their identity is going to want to protect it, rather than just throw it away over a small squabble.

I don't believe that this should be the complete gauge or rating to determine if a user is legitimate or not, but I do believe that this is a very good tool to add to the collection. The system that is in place now is very flawed and it's easily gamed. You also have many users who are in fact legitimate, yet they are new and are unable to start forming relationships and transactions due to them not having high feedback or reviewed ratings. These users would be able to get a jump start by "burning" in their identity and proving to the community that they are here for legitimate and good reasons.

By using this "Proof-of-Burn" technique along with escrow and the WoT or other trust rating systems, I believe we will have fairly good metrics to go by in order to judge an identities character and intents. The great thing about these methods and concepts is that a user can also stay as private as they want with these systems, there is no need to disclose personal information. I would much rather trust in a user who has "burned" in his username (screen name) for 10 BTC rather than a user who has not but has published his real life identity.

Please let me hear the thoughts of the community on this concept! I'm not by any means claiming that I came up with this idea, this idea is actually a very old one within the Bitcoin ecosystem. I'm just hoping that we can implement this into our community for our users. I've been seeing many similar services pop up such as: Keybase, Onename.io, etc. I believe all these directories could also benefit by adding a feature for users to "burn" in their usernames / screen names.