I've been thinking about the simplest form of reputation I could add to the blockchain. My first idea was to provide reputation based on users to provide liquidity to Steem. The problem with this is that Steem has no decentralized interoperability with other chains. You can't give reputation for liquidity provided on Binance because then you'd need access to all the information they keep secret (anything that can't be accessed through the API) like emails, driver's licenses, and social security numbers.

In this case what would be required is a link from a Binance account to its associated Steem account. (Plus all the orders each account makes on the STEEM/BTC liquidity market. )

From there, reputation could be given to users who post at specific intervals. I'm trying to brainstorm what kind of algorithm one would use for providing liquidity. Essentially, the bot wants liquidity to look a certain way. In the case of providing rep at intervals liquidity would look like a step-ladder in both buy/sell directions.

Why intervals?

Providing rep at intervals means anyone who wants to front run or undercut (proving they don't want to provide liquidity as much) won't get credit for posting a sell order at 0.0999999. This is an undercut. People at the 0.1 level get the reputation for providing the real liquidity.

DEXchanges (Atomic Swaps) are going to be key going forward for every chain.

https://cryptoiq.co/atomic-swaps-between-bitcoin-and-monero-could-be-possible-in-the-near-future/

Atomic swaps between the Bitcoin (BTC) and Monero (XMR) blockchains could be possible in the near future, perhaps even sometime during 2020, according to blockchain developer Joel Gugger.

Apparently the only thing preventing atomic swaps between Bitcoin (BTC) and Monero (XMR) from being launched at this time is the developers do not have an easy way of implementing zero-knowledge proofs, which are required for this technology.

_{I saw Monero have a nice green day very recently when everything else was flat. This event might be getting priced in now as well with everything else.}

In any case, we don't have DEXes and we don't have atomic swaps, or do we?

Like ERC-20 tokens to Ethereum, SteemEngine tokens and SMTs are grandfathered into the Steem ecosystem. Atomic swaps between all of these assets is a given (it is their fundamental definition).

Therefore, we can add a reputation system for providing liquidity to tokens inside the Steem ecosystem, and we can do it in a way that is difficult to game. Reputations like this could be the foundations of more complex/specialized ones built on top of them.

When to give rep?

Liquidity exists to allow people to enter/exit the market, right?
Therefore, reputation would be awarded whenever liquidity gets purchased/sold.
Right?

Wash Trading

Unfortunately, that doesn't work at all because anyone can set up fake trades between accounts. This already happens to fool sites like Coinmarketcap into showing their podunk exchange as having the highest volume, liquidity, and whatever else. Oops.

Solution?

Therefore, the only way to give reputation for providing liquidity, is the time that the liquidity stays available >> combined with the algorithm's (bot's) determined usefulness of said liquidity. If you are adding sell liquidity to SteemLeo at 1:1, that's not very useful. However, 0.2 might be a level that the bot wants more of at the time.

What are the rules of the bot?

Ah that's pretty interesting, because ideally it would be a DAO (probably with it's own separate coin). We have to decide a lot of things and come to consensus as a network for the rep to be valuable. What levels of liquidity are wanted? At what intervals? How fast/slow does the bot move the perceived value of the market up/down? How does the bot respond to flash crashes and pumps? There are a lot of spectrums here that can be voted on with stake. Steem makes it easy to do so.

The bot

The bot would essentially be a customizable arbiter for reducing price volatility across the entire network. The more valuable the reputation is that the bot tracks, the more popular the service will become and every network that uses the arbiter would have the advantage of much higher liquid funds available, in conjunction with measures in place to deal with flash-crashes and massive pumps. Essentially they would be avoided entirely by giving rep for users that place those deep orders at certain levels.

Oh look, another project I'm not working on. Neat.

Posted via Steemleo

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