It is becoming increasingly difficult to discern which platforms and people have good intentions online, especially as automated content and anonymous profiles increase. Some web2.0 companies such as Uber, Amazon and Airbnb offer rating systems for companies and individuals; Those types of systems are few and far between in the web3 world.
But Karma3 Laboratories hopes to change that with $4.5 million in fresh capital backing its OpenRank decentralized reputation protocol. This is the protocol's first capital raise, Sahil Dewan, founder and CEO of Karma3 Labs, exclusively told TechCrunch.
The round was led by Galaxy and IDEO CoLab Ventures. Additional investors include Spartan, SevenX, HashKey, Flybridge, Delta Fund, Draper Dragon and Compa Capital. The capital will be used to increase OpenRank adoption and help launch the initial version of the protocol to developers.
“We are really obsessed with solving the trust and security issues of cryptocurrencies,” Dewan said. “After the last (cryptocurrency) bull market, DeFi and nft mania happened, and a lot of people got into cryptocurrencies, but a lot of people got scammed.”
There is no reputation system in the decentralized world of web3, so it is difficult to determine which entities and individuals to trust and depend on, Dewan said.
Since the beginning of the Internet, there have been peer-to-peer environments that allow companies and individuals to post and buy things. But these companies have an advantage: “They can take the value of users, define the rules of what is right or wrong, and keep the data,” Dewan said. “This is not a public good, but transactional relationships between centralized parties and users.”
Decentralizing ratings and reputation systems is important because it prevents a single entity from owning reputation ratings and being able to manipulate or alter them, Dewan said. OpenRank aims to help web3 developers and protocols launch consumer apps, communities, and marketplaces with open rankings and recommendations, without the need for a centralized entity to manage them. “We wanted to create a protocol and a widespread system, not as a source of trust, but so that anyone could come and build reputation systems,” Dewan said.
This could create a basis for peer-to-peer interactions and community ownership of online grades.
The OpenRank protocol allows any developer to use their “Reputation Graphs” for ratings, rankings or recommendations for applications or communities. This means that developers, consumer apps, and marketplaces can integrate specific ratings and recommendations, while leveraging the ratings and reputations of other ecosystems and communities to build a foundation of their own.
To start, OpenRank is working with Metamask Brooches; provide ranking and recommendation API for Lens and Farcaster; and helps with on-chain discovery feeds for consumer applications, crypto wallets, and reputation-based voting and governance, Dewan said.
“They can publish it internally or use it behind the scenes to drive search and recommendations – it's up to the developers,” Dewan said. “We are not going to tell you what number to attach. “We want to create a classification system that can be used for whatever utility they want to provide to end users.”
The protocol also plans to implement “resistance mechanisms” to prevent bad actors or scammers from attempting to game the system through wash operations or sharing malicious links.
Ratings also help reduce the cost of searching and discovering what is on-chain or in the crypto ecosystem, Dewan noted. “If you don't have anything qualified, you won't know what to buy or what to trust. User engagement will not happen in the same way we see on web2 if there is no ranking.”
These classifications can be relative and specific to different people. What may appear in one person's recommendations may not reach others, depending on their interests and past interactions. “Nowadays you can't challenge what Google or Amazon shows you,” Dewan said. “But third-party developers have a market for creating new rating systems, and that is a guiding force that helps us choose and show the most value to users.”
In the short term, the startup plans to continue working with its launch partners and open OpenRank to help people find, buy and vote for what they trust on the chain. Their next goal is to open the protocol to any third-party developers who want to implement a ranking and reputation system.
“Eventually we want a self-service model for OpenRank, so that any developer can create their own rankings without permission and without having to work hard on data and computing,” Dewan said.
