It’s getting harder to discern which platforms and which people have good intentions online, especially as automated content and anonymous profiles increase. Some Web 2.0 companies such as Uber, Amazon, and Airbnb offer rating systems for businesses and individuals, but these types of systems are few and far between in the web3 world.
But Karma3 Labs is hoping to change that with $4.5 million in new capital backing its decentralized reputation protocol OpenRank. This is the protocol’s first capital raising, Sahil Dewan, founder and CEO of Karma3 Labs, told TechCrunch exclusively.
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 the adoption of OpenRank and to help release the initial version of the protocol to developers.
“We’re really obsessed with solving trust and security issues for cryptocurrencies,” Dewan said. “After the last one [crypto] bull market, the DeFi and NFT craze happened and a lot of people started using crypto, but a lot of people got scammed.”
There is no reputation system in the decentralized world of web3, so it is difficult to know which entities and people to trust and rely on, Dewan said.
Since the beginning of the Internet, there have been peer-to-peer environments that allow businesses and individuals to post and buy things. But these businesses have an advantage: “They can take the value from the users, set the rules for what’s right or wrong, and track the data,” Dewan said. “It is not a public good, but transactional relationships between central parties and users.”
Decentralizing ratings and reputation systems is important because it prevents a single entity from owning reputation scores and being able to manipulate or change them, Dewan said. OpenRank aims to help developers and web3 protocols launch applications, communities and consumer markets with open rankings and recommendations, without the need for a central entity to run it. “We wanted to create a protocol and a generalized system, not as a source of trust, but for anyone to come in and build reputation systems,” Dewan said.
This could create a basis for peer-to-peer interactions and community ownership of online ratings.
The OpenRank protocol allows any developer to use their “Reputation Graphs” to rate, rank, or recommend apps or communities. This means developers, consumer apps, and marketplaces can integrate specific rankings and recommendations, while leveraging rankings and reputation from other ecosystems and communities to build a foundation for their own.
To get you started, OpenRank works with Snaps Metamask; Providing ranking and recommendation APIs for Lens and Farcaster. and helping with on-chain discovery streams for consumer apps, crypto wallets, and reputation-based voting and governance, Dewan said.
“They can publish it internally or use it behind the scenes to enable search and recommendation, it’s up to the developers,” Dewan said. “We’re not going to tell them what number to attach. We want to create a ranking system that can be used for whatever utility they want to provide to end users.”
The protocol also plans to put in place “resilient mechanisms” to prevent bad actors or fraudsters trying to cheat the system by laundering transactions or sharing malicious links.
Ratings also help reduce the search and discovery costs found in the crypto chain or ecosystem, Dewan noted. “If you don’t have anything rated, you won’t know what to buy or trust. User engagement will not happen in the same way that we see on web2 if there is no ranking.”
These rankings can be relative and specific to different people. What may appear in one person’s recommendations may not reach others, based on their past interests and interactions. “Today you can’t dispute what Google or Amazon shows you,” Dewan said. “But third-party developers have a market for creating new ranking systems, and that’s a driving force that helps us choose and show the most value to users.”
In the short term, the startup plans to continue working with startup partners and open up OpenRank to help people find, buy, and vote for what they trust on-chain. His next goal is to open up the protocol to any third-party developers who want to implement a ranking and reputation system.
“Over time we want a self-service model for OpenRank, so that any developer can create their own rankings without permission and without having to do hard work on the data and computers,” Dewan said.
