Any large-scale coordinated effort is mediated by credentials.

In the first post of this series, we laid the foundations of this idea and established the four main use-cases of credentials. In the succeeding post, we dove deep into two of the four use-cases of credentials—organization and access control. We looked at credentials from the perspective of DAO admins or operators and explored the benefits of having an effective credentialing system in place.

In this article, which is the last in this series on on-chain credentials, we flip the script and look at credentials from the perspective of the average DAO member. We discuss how a robust credentialing system aids member attraction and retention, and addresses the other two use-cases of credentials i.e., reputation and recognition.

Recognition

We’ve all heard the phrase ‘money can’t buy happiness’, but from a business perspective, money alone also can’t buy loyalty or engagement. It is well established that workplaces require a healthy mix of financial and non-financial incentives. So when it comes to non-financial incentives, what’s better than giving your members tangible tokens of recognition?

For starters, they are better than appreciation messages that either get forgotten (if in DMs) or get buried (if in public channels). More importantly, they enable and bolster financial incentives by providing frameworks for interesting member reward programs.

For example, if a DAO recognises their most active members of the month using tokens, then at the end of the year they could give a significant financial reward to those that were members of the month more than once.

Giving outsized financial rewards to a few people might alienate the rest, but doing things this way actually justifies the whole scheme and motivates other members too. And in communities that are bigger than a 1,000 members, it is possible implement such reward schemes easily, and even automate them!

Credentials used for recognition, if done right, can also play an important part in the culture and lore-building of communities. DAOs that operate in seasons already do this.

Members of each season have unique, shared experiences that are different from those from other seasons. Using credentials is just a way to solidify these experiences, like mementoes of a sort. They can increase the feeling of belongingness, which is something that cannot be solved by financial rewards alone (which are short-term solutions for a long-term challenge).

Reputation

Artifacts used for recognition don’t take much time to turn into markers of reputation. Such markers bootstrap a culture of meritocracy that keeps the right people motivated. This is really important. For the sustained success of any organization, mechanisms to prune the lowest performers must be in place. If not, one risks lowering the morale of the entire group.

Besides motivating high performance within the organization, adding visibility to member activity lets you have crystal clear compensation policies. This does wonders to retain the most effective contributors.

In a time where the DAO landscape is marred with uncertainty at every step, contributors that put their heart and soul in their work expect some level of stability. By defining clear compensation policies, it gives them enough context to forecast and decide how much they earn, while reducing the possibility of conflicts that may arise in case of unfair compensation (either too much or too low). This is n excellent article on DAO compensation where you can learn more.

So using credentials makes it easier to motivate and retain the right people by upholding a culture of meritocracy and having clear incentive schemes. But there is one more way a robust credentialing system can set you apart from other organizations – it lets you go to your ideal contributor versus them coming and finding you.

By being specific in what you want from your members, you instantly filter in those that are actually interested. This not only reduces a ton of workload on your end, but also sets expectations from the very beginning which is imperative for a long and smooth relationship with contributors.

The Real Value of On-chain Credentials

The surface level effects of on-chain credentials are self-evident. But their second-order effects are even more interesting. Just like how social networks started by letting us know more about our friends, which cascaded into all sorts of interesting applications, similarly, using on-chain credentials would make operating DAOs easier, but also exponentially improve the DAO experience.

Let’s discuss two possible applications that will thrive in an environment of on-chain credentials. The first is automated onboarding. Right now, onboarding contributors is difficult. As if finding those with the relevant experience wasn’t challenging enough, filtering and interviewing them in another pain.

But in a world where on-chain credentials are prevalent, one could easily set some parameters and automate the onboarding of new members. By, say, specifying the experience level based on a certain type of credential, and specifying their productivity by setting a threshold of contribution density (i.e. no. of contributions over a particular period of time), one can easily evaluate the right candidates without doing much work.

Next, let’s look at undercollateralized lending, a modified version of the above. Presently, all sorts of financial loans are collateralized equal to or more than the value of the loan. But what if individuals could stake their reputation tokens and receive a discount on the collateral required? Banks do this all the time with businessmen, so why not with the average participant?

Taking this idea further, brands and communities of all sorts can add value in interesting ways based on these credentials. They can have different offerings for each individual depending on the correlation and quantity of reputation tokens they hold. The possibilities are endless.

In Conclusion

We have been using credentials from time immemorial. They form an intimate part of the human experience, and can plug some of the inefficiencies of the current web3 ecosystem.

In this series on on-chain credentials, we proved the requirement as well as the potential of a web3 analogue of traditional credentials. On-chain credentials fully satisfy the use-cases of organization, access control, reputation and recognition – and may even hold the key that unlocks widespread adoption of DAOs.

But more importantly, just like how credentials have enabled all sorts of applications in real life, on-chain credentials lay the foundation for similar innovations in web3. In an ecosystem with patchwork solutions with several moving parts, rep3 wants to make it super simple to use credentials, and do its part to increase web3 adoption.

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