Why we built Taraxa and what it is used for
Taraxa aims to democratize reputation by tracking informal transactions.
The Taraxa public ledger platform purpose-built for audit logging of informal transactions, agreements, and data. In the short term, it offers immediate operational value to users by minimizing the amount of confusion and disputes. In the long term, it enables financial value by deriving quantifiable and verifiable reputation from these informal transactions which enables non-collateralized financial instruments over DeFi.
We don't really see Taraxa's ledger and our applications as separate, they're tightly integrated as a single system. Taraxa is a purpose-built infrastructure, built to enable data anchoring, which is what makes tracking informal transactions possible.
Building Layer-1 gives our team the flexibility and know-how to adapt the underlying infrastructural technology to the application's needs, and building the application allows us to model and prove (instead of waiting for adoption) the operational and financial viability of our ecosystem.
Taking this integrated approach allows us to build for the long-term success of the ecosystem.
Informal transactions make up >80% of the world's transactional agreements! They are the informal agreements people make during work, in between the contracts and project management milestones.
We think of work as a continuous stream with milestones embedded inside.
O -----------------------> o ---------> o ---------------------------> o -----------------------------------------> O
- The **big O's **are large legal contracts, such as a contractor winning a bid for a large project.
- The **small o's **are small checkpoints and adjustments that could be legal contractual addendums to the large contracts (the big O's) or simply project management checkpoints that have gone through structured approval processes.
- The little dashes -- in the middle are where the ACTUAL WORK happens, people laying bricks, mixing cement, erecting wooden frames, etc. That's where the informal transactions happen.
Informal transactions are everywhere, here are some examples,
- You're an account who made a change to a spreadsheet and wanted to make sure your client is OK with it, you quickly send them a text, and they confirmed it's OK.
- You're a construction contractor digging through the road and hit a natural gas pipeline, you sent the prime contractor a quick email if you should stop or go around it, they said to go around it while they get an update from the county government.
Informal transactions can lead to a great deal of of confusion, delays, and disputes. Because there are so many of them, it’s very easy for stakeholders to forget or lose them, and then that leads to confusion and delays where the stakeholders are trying to remember, dig through mountains of texts / emails / chats and figure out who said what when. This is very costly and adds a lot of risk to projects. When these confusion and delays don’t get resolved, it could even turn into a legal dispute, and then that adds even more risk and cost.
This is a huge problem that no one is solving. In fact the inability to track & verify informal transactions is why large projects, companies, and organizations can’t innovate and make decisions so slowly, it’s because they are unable to tap into this treasure trove of data. Taraxa aims to make the 80% of wasted data useful, and help everyone to streamline their operations.
To write a formal legal contract so well to never need to track informal transactions would mean you could predict the future, which is impossible.
In reality, there are always a lot of changes, updates to the original contract due to unforeseen circumstances. To make matters worse, there are actually a lot of industry dynamics in construction, supply chain, etc. that force these contracts to be unrealistic (e.g., low-bid always win, concurrent workstreams).
So in practice, informal transactions will always exist, and they will always remain the most voluminous of all transaction types.
Taraxa does not collect any form of contracts and nothing of the sort is stored on-chain.
Taraxa collects audit trails on-chain, or evidence of informal transactions or as we call them, informal agreements. These audit trails are hashes of informal transactions and their signatures, which look like random strings of text on-chain to someone who does not have the original informal transactional data, hence there is no privacy broken.
In most major economies around the world, anything written down is considered a legally-binding contract: a text message, an email, scribbles on a napkin, and they are all valid and admissible in courts.
While Taraxa does not collect contracts, it collects audit trails which are evidence of contracts. This is written evidence that are also admissible in courts.
Fundamentally here's nothing special about something written in the blockchain vs. anywhere else (e.g., on a napkin).
Informal transactions in large quantities can reveal a great deal about the person or entity that is committing them to the chain. Here are just a few examples,
- Who they're working with
- How frequently do they work with them
- Roles they play in decision making processes
These are just generalized examples. If you leverage this onto a highly specialized use case, for example, tracking public influencers, you can create an audit trail that reveals a far richer set of characteristics,
- Topics they cover
- How frequently do they endorse vs. repudiate specific topics
- The impact they have on fans and followers
- How consistent they are across platforms (e.g., Twitter vs. Telegram)
All of these information could be used to quantify various aspects of reputation, which in turn could be used to create non-collateralized finance signals, or become basis of a new class of crypto assets.
As mentioned in the reputation FAQ question, the informal transactions collected by Taraxa's applications and protocol can produce powerful reputation signals to enable non-collateralized financial instruments. How DeFi protocol use these signal is up to them. But looking at the real world, purely reputation-based finance is pretty rare and they do carry significant risk.
In the off-chain (real) world, all financial instruments take into account a mix of collateral and reputation. Take a classic loan for example, if your reputation is bad or non-existent, then perhaps I will give you 50 cents on the dollar for your collateral, but if you have great reputation, maybe it'll be 70 cents on the dollar.
In the DeFi world, all financial instruments are currently purely collateral-based - all these instruments only look at how much collateral is locked in on the asset holder. Imagine what we could do if on-chain reputation signals are made available, signals that are underpinned by real world business activities.
We are building Taraxa to enable the next evolution of DeFi with verifiable reputation signals.
In the real world, loans are almost always structured based on a mix of collateral and reputation. If someone structures a loan purely based on reputation with no collateral to fall back on, that loan obviously carries significant risk of default, and is exploitable by bad actors.
The same considerations would apply on-chain as well. These ideas aren't really new or complicated, just look to what's happening today in the off-chain real world and you can see how reputation signals (e.g., credit scores) are being used.
Shorter answer: Yes, Taraxa is a next-generation smart contract platform and you can run anything on it.
Longer answer: We see Taraxa as a purpose-built, full-stack ecosystem serving informal transactions and the signals we can capture from it. We're not trying to pull in whatever happens to be the hottest DApps on the market today.
To build a sustainable ecosystem for the long term, you have to build up your own, organically-grown networking effects. For example, ETH is the finance ecosystem, even when ETH 1.0 is slow and expensive, users still stick with it because the switching cost is too high and the networking effect too big. That's ETH's killer app.
Taraxa is the informal transaction ecosystem, that's our killer app.