I think the idea of a global reputational system which I have proposed deserves a separate thread. I will begin it with describing the basic ideas: The idea is to organize a global system, open for everybody who wants to participate, which supports freedom of contract, volitional arbitration based on arbitrators accepted by above sides, and penalizes contract breaking in form of non-acceptance of the decisions of the accepted arbitrators. Whoever wants to sign whatever contract is, of course, free to do this, anyway. Nobody can prevent this, given that only the participants have to know the contract itself, and, if they trust each other, and the trust is justified, nobody who does not like the contract will even know about it. But, unfortunately, sometimes, too often, there appear some conflicts. A known method to solve such conflicts is arbitrage. An independent and non-prejudiced arbitrator decides about who is right and who is wrong. But who decides who is the best arbitrator? This may be another source of conflict. Fortunately, a straightforward solution exists: One simply has to fix, as part of the contract, who will be, in case of conflict, the arbitrator. Then, the acceptance of the arbitrator, by above sides, becomes part of the contract itself. But what happens if one side does not like the decision of the arbitrator, and refuses to accept and to follow it? This is a potential danger, and there is not much one can do about it. To use brutal force to enforce the decision is, clearly, one possibility. One can often hope that the state provides this force - but this is possible only if the state acknowledges that the decision is correct. Unfortunately, in modern states this happens only in quite restricted cases: The contract itself has to be in agreement with state regulations, millions of pages you cannot even know without consulting specialized lawyers, and if they don't, they will be modified in some unpredictable way, the arbitrators are not people you trust, but bureaucrats chosen by the state as judges. For international contracts, it is often not clear which state has to rule, and having the "own" state to rule gives a strong advantage to one side, who knows much better how to handle the "own" justice (in particular, how and how much bribes one has to pay). Many may find this possibility nonetheless acceptable, but it will be ignored in the following as unacceptable. The other possibility to use brutal force is the mafia method: To use own weapons and execute the contract breaker. This is possible only to sufficiently strong mafia gangs and will be ignored too. What we consider in the following is the enforcement by a reputational system with a blacklist for contract breakers. The contract breaking itself remains, but the contract breaker appears on an openly accessible blacklist for contract breakers. This prevents repetitions. If one has broken a contract, and appears on the blacklist, everybody can easily find out that one has, in the past, broken a contract. If one knows about this, it would be foolish to trust this contract breaker. This does not completely prevent contracts, but these contracts will be of a safe type, where the contract breaker has no real chance to break it and to get some advantage out of it. Roughly, payments have to be made in advance, wage is paid only after the work is done and checked, and no credit will be given. The main problem of such a blacklist is defamation. Assume I'm free to write a negative entry into such a blacklist. This would allow me to destroy your reputation as a honorable guy who does not break his contracts. Because of this possibility, many people would not trust such a blacklist. So, the true, correct entries would be lost in the large amount of defamation. And everybody would have to decide if some entry is defamation or not - which would be difficult, and, on a large scale, impossible. Such a blacklist would work only in a small community, where one knows almost everybody, and where one has some own, independent knowledge about who can be trusted and who is a liar. Fortunately, the very system of contracts with freely chosen arbiters allows to restrict the danger of defamation to a minimum. The sides of the contract accept the arbitrator, from the start, and sign this acceptance. This is something one can check. Then, it is only the arbitrator who has the right to decide about a conflict. And one can, therefore, restrict defamation by a very simple restriction: Only the arbitrator accepted by the contract violator is allowed to give the information about the contract violations. And that one is such an arbitrator, one can prove, by the signed contract itself, signed by the contract violator. And, of course, the arbitrator has to sign his entry into the blacklist himself. But in this case it remains possible that I will be cheated by a bad arbitrator. I sign some minor contract, accept some arbiter I do not really know, and it appears that this guy puts me on the blacklist for violating this contract. Is there something what can be done against this danger? Yes, one can make further specifications in the contract. In particular, one can fix, from the start, the maximal possible penalties - usually this will be simply maximal fines. And, as well, one can fix in the contract itself the conditions how the fines have to be paid, in such a way that you obtain a confirmation which allows you to prove that you have paid the fine, signed, say, by a trustworthy bank. And part of the entry has to be a confirmation, signed by the same bank, that no such payment has been made. As a consequence, if you have a confirmation for payment, you cannot appear on the blacklist - because, in this case, the bank would have to give also a confirmation that you have not paid - and signing two confirmations which contradict each other would immediately destroy the reputation of the bank itself. Thus, the risk of a bad arbitrator can be reduced, first, by the upper limit of the possible penalty related with the contract in question - in the worst case, you have to pay this maximum penalty, such is life. The other danger seems negligible: not only the arbitrator, but also the bank would be cheating, and, moreover, the bank would be ready to destroy its own reputation only for your single particular case. (Note: This last danger disappears if one uses bitcoin to transfer money. In this case, the transfer itself would be part of the public record.) Given that, with these restrictions, the participators of the system are quite safe from the danger of defamation, those who use this information can, on the other hand, trust the records. All what they need to trust is signed, with an electronic signature which is impossible to fake. It is the contract violator himself, who has accepted as the arbitrator, as the bank which realizes the payment of a penalty as reliable. That means, what they tell us - that this guy has broken the contract - comes from sources reliable according to the guy himself. So why not trust them, if one thinks about trusting this guy? Of course, a good cheater will have a (not really) plausible story which explains all this by a devil conspiracy or so. But careful people will not trust such stories, but, instead, trust the blacklist record, once it is signed in accordance with the rules.