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For some reasons, Stack Exchange became its own country and decides to use its reputation system as the official currency. What would be the advantages and the disadvantages of such a system in comparison with current monetary systems?

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There would be hacking. And cyber terrorism. And down voters. So many down voters. – XandarTheZenon Jan 22 at 22:16
Wait, what? The government is paying everyone based on how their fellow citizens see their actions? I sure don't want to be living there ;-) – bilbo_pingouin Jan 22 at 22:21
ahmed, oh dear ahmed. My goold old friend ahmed. You have asked such a wonderful question. Your answers I saw are full of wisdom and intelligence and I have upvoted every one of them. Incidentally if you can take a look on my answers....yours truly. – Thorsten S. Jan 23 at 5:04
@ThorstenS. This is agent Ahmed from Central Moderators Agency and I'm arresting you for installing and operating a Cross Upvoting scheme. You have the right to remain silent. Anything you say can and will... – ahmed Jan 23 at 7:51
The biggest downside is that Jon Skeet takes over the world. – DJ McMayhem Jan 23 at 20:21
up vote 8 down vote accepted

Your question is similar to this real-world one, which asks how we could take a system like Bitcoin, but issue new currency when people do something more useful than bitcoin-mining. Someone else already mentioned Cory Doctorow’s fictional Whuffie.

The new currency would have a lot of the same problems as Bitcoin, one of which is that nobody is managing the money supply, and having the right quantity of money, avoiding massive inflation or deflation, turns out to be important. StackExchange the country might work around this with some Modern Monetary Theory: instead of controlling the source of money, it could control the money sink: that is, tax everyone’s reputations not in order to fund public expenditures, but in order to prevent inflation. If there’s a risk of harmful deflation, it might temporarily grant a bunch of bonuses just to get more currency out there. This mechanism might also be a way to achieve what some real-world scrips have tried to: encourage people to spend it quickly instead of hoarding it by having it expire. Or just increase or reduce the point values of upvotes arbitrarily, although this would create resentment.

Most other details of economic policy depend on StackExchange the country and its balance of trade. If there’s a central bank that collects reputation, purchases foreign-exchange reserves, and uses them to maintain a peg against the dollar (for example), then reputation becomes dollars by another name, except that the benefits of seigniorage go not to the government, but to users who ask and answer questions. They effectively have jobs working for the government. That seems as if it would be vulnerable to cliques, but it makes more sense than giving it to people who own gold or silver mines. Only, dollars wouldn’t have the same unpredictable, unavoidable taxation needed to make the system work, so everyone would want to convert their reputation into dollars immediately, and the system would not be stable.

One wrinkle is that there isn’t one kind of reputation: there’s World-Building reputation, TeX reputation, StackOverflow reputation, and so on. It would probably be impossible to maintain a single exchange rate between these; some would have more rarity and utility than others.

If the exchange rates are allowed to float, reputation would not be a good store of value. (Bitcoins are mainly useful, compared to other currencies, as a way to get around Chinese currency controls.) Someone would need to want to buy it for its value not to collapse, and StackExchange right now would need to import just about everything. So the idea is only viable if people need to buy about as much reputation as people want to sell: this could happen if StackExchange sells as many services to the outside world as its citizens import, and the people buying answers need to buy rep using dollars or euros to pay for them. Then, those dollars and euros could be used to buy imports without the whole shebang becoming dangerously unbalanced.

Along the way, “reputation” would completely lose all connection to your actual reputation on StackExchange and just become a measure of net worth.

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Such a great answer, I wish I could upvote it more than once! Thank you so much. I think Stack Exchange as a nation would be thriving and cruising is way too the top of the economic ladder thanks to the plethora of great minds that populates it, and to its discussion based political system. Thus, its currency would gain much power and becomes comparable to that of the dollars, isn't it? – ahmed Jan 23 at 8:00
And as for the reputation source wrinkle, it wouldn't matter where you got your reputation from, just like real world dollars; it doesn't matter if you got them from your 9 to 5 office job or from that very lucrative side project. – ahmed Jan 23 at 8:04
There are still a lot of questions to be resolved, one of which is how the economy of StackExchange works. If people get rep for doing things that earns StackExchange hard currency, it could keep the ratio of rep-to-dollars steady, but the rep system would have to drastically change. If not, SX would have to talk the people bringing in money to subsidize people who aren’t. – Lorehead Jan 23 at 12:59

One disadvantage is that it would tie monetary gain to hive mind thinking.

Say you live in an area where the majority of people see women as second class citizens.
If you get up and say "You know, I think women should be treated as equals, and get to drive cars and own property" you'd get down voted all over the place and there goes your life savings.

This could be an advantage if the current popular opinion is one you agree with, but even then it could discourage people from thinking new things that they believe might be controversial at first.
It also gives trolls to much power over you.

Also, people who are charismatic and good at communicating will do better than those that aren't as strong in that area.

Something similar to this is the reputation system in the book Down And Out In The Magic Kingdom by Cory Doctorow, where they are essentially post scarcity, except in service related areas, so they are able to make it work.
The more you help others, the higher your reputation, and the higher your reputation score the more likely people are going to want to help you. If you start freeloading then your reputation will suffer, and you'll have to work harder to get it back.

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"people who are charismatic and good at communicating will do better [...]" well it isn't a rule, but as a trend, I'd say it is pretty realistic. – bilbo_pingouin Jan 22 at 22:20
Wait, you mean Steve Jobs or Bill Gates aren't good at communication..? – bilbo_pingouin Jan 22 at 22:28
Would a modified system where downvotes are non existing or controlled (for example, only courts of law can order a downvote) be a better place then? Would it solve all the problems of such a system? – ahmed Jan 22 at 22:49
Hmm let's see ... popular opinion, charisma, good at communication ... more or less the same as democracy in real world? – Masked Man Jan 23 at 15:24
This answer overlooks the fact that, whilst the score of a particular post is the simple difference between number of votes cast up and down, the effect on the poster's reputation is not so simple: they earn +10 units for each upvote (on an answer, at least) but only suffer -2 units for each downvote. Thus an (answer) upvote is worth 5 downvotes, and therefore a post only requires support from 20% of the community to have a net postitive effect on the poster's wealth: the remaining 80% are free to vote down at will, the poster will still gain overall. – eggyal Jan 24 at 12:36

Pro's: it would be costless to mint new currency. Also, people would be paid for their knowledge and skill, just like in the real world.

Cons: Rampant inflation. In just a few hours, someone can earn hundreds of reputation from a smart question.

Interesting wrinkle in this problem: What about hive-voters? Say an organization of, say, 10,000 people form up and upvote all of each others questions and answers, they will be insanely rich in a matter of minutes.

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"In just a few hours, someone can earn hundreds of reputation from a smart question." actually... it could just be a really stupid person, asking a question where the answer is obvious to most of us (such as "this nigerian sounding guy called me and wants my apple password, he sounds nice, should I give it to him?") – n00b Jan 23 at 0:52
True, then someone LOSES 100's of reputation in a few hours – DevilApple227 Jan 23 at 22:35
@DevilApple227: It's actually far harder to lose reputation on SE than gain it (upvotes are worth +10; downvotes only cost -2). – eggyal Jan 24 at 12:38
It's true that it is far harder, but I've seen posts in the -15 range or so. A few of those... – DevilApple227 Jan 24 at 23:55
That really doesn't say much: after all, +4-19 yields a post score of -15 yet net reputation for the poster of +2! – eggyal Jan 26 at 1:08

It's pretty bad.

It cannot be exchanged between users except for a complex system of bounties. It can't be exchanged against other currencies, complicating imports and exports. And loses its value by the minute. The central bank can't control the hyperinflation. Etc.

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It doesn't really lose value by the minute, because (as you point out) it can't really be exchanged much. You can only use it to buy answers and downvotes, and those both have fixed prices that don't change no matter how much currency is out there. – Robert Jan 23 at 19:33
It still does. If you have 10k rep and the next one has 1k, you're rich. If you just wait without doing much, people will reach and overpass you. You become relatively poorer. Without actually losing anything. – bilbo_pingouin Jan 23 at 20:54
Your relative position changes as other people acquire more points, but your buying power doesn't (much). When prices are fixed, there's no loss of value. – Robert Jan 23 at 22:00
Due to the fact that the only exchange of points between users are bounties. If everyone has hundreds of thousands of rep, they'll start multiplying bounties. Creating an inflation, and making your effective buying power lower. But you're right in the sense that it depends on some parameters that are not explicit here. – bilbo_pingouin Jan 23 at 22:33
I think "it cannot be exchanged between users except for bounties" contradicts "it is used as a currency". Reputation currently is not a currency, and unless it can be exchanged reasonably freely then it will still not be a currency. So unless you assume some means of exchanging it gets implemented as part of the change, the result of "Stack Exchange decides to use it as the official currency" is, "everyone has a good chuckle at their nonsense and gets on with life". – Steve Jessop Jan 24 at 14:49

Currencies only have value as long as people trust they have value. You wouldn't accept a dollar if you don't believe you won't be able to buy anything for it. So, the risk? People will stop believing that somebody would accept it as a currency. It is kind of self-fulfilling prophecy.

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There would be several difficulties with that system. For one, every citizen in the country would need to have access to Stack Exchange to gain money and survive. Also, I would imagine this could lead to massive inflation because high-rep users with 20k rep and more. In a way, your idea doesn't make sense because when you award a correct answer with 10 reputation, where does the rep come from? Not from your rep account, and not from their rep account, so from the government? Or maybe some higher being? If it was the government, soon, citizens would be far richer and thus more powerful than the government, so no matter which way you look at it, this potentially catastrophic idea would lead to civil war and tremendous loss of life.

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It's far too easy to hack.
You only need a valid e-mail address to create Stack Exchange account.
If gaining points was valuable, you could create 21 accounts, have them ask and answer questions and upvote each other's answers and questions. If each fake provides 5 answers and the fakes upvote them, they all jump to 1000 rep overnight, even without any real humans liking them.

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Some terminology changes are recommended, such as upvote instead of "like", and Stack Exchange instead of "stack exchange". And do you mean "rank 1000" or 1000 reputation? – wizzwizz4 Jan 23 at 7:40
It's quite obvious that if such system would be used as a currency, it'd need to be a real name system. P.S. I regret it already isn't. – Trang Oul Jan 23 at 9:23
"You only need a valid e-mail address to create Stack Exchange account." - I suspect this is taking the question too literally. – O. R. Mapper Jan 23 at 16:00

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