Editing Reputation (section)

== REP token design ==
There are three mechanisms that combine to define a REP token in DGF: 1. minting, 2. REP salary, & 3. review.

=== REP Token Minting Mechanism ===
''Reputation tokens (REP) are minted when a fee is paid to the DAO. Ownership of REP is determined by the work done to earn that fee. The fee is distributed to the entire group, proportionately according to ownership of past REP.''

This basic mechanism is the heart of the entire DGF. The mechanism gives REP tokens for work, delaying the fungible cash money reward and diffusing it to the entire group. The smart contract that governs the REP Token Minting Mechanism is called the [[Validation Pool]] (VPSC). 

==== DAO workflow ====
To clarify the process for minting and distributing REP, here is the explicit DAO’s workflow:

1.      A public outsider (non-member of the DAO) asks the DAO for work in return for a cash fee.

2.      The DAO chooses a member to do work for the outsider.

3.      The member does the work for the outsider.

4.      Outsider gives the fee to the DAO.

5.      The DAO mints new REP for the worker, if the work was done properly (as determined by the Validation Pool).

6.      The DAO shares the fee with everyone who already has REP.

In the course of the workflow, the fees the DAO earns are not given to the member who did the work to bring in the fee. Instead, the fees are shared with everyone in the DAO, proportional to their REP holdings. This is called the REP salary. 

=== REP Salary Mechanism ===
''Any fees the DAO earns are split proportionally with every REP token holder.''

Specifically, suppose the total number of REP tokens in the DAO is <math display="inline">R_T</math>, the number of REP tokens member <math>m</math> holds is <math>R_m</math> and that the DAO earns a fee of <math>$f</math> in cash. Then member <math>m</math> earns <math>$f*R_m/R_T</math>.

Instead of fees going directly to those who do the work, newly minted REP tokens proportional to the fees are given to those workers. Workers only get cash later, as their REP continually earns parts of new fees through the REP salary.

The REP salary mechanism is the last stage of the [[Validation Pool|Validation Pool smart contract.]] 

As an example, suppose that <code>worker1</code> has 50 REP tokens in a DAO with 1000 REP tokens total. Suppose <code>worker1</code> finishes a [[work smart contract]] (WSC) which earns a fee of $100. Then <code>worker1</code> does not receive the $100 fee directly. Instead <code>worker1</code> receives 100 newly minted REP tokens. The entire DAO shares the $100 fee between all 1000 REP tokens, meaning each expert receives $100/1000=$0.10 for each REP token they own.

[[Reputation tokenomics|Tokenomics formulas]] show that, on average, the REP salary eventually pays out the present value of the fees for the work. The system is ultimately fair, since all the profits are shared entirely with the members. The REP salary delays the distribution of the fees, which gives REP tokens some of the meaning of reputation, since they can be slashed if at any point the DAO discovers the actions which earned the REP were harmful to the DAO.

=== REP Review Mechanism ===
REP review is the purpose of [[DAO governance]]. [[Governance#Executive governance|Executive governance]] is the automated review of present uses of REP tokens. [[Governance#Judicial governance|Judicial governance]] is the deliberate review of past uses of REP tokens. [[Governance#Legislative governance|Legislative governance]] reviews plans for future uses of REP tokens. 

Automated executive review is achieved by automated binding votes with govREP in the [[Validation Pool]]. Deliberate judicial and legislative review requires a lengthier process of commenting and referencing a series of proposals with non-binding votes which end with a binding vote to conclude the judgement.