Cory Doctorow is the latest to join the hallowed ranks of science fiction authors whose ideas have become reality, though not for some cool gadget or super-weapon. The Whuffie Bank is a non-profit start-up that has taken its name and concept from Doctorow’s Down And Out in the Magic Kingdom novel – a currency based entirely on reputation. [via pretty much everyone, though I saw it first from Chairman Bruce]

The startup is hoping to promote change in the web by rewarding users with a positive impact on the web with this karma-like digital currency. The service will monitor your activity across various websites, including things like comments, posts, and more. When you complete positive actions, you gain Whuffies, and you lose them when you do something that the organization deems to be detrimental. The company hopes that as we use the web more and more in our day-to-day life this positivity will extend beyond the web.

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The algorithm takes into account ‘public endorsements’, or the number of times a user’s tweets are retweeted, or a Facebook post is Liked. It also takes into account who is making the endorsement, and the content in the messages that are being posted. You can make offers to other users using Whuffies as payment (for example, I could ask someone to help me draw a logo, offering 100 Whuffies as payment).

It’s a fascinating idea, and running it as a side-supplement to regular currency is far more likely to succeed than a pure reputation economy… indeed, the way The Whuffie Bank are pitching it, it’s more like an attempt to formalise the invisible transactions of kudos that already occur in the web’s interlinking clades and cultures.

But it’s still pretty deeply flawed, I think, because the metrics it’s using are too easily gamed, and have hugely diffferent values from group to group. Think of how the web PR shills on Twitter constantly retweet each other like some acoustically-perfect echo chamber, or how some people in your Facebook network will blithely click the “Like” button on every Mafia Wars announcement they see. I think the problem is one of scale: a reputation currency can only work across a group that’s small enough to have a real idea of who and what every participant is and does. Trying to make it global – or even national – is probably a doomed enterprise; it might work for small city-states or large towns, though, alongside a time-based currency like LETS.

That said, I still believe there’s a useful idea at the core of the Whuffie concept – it’s something I’ve been kicking around ever since reading Down And Out…, and when I finally start squeezing some fiction writing time back into my schedule, a modified version be appearing in my own stories. What do you think – is reputation quantifiable? And how could we measure it accurately enough to trade on it?