# Reputation Gain/Loss

**Validating Nodes (VNs)** accumulate or lose reputation based on their actions and performance. When VNs misbehave by raising failed challenges, failing to validate transactions correctly, or remaining inactive for an extended period, they lose reputation points. This **loss of reputation** directly impacts their standing in the network, affecting their ability to earn rewards and participate in validation.

<figure><img src="https://651401021-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2FY2TowO8fF4a1GlgpRfIZ%2Fuploads%2F53rag4l5xZ31Kmlgg024%2Fimage.png?alt=media&#x26;token=5eb67f6c-891d-49fd-8322-2b384e7a6dde" alt=""><figcaption><p>Loss of Reputation</p></figcaption></figure>

### VN Reputation Loss Behaviors:

{% tabs %}
{% tab title="Failed Validations" %}
Whenever a VN participates in validating transactions, the expectation is that it will process and approve valid transactions correctly. If the VN **fails to validate** a transaction properly, whether due to a technical error, negligence, or intentional misconduct, it will lose reputation points.
{% endtab %}

{% tab title="Invalid Challenges" %}
VNs are responsible for raising **challenges** against the Sequencer if they detect discrepancies between on-chain and off-chain transactions. However, if a VN raises a **challenge** and the other majority of the nodes find it invalid, it will lose reputation points.
{% endtab %}

{% tab title="Inactivity" %}
Inactivity in the network refers to the failure of a node to perform validation tasks over an extended period. After an initial **#-day grace period**, VNs start losing reputation points for each additional day of inactivity.
{% endtab %}
{% endtabs %}

Key actions that lead to reputation loss for **VNs**, along with the corresponding penalties applied to each behavior:

| Reputation Loss Trigger   | Reputation Deduction |
| ------------------------- | -------------------- |
| Failed Validation         | -## points           |
| Invalid Challenge         | -## points           |
| Inactivity (after # days) | -## points           |

***

### VN Reputation Gain Behaviors:

{% tabs %}
{% tab title=" Successful Validation" %}
Each time a node correctly validates a transaction, it helps to maintain the security and integrity of the exchange. Every **successful validation** ensures that transactions are processed correctly and fairly, which earns the node **reputation points**.&#x20;
{% endtab %}

{% tab title="Successful Challenge" %}
Nodes are responsible for monitoring the Sequencer’s behavior and identifying any discrepancies between off-chain and on-chain transactions. When a node successfully identifies a **Sequencer error** and raises a **valid challenge**, it earns **reputation points**. This helps ensure transparency and fairness within the network.
{% endtab %}
{% endtabs %}

Key actions that lead to reputation gains for VNs, along with the corresponding points awarded for each action:

| Reputation Gain Trigger | Reputation Gain |
| ----------------------- | --------------- |
| Successful Validation   | +## points      |
| Successful Challenge    | +## points      |

***

### Sequencer Reputation Loss

When the Sequencer is wrong, the **reputation it loses** is global. This impacts not just the internal network but Yamata's overall credibility. If the Sequencer is found to be hiding or mismatching transactions, it undermines trust in the exchange, leading to reduced transparency and a perception that it is acting against its users.

As a result, fewer people will trade on the platform, directly reducing its revenue. In this way, it’s in Yamata’s best interest to ensure the Sequencer stays accurate and maintains its reputation to keep user trust and trading volume high.