This is an extension of a previous post. I'm trying to break it up into smaller parts.
Flagging
I've never flagged anyone and no one has flagged me. I've only been here a week. From what I've read, flagging lowers reputation, SBD rewards, and stops posts from trending. Anyone can flag anyone for any reason. This system is subjective and not ideal.
Flag Wars
The lax rules of flagging inevitably lead to flags wars: the act of flagging every post of someone that flagged you. This is an inherently flawed system. You should only flag posts that deserve to be flagged, just like you should only upvote posts that deserve to be upvoted.
Subjectivity
There are many reasons a person might get flagged because of subjective opinions. Anyone can flag for any reason, therefore, there must be penalties for false flagging (example: revenge flagging). There must be a way to determine if the accusers are in the right.
Solution: Add Trials by Jury
When a person get's flagged, they do not incur a penalty until the weight of all flags added together are greater than a predetermined threshold. Once this threshold is breached, the accused has two options: accept punishment or double down to start a trial that incurs twice the penalty (if found guilty).
Steemit will send out random jury invites to random users, until it gets enough volunteers to start the trial. Jurors could be paid as little as 1% of the reward pool to promote participation incentive. Using majority rules a verdict is determined. In the case of innocence, it must be determined if the false accusers deserve punishment. In the case of guilt, a reduced fine should be considered.
Penalty
Fines should be measured in Steem Power: the measure of blockchain integrity. A guilty defendant's fine should be split among his/her accusers, similar to curation distribution. Conversely, false flag accusers should lose their SP fine to the accused. This mechanic will stop flag wars and keep people honest, in addition to providing increased entertainment for the community. Never underestimate the power of mob justice.
Next: I'll go more in depth on why Steemit needs 3 reputations. One of them is judgement reputation. This would be required for calculating flag weight, flag 'curation', and increasing you're chances of being selected as a juror.