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Dealing with malicious nodes is an important issue for many types of overlay networks. In overlay networks, malicious nodes can drop, delay or in other ways subvert user traffic, modify packets and break protocols required for the successful operation of the system. We propose a reputation management model supported by an ID based cryptosystem to reveal a malicious node with the aid of altruistic legitimate nodes who wish to identify a malicious node. We propose a deterrent structure using simple mathematical methods to calculate reputation of nodes. Evaluations show that the cost of malicious behaviours for nodes can be extremely high.