I think the only way your reputation should decay is if you do something opposed to the interests of a faction in question. Killing their members would certainly qualify
MMOs do tend to invent these annoying little mechanics to make players log in for reasons other than wanting to play, and while it can be somewhat effective in the short term, I think it serves to actually push the players away in the long term. There's a point when most people just get tired of being punished for not playing and decide they don't care anymore. The way to make people keep playing is to improve your content, not punish them if they don't log in as often as the developer wants them to. Especially given the fact that a significant portion of the ED player base are people who played the original Elite back on it's ZX Spectrum and C64 variants. In other words, not teenagers, but people with careers and families who want to play when they can and not be punished for not being able to be a regular at all times. It's a bit of a failed move in my eyes.
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