A group of young entrepreneurs in California have developed iList, an amazing online classified advertising service that ties users to their public identities. This free service, which is similar to Craigslist, attempts to put an end to questionable and sometimes criminal postings on other sites by holding accountable those people who care about their identity and reputation.

Brad Seraphin, iList’s marketing director, told me that his team initially came together because of shared interest in technology and ethical concerns about how some of these online sites have been handled. It wasn’t until his partners came up with the iList idea and told him about various crimes committed online that Seraphin became aware of how bad things were. Seraphin’s oldest brother told him about a vanguard journalism piece he saw on “Tina”, the slang for “crystal methamphetamine” adopted by the drug culture on sites such as Craigslist. He went online to check it out but couldn’t find the article. Instead he ran across a story about a murder that occurred when a girl responded to a “nanny for hire” ad. As he continued to search, he discovered more and more scams, criminal behavior, and questionable ethics.

The numerous news accounts of drug dealing, sex for sale, and other immoral activities tied to postings on these sites convinced Seraphin to try to change the online classified ad culture through iList.

Here’s how it works: Everyone on iList must reinforce their authenticity by linking to social network profiles on sites such as Facebook, MySpace, and Twitter. This simple registration process provides the necessary visibility that iList hopes will thwart spammers, scammers, and anyone else attempting to use the service for nefarious purposes. As an extra layer of optional protection, iList awards a visible yellow star to users who verify their account with a mobile phone.

Put simply: On iList you can see exactly with whom you are dealing, that person’s friends and associates, and, in general, the company a person keeps by having information from multiple social sites. If a user posts something ranging from weird to illegal, it is easy to contact authorities to protect the public. “You’d have to be pretty foolish to try selling drugs or sex on iList when everyone knows exactly who you are,” says Seraphin.

An additional benefit of iList, says Seraphin, is that it lets you use the power of your social networks to enable friends to help spread your listing quickly to others in their networks. Instead of dealing with strangers, iList helps connect you to a helpful audience of friends who could use their networks to help connect the right people. iList hopes that someday churches and other non-profit organizations could hold safe “online garage sales” on the site to sell gently used items as a fund-raiser. One person makes a posting and the church or organization can pass on the good word until they can pair the listing with a matching buyer.

This is a great example of the market functioning as it should. That is, where virtuous products meet consumers with values. iList could revolutionize how the public conducts business online by humanizing and personalizing a process that online auction sites like eBay and uBid would do well to adopt as well.