Various practices and explorations of DID under the blockchain

A few days ago, Vitalik Buterin and others released a paper titled "Decentralized Society: Searching for the Soul of Web3.0", which pointed out:

“Today, Web 3.0 is more about expressing transferable, financialized assets than a codification of social trust relationships. However, many core economic activities, such as unsecured loans and building personal brands, are built In a lasting, non-transferable relationship.

In less than ten years, Web3.0 has created an unprecedented unique and flexible parallel financial system, bringing a complex and open ecosystem to financial transactions, and then, the economic value of financial transactions is determined by humans and produced by their relationship. Since Web3 lacks the foundational elements that represent this social identity, it fundamentally relies on the centralized Web2 structure it seeks to outperform, thus replicating its limitations. "

Before that, we were in "Identity Management or Become the Next 100 Billion Market?" "In the article, the importance of DID to Web2.0 and Web3.0 is introduced, and it is mentioned that DID (Decentralized Identifier, decentralized identity system) is a market that needs to explode. There are two main reasons for this:

First, under Web 2.0, the contradictions in data privacy and ownership have intensified;

The second is the absence of native Web3.0 identity, which, as a prerequisite for trust, makes Web3.0 unable to support common activities in the real world, such as confirming the authenticity of identities, providing undercollateralized loans, and resisting Sybil attacks (Sybil attacks). Attack), one-person-one-vote voting governance, etc.

Today, we will focus on the various practices and explorations of DID under the blockchain, including:

As an indispensable component and underlying infrastructure of Web3.0, the value of DID does not lie in itself, but based on a series of applications generated by it. At this time, DID acts as a data entry point and a data security governance window. The DID protocol under Web3.0 is committed to solving multiple pain points on the chain such as DeFi, DAO governance participation, non-robot proof, and NFT fraud.

The core driver of finance is the credit element, and modern finance is essentially a variety of games built on credit. In less than ten years, the blockchain has created an unprecedented, unique and flexible parallel financial system (DeFi), bringing a more open ecosystem to financial transactions.

The most developed of DeFi is its credit products, but due to the lack of identity, many DeFi lending agreements require over-collateralization, because credit scores cannot be used to measure the creditworthiness of borrowers, and this also limits DeFi agreements to obtain mortgages or large amounts. Business loans and other functions.

If DID can be used to rate personal credit based on direct consideration factors such as asset status and behavior data on the chain, and provide different levels of services in comparison, for example, entities with a good debt repayment history can use less or no collateral from the lending platform Under the background that the total lock-up volume of DeFi has exceeded 110 billion US dollars, this will stimulate more imagination, and DID can also give birth to and support more DeFi products and services.

Although the use of blockchain can help us track the production time and circulation history of specific commodities, it cannot track the social provenance for us, nor can it provide a rich social background. This has led to the lack of social context in the current NFT field. The abuse and fraud of the Internet also force most artists to promise scarcity and original provenance only through centralized platforms such as Twitter and OpenSea .

By deploying DID solutions, buyers and sellers can verify the creator or a specific digital artwork. Of course, this application range is not limited to art, but can also be extended to services, rentals and any market based on scarcity, reputation or authenticity.

DAO (Decentralized Autonomous Organization) is a virtual community gathered together for a common purpose, governing and collaborating through smart contract voting on the blockchain.

With the continuous development of the encryption market, DAO has gradually become a standard for the development of projects on the chain, and it is one of the important conditions for evaluating the maturity of a union/team. Projects equipped with DAO will also make users more trustworthy. Since DAO governance is decentralized, decentralization is the key to DAO autonomy, but the lack of proof of individual uniqueness allows a single user to accumulate voting power by registering multiple wallets.

So far, Web3.0 has largely relied on on-chain asset sales or airdrops to call in new communities or empower communities, but the accuracy of doing so is not high and it is vulnerable to Sybil attacks.

At present, more and more projects in the circle are also aware of this. For example, the recently announced launch of the Hop Protocol, a cross-chain protocol for governance assets, stated that in order to combat sybil airdrop attackers, it plans to reward community members for identifying and reporting sybil addresses. It can be seen that the application of DID in this respect will have great prospects.

In addition, due to the rise of multi-chain ecology, on-chain identity is no longer a single-chain dimension. More platforms that provide on-chain identity services also act as identity aggregators, allowing users to manage cross-chain identities. When interacting, you can also use quantifiable activities to build and improve your on-chain reputation and credit for yourself.

At present, there are already many protocols that are building solutions for users’ common identities under Web3.0, such as an identity overview that demonstrates ability, value or status, including ENS, POAP, CyberConnect, Lens Protocol, Rabbithole and Gitcoin DAO that focus on bounty tasks , Layer3.xyz, there are also non-robot proofs, such as BrightID, Proof of Humanity (POH), and identity protocols for on-chain and off-chain credit, such as Arcx.money, Project Galaxy, Reputation DAO, etc.

Project Galaxy builds a Web 3.0-based DID system, the basic framework includes its application modules, credential oracle engine, and credential API for developers (data consumers) to utilize credentials. Since the use of credential data will be charged based on usage, and most of the collected fees will go to credential data stewards, such data stewards will be rewarded when credential data is used in Galaxy's ecosystem.

For on-chain credentials, curators can provide subgraph queries or static snapshots. Off-chain, integrations have been made with data sources like Snapshot.org, Twitter, and Github.

On January 25 this year, Project Galaxy completed a financing of US$10 million, led by Multicoin Capital and Dragonfly Capital.

ARCx is a decentralized scoring protocol that powers on-chain identity and credit score-based lending. ARCx issued a product called DeFi Passport, which quantifies the creditworthiness of its on-chain addresses based on the credit score of each Passport holder. Credit scores will be determined by analyzing the holder's historical activity. ARCx also built a machine learning model to backtest the classification of liquidated or not-liquidated positions, reflecting the correlation between on-chain activity and credit risk.

In 2021, ARCx completed $1.3 million in financing, led by Dragonfly Capital, Scalar Capital and Ledger Prime.

Litentry is a decentralized identity aggregator that links user identities across multiple networks. Users can manage their own identities through it, and DApps can obtain real-time DID data of identity owners across different blockchains. Through aggregated cross-chain identities, blockchain projects can provide dedicated hierarchical identity services based on this to support the next generation of Web 3.0 services.

Litentry calculates an individual's credit rating to facilitate DeFi analysis services. Through all the on-chain activity data aggregated by Litentry on various addresses, users can generate proofs in a decentralized manner by submitting addresses for activities such as IDO/airdrop whitelisting.

In the future, we will continue to explore in depth, such as weight calculation based on user behavior on the chain, risk assessment, credit judgment, user value calculation, etc.

The main features of DID-based Web3.0 can be summarized as five key words: "initiative", "digital maximization", "multi-dimensional", "decentralization", and "privacy first".

"Initiative" means that users have the absolute right to speak about data, and master the ownership, management and control of digital identity data; "digital maximization" refers to the integration of digital technologies and solutions into all areas of business; "multiple "Dimension" refers to comprehensive consideration, establishing a comprehensive and unique digital identity system to prevent fraud and identity theft; "decentralization" means a decentralized network structure based on blockchain and technical features such as tamper-proof, which prevent identity data from being stolen. Controlled by a single centralized authority; "privacy first" refers to ensuring information security, protecting user privacy, and maximizing the establishment of Web3.0 trust.

Different from centralized identities, DID has three obvious advantages:

Return the control of the data to the user, giving the owner full sovereignty over their digital identity and usage, just as the user holds the private key means that he fully owns the encrypted assets; to achieve data integration, the user can have a information and separately managed digital identities, rather than multiple digital identities managed by different centralized platforms (such as Alipay accounts managed by Alipay, bank accounts managed by banks, academic qualifications managed by Xuexin.com, etc.); through DID, users can Securely manage and use your own private data. When the platform obtains user authorization, it no longer needs to know all the information of the data to confirm the user's identity, which is to realize the security model of "available and invisible" data. Of course, the current DID based on the blockchain still faces the following four major problems:

For Web2.0, issues such as data privacy and security have raised the rigid need for digital ownership. From the perspective of Web3.0, the pain points of current use cases on the chain also make decentralized identity the most potential and challenging field of.

The essence of DID is to maximize the establishment of Web3.0 trust while protecting user privacy. DID-based service models can be very rich and diverse, and the current exploration of it has just begun. As the core component of Web3.0, I believe that the development of DID will also evolve with Web3.0 to create more valuable application modules, and we will continue to pay attention to new use cases to bring you more first-hand information.