A clear look at the fate and revolution of digital identity in one article

Author: Kyle Liu, Bing Ventures Investment Manager

Introduction: As one of the important applications in the blockchain field, digital identity has great potential and development prospect. In the era of Web 3.0, digital identity is expected to be decentralized, censorship-resistant, and tamper-resistant, making it a key component of many blockchain projects. However, digital identity also faces various problems and challenges during its development.

It’s unclear which vertical of Web3 social will take off, yet even the major Web3 social products lack traction compared to their Web2 counterparts. But there are reasons to believe that Web3 social will surpass Web2 in the long run. The reason is simple: although a Web2 application accumulates data on its own, it has a remarkable network effect. While Web2 products accumulate data in siled ways, Web3 applications consume and contribute to a shared data ledger and therefore enjoy network effects at the ecosystem level, rather than at the application level as in Web2. We will see what is the right mix of protocols and applications that can turn this vision into reality.

Difficulties faced by current digital identity solutions

Security and privacy protection issues

Digital identities usually require data storage and processing on multiple nodes, so There may be risks such as security vulnerabilities and data leaks. In addition, digital identity also needs to solve issues such as how to ensure the security of user authentication, how to prevent malicious attacks, and how to implement data encryption and access control. In addition, privacy protection is also an important issue because these projects usually need to collect and process users' personal information.

It takes a short time for users to build reputation

The construction of digital identity requires the evaluation of users' behavior on the blockchain, and then forms a corresponding reputation evaluation. However, this kind of evaluation requires users to accumulate credit over a long period of time. For new users or new users entering a certain field, the role of the on-chain credit system is very limited.

Data is complex and difficult to classify

On the chain, a huge number of operations are recorded every second. So how does the identity system classify these behaviors into categories such as transactions, Mint NFT, third-party DAPP interactions, etc., and then display them in the address or domain name corresponding to each identity, which is a very complicated process.

Reputation systems are not interoperable

There are more and more ecologies centered on public chains, but the interoperability between public chains is extremely limited. It is easier to build a reputation system for an ecosystem alone than to build a reputation system for the entire crypto world. However, improving the interoperability between public chain ecosystems is also a focus to be solved in the future.

Lack of scalability

Since digital identities often require data to be stored and processed on multiple nodes, the system may become slow as the number of users and data volume increases or unstable. In addition, issues such as how to manage large amounts of data, how to ensure data consistency, and how to achieve efficient data access need to be addressed.

Source: Dock

Building a new decentralized authentication system

Building identity in the current crypto market The main projects of the solution can basically be divided into the following categories based on different use cases and implementation methods: 1. Data/behavior tagging; 2. DeFi credit scoring; 3. Badges/certifications; 4. Privacy certification; 5. Identity Resume. This article will start with different subdivision development trends to analyze the prospects of this type of track.

Source: Bing Ventures

Standardization trend: modularization + interoperability

Into web3, the latest The main discussion points center around identity ownership and interoperability. In traditional web2, interoperability is mainly achieved through federated identity management, which can link information stored across identity management systems, and single sign-on systems. (SSO). The problem here is: Identity data is provided by organizations, companies and service providers, rather than owned and accessed by the individuals to whom it belongs. Web3 identity solutions, on the other hand, are centered around a user-centric ownership model.

Sismo

Sismo is a modular proof protocol on Polygon that focuses on decentralization, privacy and usability, issuing proofs in the form of non-transferable badges. The feature is to use zero-knowledge proofs to issue badges to users' other accounts (such as ENS and twitter or github) to build their Ethereum profile, and users can aggregate their reputation into a public profile while maintaining confidentiality.

Sismo allows users to apply for ZK certification and use Sismo’s SDK. Developers can now use Sismo’s certification to lock in user groups. It is still in Alpha testing stage. Application scenarios such as: anonymously proving holding NFT, without revealing which BAYC and which Ethereum account (and its complete history) are held to prove ownership. and access the community of holders through the ZK badge. Additionally, in DeFi, ZK badges can be used to obtain loans at better borrowing rates without revealing specific transaction data.

Spruce

Spruce is a digital identity authentication company committed to promoting digital identity authentication while protecting user privacy, and trying to re-establish a trustworthy interaction between enterprises and governments. . Spruce connects with existing identity and data devices in enterprise environments, including identity servers, internal resource APIs, key management systems, ERP and cloud services.

The Ethereum Foundation and the Ethereum Name Service (ENS) announced support for Spruce’s proposed system for secure login using Ethereum, allowing users to log in using cryptographic identifiers such as their Ethereum wallet address. By using Spruce's system, users can use their cryptographic identifiers to verify their identity without having to provide their personal data to third-party agencies.

Enhanced user experience: decentralized governance + privacy protection

Compared with Web2, the enhanced user experience of decentralized digital identity projects is more important because of Web2’s authentication and data Storage is centralized, meaning users’ personal information and data are stored on central servers, making them vulnerable to hacking and abuse. The identity verification and data storage of decentralized digital identity projects are decentralized, which means that users’ personal information and data are stored in a distributed network, making it more secure and private.

BrightID

BrightID is a decentralized anonymous social platform that is committed to solving the problem of identity uniqueness by building and analyzing social graphs. BrightID allows users to prove their unique identity to applications without having to use multiple accounts. At the same time, the application does not need to collect personally identifiable information or cooperate with a centralized organization, thereby protecting user privacy to a certain extent.

BrightID uses P2P method to encrypt and send any personal information of users, including text, photos, etc., to avoid data being stored on the network. Its official Token is BRIGHT, with a maximum supply of 100 million and an initial supply of 25 million. BrightDAO can supply up to 10 million each year. Specific use cases of Bright Token include: liquidity mining, governance and voting, hacker bounties, faucet testing rewards, etc.

FaceDAO

FaceDAO is an anonymous social network built on a decentralized blockchain, using facial recognition as a login threshold to protect user privacy. It uses private keys and DID as the carrier of data, allowing users to have absolute control over the data. In order to encourage users to contribute to the ecological development of the platform, FaceDAO will issue token rewards to users and use decentralized autonomy as its operating model to allow users to participate in platform governance decisions.

In less than three months since its establishment, FaceDAO already has more than 500,000 real community members. According to official data, the top three countries with the most users of FaceDAO are Indonesia, Bangladesh and India, with users from these countries accounting for 80% of the platform’s users. At the same time, a large number of people from developing countries such as Nigeria, Vietnam, and the Philippines are also joining FaceDAO.

The future development direction of Web3 identity system

Clear and comprehensive on-chain identity map

One of the key points in Web3 is decentralized social networking, and the identity system can help Users build more comprehensive personal resumes, and the social graph on the chain is more clearly visible. Users demonstrate their abilities and loyalty to NFT, protocols, ecology, etc. through various certifications, thereby presenting their reputation in the entire social graph, which is also conducive to users to carry out a series of other activities.

Higher level of privacy protection

On-chain reputation is established based on credibility, but there are also users who do not want to display all their behavioral data. Therefore, while building reputation on the chain, privacy protection issues also need to be considered. This requires more flexible and secure authentication methods, as well as better data management and control for users.

Source: Dune

Solutions that make decentralized authentication possible

Digital identity today The project is relatively simple and has not yet formed a basic structure. It is only established based on specific market needs. With the further development of DID and the establishment of a consensus on chain reputation, it is believed that a mature on-chain reputation system will emerge in the future. However, we have yet to see the emergence of a killer app, and the path to mass adoption is unclear.

But we can definitely draw a conclusion about the digital identity we have seen so far. At present, Web3 digital identity still cannot directly compete with Web2 in terms of user experience. Rather than competing directly with Web2 apps, it would be a smart move to leverage its unique ecosystem in DeFi, NFTs, and other verticals to provide users with unique, innovative utilities. We think the following projects deserve attention because they have the following qualities:

• Silky account portability. A person's online identity should not be owned by a company that has no responsibility for its users. Users can smoothly transfer their accounts from one provider to another without losing any data or social graph.

• Powerful interoperability. The world needs a diversified market for Internet services to ensure healthy competition. Interop needs to feel like second nature to the Web. Different modes of interoperability frameworks respond to different needs, but their essence should be to help users gain more benefits.

• Secure privacy network. The popularity of multiple anonymous social networks on the traditional Internet can also be seen from time to time, and people have a strong demand for privacy. However, facts have also proved that the soil of Web2 is difficult to breed towering trees in this field. Fortunately, Web3 provides another new testing ground.

In short, the future decentralized digital identity system will move towards more standardization, strong interoperability, good privacy protection, excellent user experience, democratic and transparent governance mechanism, etc. develop. Web3 digital identity is currently in the experimental stage and has not yet achieved brilliant results. However, if the "verifier" model is designed in depth, the value of the "proof economy" is mined, and the co-construction and sharing gameplay of social networking, wallets, investment and even intelligence are integrated, these magic Can the new model of elements be a breakthrough? We'll see.