A few decades ago, your digital identity wasn’t very important. Your email address was the only thing that represented you online. But today, social media accounts are much more important. How you appear online is now important to you, your friends, and your employers. Most of our interactions happen through digital accounts that are stored on someone else’s computer.
Your digital worth is measured by how much engagement and advertising revenue you can generate. Usually, you only get a share of that revenue, but for most of us, the value of our digital identity is trapped within the platform. This applies to Facebook, Twitter, Reddit, and even our workplaces.
If you have worked at a company for a few years and have decided to move on, your reputation with the individuals you have worked with and the programs/emails you have created will still stand, but otherwise, the company’s reputation is your reputation. This dynamic has slowly changed with the rise of the internet and the consequent rise of the personal brand. However, your personal brand is still built off of your own word (which may or may not have much value when first starting out).
We don’t have a lot of control over our digital identity – it exists in bits and pieces across different platforms, and we can’t really change or reuse it much. It would be great if we could own all the pieces of our digital identity, and decide who we want to share it with and how it should look. It seems like we might not be too far away from being able to do that.
“Digital identity” is a complex and abstract concept. It can be sorted into categories like identity type, platform type, transaction type, and action type.
Hierarchy of Digital Identity
After that, it’s just a matter of attribute organization. The different types of identity can be split into physical and digital categories. Within digital identity, there are platform types of Web2 and Web3. The organization of attributes is the next layer. Now for the meat and potatoes of this breakdown, transaction and action types:
Social transactions are interactions between individuals or groups that are carried out for a specific purpose. Individual transactions are similar to those made through Venmo, where two parties exchange goods or services. Community transactions are geared towards benefiting a group as a whole, and can take the form of funding a shared project or governing the use of shared resources. Gaming transactions are those in which the outcome is uncertain and not always known in advance. This is common in many games, such as when players go on raids or interact with unknown entities in the course of the game.
Protocol Transactions are interactions with a product to take advantage of its specific benefits. Selling/Acquiring are marketplace actions where the protocol is used to do a peer-to-peer interaction. Staking is where you put your belief in a protocol as a key member of the product community. The use of the stake may differ, but the signal is the same. Use is the main use case action of the protocol. Sometimes it’s “selling/acquiring” or “staking.”
The article is discussing different types of conversations that are had in various communities. Proposals are like Ethereum Improvement Proposals, but can be more general. Moderation is when people enforce rules set by proposals. Feedback is usually in response to proposal or moderation actions.
– Contributions are transactions where you create or engage with something someone else has created. – Consumption refers to actions like liking or saving an article, or running npm install on someone’s node js package. – Creation includes creating new ideas, products, integrations, and much more. – Sharing these actions bridge platforms and communities and contribute directly to network effects.
How we represent ourselves online through our actions forms our digital identity. Let’s explore how this could be realistically used and represented.
What is the purpose of the digital identity layer?
The tokens that are built off of transaction data are likely to rely on different models and algorithms. These models will take different combinations of transaction and action types depending on what they want to represent. SourceCred allows custom-set rules for measuring “contributions”. Spectral.finance creates machine learning credit score models that may take on a Numerai style many-model architecture in the future. I’d expect Rabbithole.gg to have some token(s) representing levels of different skills in the future, where the levels are calculated with different models. The way we tokenize web2 account transaction data probably won’t be that different in structure data => model => token. They may rely on existing web2 aggregators like orbit.love and their model for calculating reputation by community.
The difference between fungible and non-fungible identity tokens reflects the different kinds of economies that will be generated. Fungible tokens act as a standard reputation coin that is the same regardless of the type of community or contribution. These may help facilitate cross-community collaboration and talent acquisition, leading to new treasury management strategies and considerations. Non-fungible tokens are identity bonds that can be staked or lent out, which grow in value over time as an individual’s actions continue to evolve. Identity forges (a protocol where you and I place our creditworthiness NFT to create a new representative token) will increase the utility and complexity of this token. Multiplying this across all proof tokens creates an “identity marketplace.”
Earlier I said that social graph tokens would likely be represented by your closest nodes instead of the full graph. This comes from the two popular approaches I’ve seen today:
- Sybil Resistant: The theory here is that if I am verified by enough other “people” who are real, then I am real. BrightID’s health score reflects this, and it seems to be working well.
- Tiered Entry: Let’s start with 100 people who we know are real and trusted, and then bring in more people based on the selection/voting of those 100 people
Your social graph is the people who have verified or voted for you. Whether or not these decentralized identities (DIDs) aggregate under addresses or the other way around largely depends on how we interface with the digital world. The tokenization of these graph shards could take many forms and will likely be layered upon by proof tokens.
This text is discussing the idea that our digital identity is evolving and becoming more complex, and that we need new tools to manage it.
Decentralized Identity: Passport to Web3
Decentralized Identity (DID)
The W3C’s DID specification is the most widely accepted standard for ensuring that identity systems can work across different networks and platforms.
The diagram below provides an overview of the DID architecture. A DID is an address on the internet that someone can own and control. It can be used to find relevant information, such as sign-in details and data encryption keys, associated with the DID. This information is stored in DID documents, which can be cryptographically signed to prove ownership.
In short, the DID is a central hub for identity. Users can control when and how they share information from their digital identity with others, and they’re not limited to a single platform or ecosystem.
DIDs Provide Users with Control, Security, Privacy, and Portability
DIDs Enabling New Use Cases
But in the digital world, there is no easy way to know that the person on the other end of a transaction is who they claim to be. Identity is important in the physical world so that governments can keep track of their citizens and so that people can claim the things that they are entitled to. In the digital world, it is difficult to verify someone’s identity.
DIDs could potentially solve issues with the current pain points of Web3. Some of these include issues with internet economic activity.
NFTs — Authenticity and Identity
Fraud and copyright infringement continue to be a problem for artists and creators. For example, Derek Laufman, a digital artist and designer of Marvel’s Super Hero Adventures, found his work being auctioned off on the NFT platform Rarible without his knowledge. This is a common problem.
NFT Fraud Continues to Plague Artists
This can be solved by having a strong DID infrastructure. This would allow applications to be built that would allow creators to sign off that an NFT (which represents a digital or physical asset) was created by them. Buyers and sellers would then be able to verify the provenance (origin) of the digital artwork. DIDs could also help foster greater engagement between artists and their community. For example, restricting NFT ownership to community members would limit speculation from scalpers or serving exclusive NFT content to select holders.
NFT’s could be used to help create decentralized identities. For example, someone might use an NFT to represent their online presence instead of just a username. One person who has done this is the co-founder of Manifold, @richerd. He has an NFT called a cryptopunk, and he turned down an offer of $9.5 million for it because it represents his identity and brand.
NFTs As Online Identities
Unlocking the Next Phase of DeFi
While collateralized loans have been a driving force behind the growth of the DeFi industry, the need for over-collateralization has limited their use cases to mostly traders seeking leverage. The typical reason someone would want to take out a loan is because they don’t have the necessary funds readily available, but the high collateral requirements of many DeFi protocols make them inaccessible to many would-be borrowers.
Introducing DeFi to mass adoption would be made possible by lowering or removing the collateral requirement. If there was a strong DID layer, it would allow for “on-chain” credit scores, which would give users access to credit-based lending. Also, since users would directly control their credit score, they could better monitor and adjust their borrowing/lending behavior. Consequently, DID would offer the opportunity to further democratize decentralized financial systems.
In addition, having a strong identity layer to financial applications could solve other current problems in DeFi, such as:
- Improving fair distribution of token airdrops by authenticating actual members and reducing the potential for bots to dilute airdrop events.
- Using DIDs to gate access to DeFi pools to reduce spam/sybil attacks or enable institutions to participate by providing compliance tools to identify counterparties.
- Guiding users through the dark forest of Ethereum by illuminating participants that can be trusted act in positive-sum ways.
Decentralized Autonomous Organizations (DAOs)
A DAO’s use of token-based governance often makes sense since those with the most to lose (large tokenholders) have the most influence and priority. However, this can put Active contributors at a disadvantage who may not have as much capital but still contribute a lot. Also, although members can develop a reputation within a DAO, they may have to start from the beginning in building credibility in a new context.
Decentralized Identifiers (DIDs) could help preserve a user’s reputation across multiple Decentralized Autonomous Organizations (DAOs). Being able to port over credentials from one DAO to another would reflect the reputation portability that we already enjoy in the physical world. This would prevent active contributors from having to start from scratch if they want to become involved in a different DAO. Furthermore, other Web3 contexts, such as participation in Gitcoin, publications on Mirror, or code contribution to Radicle, could also help DAOs find qualified candidates.
The DID Ecosystem
The DID ecosystem is made up of layers, with each layer building on the one beneath it. We’ve slightly adapted DIF’s 4-Layer Identity Model to map out which DID projects are focused on which layer, though it’s worth noting that most projects span more than one layer.
The Decentralized Identity Ecosystem by Layers
Layer 1: Identifiers and Standards
The standards, identifiers, and namespaces form the public trust layer, ensuring that there is a standard way of doing things, that things are portable, and that different systems can work together. They also allow networks to set up and oversee DID methods, so that developers and users know what the rules are and what the system is supposed to achieve.
The Decentralized Identity Foundation (DIF) is necessary for the development, discussion, and management of all activities related to creating and maintaining an interoperable & open ecosystem for the DID stack.
Layer 2: Infrastructure
There are various solutions that allow applications to interact with each other and verifiable data registries. These solutions include communication, storage, and key management. Ceramic and ENS are two examples of projects that are at the forefront of building DID infrastructure. Although ENS could be debated as being categorized differently, we place it in the infrastructure layer because we believe that credentials and applications will be built on top of ENS in the future.
Layer 3 : Credentials
The following text discusses how DIDs can negotiate proof of control and authentication, as well as securely passing data between identity owners.
BrightID is a prominent project amongst others of its kind. With a social identity network of over 30,000 users, it allows people to prove to applications that they don’t have multiple accounts- thus reducing the chances of sybil attacks.
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