DID Revolution: Explaining the Three Decentralized Identity Solutions of PoP, SBT and VC

By Donovan Choy, author of Liberalism Unveiled

There are some glaring problems with today’s digital identity systems: centralized entities control who and how they access it, we have too many accounts to keep track of, too many passwords to remember and create password fatigue, and those who control this data Organizations become great honeypots for cybercriminals.

How did we get to where we are today?

It’s trendy to put the blame on Web2 giants, but the truth is that tech giants have greatly accelerated digital identity innovation by popularizing the federated identity model.

By establishing federated identity protocols like OAuth, SAML, and OpenID, big tech companies act as middlemen for “identity providers,” dramatically reducing the number of logins users have to keep track of. Single Sign-On improves the interoperability of digital migrations across our online services.

Single sign-on allows us to access Gmail and YouTube without logging into multiple accounts, or log in to various e-commerce sites using Facebook or Twitter.

But while Web2 digital identities ameliorate many of the problems associated with centralized digital identities, problems remain. Web2 digital identity still operates within the same account-based structure as its centralized entity predecessors.

Those accounts still belong to the big tech companies that issued them . like this:

1. Your digital identity “ownership” does not belong to you.

2. The operation of your digital identities depends on their servers.

3. Our rich social relationships are not privately owned by us, but the proprietary data of private companies.

The good news is that thanks to advances in cryptography and decentralized blockchain networks, an alternative is on the horizon.

I call it the Decentralized Identity Revolution. This time, blockchain provides an opportunity to form our own self-sovereign identities in a spontaneous bottom-up manner, without the need for us to go through the middle of a centralized institution as traditional methods do.

Functionally, the key difference in the decentralized identity revolution is that ownership of your online identity is no longer account-based and “provided” to you by a middleman. Rather, it is a digitally shared connection that all parties in a connected relationship commit to maintain over a period of time that mirrors the type of direct relationship we have in the real world.

That’s what this article is about. Generally speaking, Web3 digital identity players are divided into three groups.

They are the Personality Proof Project, Verifiable Credentials, and most recently Soulbound Tokens.

Let’s go through them one by one.

Proof of Personhood

Proof-of-Personality (PoP) protocols are perhaps the least ambitious of the decentralized identity projects. As the name suggests, these projects try to do one thing, and only one thing: to prove uniqueness of identity.

Popular projects include Proof of Humanity, BrightID and IDENA .

PoP projects are primarily used to establish unique identities. This, in turn, solves the conundrum of Sybil-prone projects such as Universal Basic Income (UBI) or quadratic financing.

They do this through traditional authentication methods like photo and video submissions, or complex AI Turing tests.

While PoP projects also establish identities through “web of trust” community mechanisms, such as requiring participants to sign each other’s digital attestations as a form of “guarantee,” they do so only to prove the uniqueness of the identity.

In short, these items help build personality, but this individuality is a black box. They are not suitable for mapping rich, contextually relevant identities on the social graph, nor are they suitable for connecting people with each other – as soul-bound tokens and verifiable credentials try to do.

soul bound token

In May 2022, Glen Weyl, Puja Ohlhaver, and Vitalik Buterin jointly published the article “Decentralized Society”, elaborating on the case of “soul-bound” tokens (SBTs).

SBTs can simply be thought of as permanent, non-transferable tokens on a public blockchain, like the popular World of Warcraft video game, in which the author borrows the “soul binding” metaphor. Soulbound tokens can be issued in various forms – academic performance, financial liabilities, employment contracts, and can be issued by anyone, be it an individual, private company, university, community, or government.

Why do we want our identities to be permanent and untransferable? 

When two people shake hands when they first meet, the relationship exists only in their short memory. SBTs attempt to formalize the handshake on a public blockchain so that the world can see and verify. By doing so, we can shape a person’s identity according to the social context, thereby opening the door to a coordinated world that, until now, would have been impossible without intermediaries.

Essentially, SBTs codify social capital (i.e. reputation) as formal property ownership. By “baring our souls,” people can openly stake their reputation on the veracity of who they claim to be.

The following examples are of economic innovations that SBTs can unlock.

  • Art: A struggling artist who has no professional certification but is recognized by the grassroots community can demonstrate their “street cred” through SBTs.
  • Education: Those who cannot afford an expensive college degree can demonstrate their educational qualifications through SBTs obtained from informal learning channels.
  • Banks: Loan applicants can prove their creditworthiness by not having a bad credit history, or show their good reputation with SBT collections, without the capital-inefficient overcollateralization model commonly used in DeFi (when the loan is repaid, another SBT can be issued as proof of repayment).
  • Governance: DAOs can improve their collective decision-making system by protecting giant whales (SBT is not purchasable). DAOs can also avoid the tyranny of majority consensus by issuing SBTs to trusted outsiders through a more inclusive voting system design.
  • Records Management: By easily transferring all medical records as SBTs, friction can be reduced when changing medical or insurance providers or exiting related relationships.
  • Business Operations: Improve the efficiency of traditional business functions such as sales/HR by easily locating the types of SBTs held by prospects/employees.

The grand vision of SBTs is that one day, when Web3 has penetrated mainstream society, there will be a rich ecosystem of SBTs, SBTs will be everywhere, and individual wallet addresses can provide a reliable and comprehensive “digital identity”, and Not self-issued credential like we whitewash our LinkedIn pages and job resumes.


Do we really want to bare our souls?

Soulbound tokens are not without criticism.

The permanence of SBT is pretty good when we want to prevent some kind of negative behavior from hiding, such as a person’s bad credit or criminal history. But this censorship resistance can backfire.

Disco founder Evin McMullen was particularly critical of SBTs.

The permanence and publicity of SBT makes it easy for anyone to gain access to a person’s relevance and inferences, and may prove to be costly in terms of lack of privacy and encourages some forms of negative discrimination.

For example, a racist employer might discount a potential employee’s performance because a glance at a job applicant’s wallet would prove his participation in the black human rights movement.

To alleviate this problem, SBT critics like McMullen prefer the W3C-dominated form of “verifiable credentials” (VCs), sometimes confusingly called certifications, badges, or claims.

Like SBTs, VCs can be issued by anyone and can represent any bit of information. The key difference, however, is that it operates privately by applying zero-knowledge proofs.

Here is a brief explanation of how VCs work:

1) I say I’m Batman, but you don’t believe me. 

2) To prove that I am indeed Gotham City’s Dark Knight Batman, I sent you an off-chain crypto VC.

3) This VC is issued and cryptographically signed by the Gotham Police Department’s decentralized identity (think of it as a wallet). The “signature” of each DID represents a unique watermark, so you know this information hasn’t been tampered with.

4) Now you know I’m Batman, because it’s impossible for an imposter to get that credential.

5) The whole verification process is confidential, I don’t need to reveal anything about myself to you.

3oOImv3BJcZd7doOLLCmBdlJs5GiDVXafa6ASird.pngIn short, verifiable credentials differ from SBTs, which operate on a “selective disclosure” basis.

Many verifiable credential protocols already exist in the Web3 world and are market tested. They build on the official web standards established by the W3C framework in July this year and provide a decentralized way to establish privacy-sensitive digital identities that do not require a central issuer.

Some notable examples, such as Civic, whose on-chain VC products have supported at least 295 NFT minting projects and helped prevent 1.2 million bot attacks. Another example is Ontology, whose flagship identity solution has created over 1.5 million decentralized identities (DIDs).

Finally, protocols like Disco allow you to create a decentralized identity from your Ethereum address to sign off-chain VCs.


Workarounds and tradeoffs

The co-authors of the SBT article are not unaware of these criticisms. As they explicitly acknowledge in the text, SBTs can lead to “dystopian scenarios” such as permissive immigration systems, enhanced regulatory captivity, or automatic discrimination.

But these criticisms are not necessarily a foregone conclusion.

To address privacy concerns, zero-knowledge techniques can be applied to SBTs to create individual access rights to read them, allowing SBT holders to decide how and when to disclose their SBTs. Second, variants of SBTs can be used to mitigate their permanence. For example, having SBT become a transferable token after a period of time, or allowing issuers to withdraw SBT entirely.

The tension between soul-bound tokens and verifiable credentials can be thought of as the difference between choosing to be a public figure or choosing to keep a low profile in private. One’s public reputation (soul binding) carries more weight and power because it’s actually a megaphone shouting “I have nothing to hide”, but your opponent can also do it by discrediting you ruin your reputation.

On the other hand, private reputation (verifiable credentials) is not trusted by the public due to its covert nature, but it is not easily manipulated by others and you have more control over how people (a minority) see you right.

From this point of view, the biggest disadvantage of the soul-bound token is also its biggest advantage. It’s useful to bet your reputation in public and have others scrutinize it, but you’d better make sure you don’t have any ulterior motives or you’ll quickly get burned.

The Decentralized Identity Revolution

The Internet has no identity layer.

Efforts to build this layer for decades have relied on some form of centralized provider…until now.

Web3 Digital Identity — a project for Soulbound Tokens, Verifiable Credentials, and Proof of Personality — represents a credible alternative to building digital identities in a decentralized, bottom-up manner.

Although their approaches differ, the goals of these builders are the same: to enable individuals to create a rich social layer without relying on a central issuer.

Nine times out of ten, the digital identity solution will vary depending on the purpose. Whatever identity settings are determined will vary depending on the purpose for which they were created. Deep personal information such as a person’s medical condition may not be stored as on-chain SBT, but other situations would be more appropriate, such as a person’s criminal history.

Thanks to blockchain technology, these efforts will eventually lead to the gradual replacement of centralized identification systems (drivers licenses, passports, birth certificates), this time finally reducing the reliance on power to determine the rules of human identity.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/did-revolution-explaining-the-three-decentralized-identity-solutions-of-pop-sbt-and-vc/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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