How long until the mainstream of decentralized identity?

In a material-rich world, attention is the scarcest asset. The internet has made sharing articles, pictures and videos cheaper and more efficient than ever, creating a huge amount of data.

In a computerized world, your data is the fuel that drives decisions. Centralized governments work with the walled gardens of social media to control how we appear online. This data does not belong to us. It’s owned by them, and they can do whatever they want with it, whether it’s using it to show you ads, or removing you from the platform, destroying all the posts and social capital you’ve created along the way.

Now we have a new tool: the blockchain. Blockchain provides a trusted neutral settlement layer for scarce digital assets. Everyone using the blockchain has a unique identifier (public key) and transactions are verifiable. These simple features enable Decentralized Identity (DID), an online profile that keeps your reputation free from the control of third-party actors.

Decentralized identity or digital identity?

A digital identity can be thought of as your collective behavior on the Internet. This could mean:

  • website you visit
  • what you buy
  • Email address
  • phone number
  • Created accounts and posts

These are independent of each other. Every website has a specific idea of ​​who you are. Yelp knows what kind of food you like, Facebook knows who your friends are, and Google knows what you’re interested in. Every company uses the data you create to make a fortune by showing you ads and selling ad space to other companies.

With the advent of blockchain technology, we also have a decentralized on-chain identity. Your Decentralized Identity (DID) consists of three parts: your wallet address (public key), assets you own, and transactions (sent and received) related to you.

Decentralized identity is interesting because it is based on blockchain. This makes action a scarce asset. In the Web2 world, creating a new account tends to cost the same as creating a new email address (about 2 minutes), which makes it trivial to create accounts to hype and hate something, and people often don’t know what’s really behind those accounts Who is the master.

But in Web3, every wallet has to spend money to pay for gas and for membership, and crucially, the history of user activity is completely public! This creates a new way of assessing online personas, while users remain in control of their data.

Authentication can be tied to a wallet address, artists can identify their true fans through NFT transactions, and financial institutions can use online transaction history to determine the best credit level for a loan.

The cost of creating a new identity is not just the cost of creating a new wallet, it also includes the cost of creating a transaction record.

reputation accumulation

On-chain resume

Your wallet builds reputation through the protocols you interact with and the assets you own. These are very hard to fake. As mentioned earlier, every interaction with a blockchain network has a transaction cost in time and money.

The history of such financial transactions has been used to determine whether users are eligible for token airdrops from various protocols. Compound kicked off the DeFi summer with an airdrop, and the protocol now has access to a detailed history of early adopters and devout followers.

Another example is BANK. BanklessDAO’s token BANK is distributed to wallets holding BanklessHQ member POAP. Whereas POAPs and NFTs can be used as portable credentials and certificates of completion. No one can take them without seriously compromising the security of the wallet. In the future, when people earn a degree, they will likely receive an NFT as well.

The protocols you interact with can also tell you who you are.

Have you participated in ConstitutionDAO? How about Gitcoin? Maybe you donated some cryptocurrency to the Covid-19 relief fund? If you answered “yes” to these questions, it looks like you are a charitable donor, but you may be lying. On the other hand, if you can sign a message proving that you have the address of the donation wallet, you can demonstrate these levels of interest and enthusiasm.

Fan Proof

Fans can choose to buy NFTs from their favorite artists. This creates an on-chain Patreon, where creators can give away special products or services to early fans.

Imagine a promising musician looking for a way to release an album. Artists may publish music on SoundCloud, have a huge number of plays and followers on social media, but the income they earn is not enough to pay for the studio. The singer then told his fans that he would be releasing a commemorative NFT to help launch his next album.

If the album does well and kicks off the musician’s career, then this NFT becomes a valuable collectible with the potential to benefit the buyer/holder. The musician will also know the wallet address of the “superfan” who can give them special offers on shows, merchandise or token airdrops.

social graph

DID has the potential to open up the data that makes Facebook, Twitter, and other social media sites so powerful: the social graph. Social graphs are used to determine the relationship of one account to another, mapping out the network effects that make these social media services “sticky”.

On blockchains like Ethereum and Bitcoin, public transactions openly and transparently show the relationship between wallets. This creates an instant social graph for payments and allows any service to launch their own network, avoiding the “cold start problem”.

financial health

Blockchain transactions can also be used to determine your credit risk, which enables low-collateral borrowing — a huge catalyst for capital efficiency.

DID and Sybil resistance

A Sybil attack is a security breach that exploits an application’s reputation system by creating multiple accounts. Both Bitcoin and Ethereum’s consensus protocols are defenses against such attacks. Due to the reputational costs associated with establishing that DID address, DIDs are an excellent tool against Sybil attacks.

How long until the mainstream of decentralized identity?

We’ve already mentioned Gitcoin and how contributing to Grants round can increase the level of publicly verifiable charity for your address. In Gitcoin Grants Round 10, the team had to implement a hierarchical DID trust system in which users could stack multiple crypto-native identity projects together to increase the account’s donation weight to the matching pool.

Because of the way the matching curve distributes funds from Gitcoin’s matching pool, it is more beneficial for projects to receive more small donations than fewer large donations. This creates a loophole for a possible Sybil attack. Gitcoin’s solution is to implement a layered trust system to mitigate this attack.

There are currently 9 trusted identity applications including Gmail, Twitter, SMS and Facebook, and the remaining 5 are crypto-native. Donors can remain completely anonymous if they wish, but this is the least efficient way to donate.

Not just for Gitcoin, but for any application that needs gated access for similar reasons or for unforeseen vulnerabilities, DIDs are an important tool for solving problems like Sybil attacks and proof of humanity.

While your Gitcoin account is not blockchain-based like your wallet, it is a great example of an early use case for the DID system. Gitcoin is already trying to integrate Web3 further by using applications like ENS, which allow users to verify accounts by linking to ENS domains.

Emerging DID System


The Ethereum name service project ENS is probably the most well-known DID protocol to date. Although ENS is an Ethereum-native project, it integrates data from the Bitcoin, Litecoin, and Doge blockchains, associating all these L1 addresses with the same ID. They also have some Web2 integrations like Discord and Twitter.

ENS is modeled on the Domain Name System (DNS), the core system of the global network’s digital infrastructure, and acts as a common, modular building block for DIDs. Not only does having an ENS name make it easier to identify addresses, it is autonomous and permissionless compared to DNS. As a powerful NFT, ENS aggregates everything we have in cyberspace.

Proof of Attendance Agreement

The POAP project is built on the Gnosis L2 network, providing a cost-effective way for projects and communities to track their users and each user’s commitment to the project. Users receive NFTs to prove they participated in certain events, which adds a new dimension to DIDs.

Have you attended ETH Denver? Did you participate in a hackathon? Are you registered as a Bankless Premium Member? POAP can be used not only to prove each user’s event attendance, but also to measure their engagement with those events.

Bright ID

Owning an ENS name is expensive on L1, and ENS does not guarantee that every account has a unique owner. No project currently offers a complete solution to this, but Bright ID is trying to build a decentralized, crypto-native social graph to specifically address this “uniqueness” problem.

It works by allowing you and other users to confirm human identity to each other, and Bright ID’s confirmation of your uniqueness is directly related to how many confirmations/connections you get in the social graph. This turns uniqueness into a matter of probability.

Bright ID has been around for several years and they are one of the 5 decentralized options Gitcoin uses to verify accounts. The goal is to provide a blockchain-agnostic social graph that proves that you are a unique person by mapping your connections (your social graph) to ensure you are not creating multiple accounts.

Aave’s Lens

The Lens Protocol is the latest addition to the DID ecosystem. Aave, the developer of the DeFi lending protocol, announced the project in February 2022 and held its inaugural hackathon afterwards.

Built on Polygon, Lens works by tokenizing everything we think is ubiquitous on social networks — likes, follows, shares, bios — and wraps it all up as NFTs.

“NFTizing” these social capital assets creates new primitives that Web3 can leverage across the ecosystem. This can make buying likes, retweets or followers more expensive.

The hackathon, dubbed LFGrow, resulted in some proofs of concept, one of which was to implement gated comments based on on-chain reputation of addresses and encrypted messages. While it’s still very early days, adding crypto-native social capital Lego to our DIDs could change the way we interact online. Instead of being forced to use walled gardens, we can create and provide social capital on a trusted neutral settlement layer.

Graphs of Graphs

DID applications have not yet had their own bubbles like DeFi and NFTs, but their time is coming.

Because these agreements are permissionless, they can create value for everyone on top of each other: that’s the nature of positive-sum games. Engagement in Twitter and Facebook is not portable. The reputation you build on one platform is not immediately valuable on another. But with DID, interoperability is enabled by default, and ownership of your social capital is under your own control.

As new primitives are added to the crypto ecosystem, each primitive increases the potential total strength of the entire DID system. POAP can increase the value of your Bright ID social graph, and conversely, your Bright ID reputation can serve as the key to getting gated POAP. Both of these can add value to your more generic ENS.

Your DID is basically certainly not one protocol, but multiple protocols building the social graph.

Posted by:CoinYuppie,Reprinted with attribution to:
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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