Why do DAOs need better decentralized identity tools?

To fully unlock the potential of DAO, decentralized identity tools are inseparable. This article was written before the publication of Buterin’s DeSoc paper, but it also focuses on the entanglement between web3’s anonymity, privacy, and the user’s true identity. In addition to expounding the importance of decentralized identity tools to DAO organizations, the author also introduced promising concepts and architectures such as “Soul-bound NFT”, Human Proof, Proof of Existence, and Spruce ID mentioned earlier by Buterin.

DAOs are driven by communities, but who exactly make up those communities? Today, it is possible to use Ethereum addresses to represent individuals, but this approach is flawed. Creating an ethereum address costs no money and can be anonymous, meaning that many ethereum addresses are often owned by the same person.

I believe that the full potential of DAOs depends on the ability to link identities on and off-chain. Web3 culture recalls the early days of the internet, when anonymous forums were a breeding ground for ideas and many people felt free to post anonymously.

This freedom is conducive to the breeding of dangerous and subversive ideas; you don’t put your professional reputation at risk by publishing some wild, unconventional ideas, so the price is low.

However, anonymous posting and decision-making are real constraints to the governance of a forward-looking, democratic and transparent DAO.

The field of DAOs has become very broad. Now there are market-making protocol DAOs such as Maker or Uniswap, investment and collection DAOs, social DAOs such as FWB, service DAOs such as Raid Guild, entertainment DAOs such as eDAO, and so on.

Why do DAOs need better decentralized identity tools?


While contributions to the functioning of individual DAOs may vary, decentralized identity tools are important to any DAO.

  • Improvements to the DAO, a market-making protocol, rely heavily on external contributions. If the main goal is to hire the best contractors for a specific technical task, identity tools seem less important.

However, in the absence of identity protection, anonymous contributors are more likely to do evil, such as building backdoors in specific pieces of code. While it is possible to blacklist an attacker’s Ethereum address from contributing again, this does not prevent him from using a different address to carry out similar attacks in the future.

If highly skilled contributors are uniquely identified, it is easier for them to build reputation and credibility. This makes identity tools especially important for service DAOs.

As pioneered by SkillWallet, identity tools should be used to consolidate contributors’ past project information and associate it with their identities. This will allow those contributors with special skills to be easily matched with the demand side.

  • For a social DAO, tools that allow its members to identify each other safely and securely are invaluable. It ensures a minimum level of trust among members, which in turn creates a better atmosphere for like-minded people to communicate.
  • Investing in DAOs, especially those offering fundraising or funding ecosystem infrastructure, requires thoughtful governance decisions to ensure that money goes to the right projects or individuals. Linking governance rights to the expertise, skills and experience of specific people is critical to ensuring that the right people are involved in governance decisions. Investing in DAOs desperately needs decentralized identity tools as their governance decisions can profoundly affect the future of the entire blockchain ecosystem.

Any DAO that lacks a decentralized identity is vulnerable to a sybil attack. In a Sybil attack, individuals create multiple addresses and try to manipulate the governance framework by sending proposals frequently to the network, or voting multiple times with different addresses. This behavior especially creates difficulties for the implementation of “one person, one vote”. In the future, the decision-making of the entire organization, enterprise and even the government may be conducted in a transparent and decentralized manner by connecting with the blockchain. To enable this future, we need tools to prevent the same person from using multiple addresses for evil.

Soul-bound NFT & ENS

In a recent blog post, V God proposed the concept of “soul binding NFT”.

His proposal is fairly broad, but basically assumes that a specific “ID NFT” can be stored in an address that can indicate the off-chain identity of its holder and thus be precisely identifiable.

There are some challenges to overcome before it can be implemented.

First of all, how is such an NFT issued? The idea is similar to Proof of Attendance (POAP), a unique NFT issued to specific event attendees to prove their attendance. However, even if you are not participating in an event, you can give your wallet to a friend to claim POAP.

Second, how to ensure that holders of Soulbound NFTs do not transfer them? In practice, almost all NFTs, including POAPs, are transferable. Individuals may transfer assets to different wallet addresses for security reasons. This flexibility challenges the concept of “soul-bound NFTs”. Because people need to check whether it really identifies a specific individual by looking at the transaction history of the NFT.

One solution is to bind the soul-bound NFT to an ENS (Ethereum Domain Name Service) domain name that users are unwilling to give up, or ENS itself can be used as a unique identifier.

Human Proof of Kleros

Kleros has developed an improved version of “Soul-bound NFT”, an ERC-20 registration system called “Proof of Humanity”.

In this registry system, a specific offline identity is linked to an Ethereum-specific address. “Human Proof” requires you to submit a video, a deposit, and a surety that the applicant is indeed a real person and has never registered before.

Because applicants who report violations of the rules are rewarded with monetary rewards, this incentive structure makes registered members have a strong interest in verifying that others are real.

After successfully registering an address on Kleros’ “Proof of Humanity”, people with real identities and specific skills and experience in the real world are whitelisted.

proof of existence

Governor DAO proposes a method based on biometric authentication technology to issue unique and non-transferable ERC20 personal tokens called “Proof of Existence”.

This is achieved by using MetaMask to log in to the portal they provide, and then collect hundreds of audio and video data for hashing. From this, a unique cryptographic hash representing a person is created, and the Governor DAO gets the hash corresponding to the input address.

Those who pass the identity test get a “Proof of Existence” token that will be permanently associated with their wallet. The token represents a unique source of identity.

Sensory data for a given user can only generate the same hash, thus preventing that user from generating another proof-of-existence token attached to a different address. This is probably the most sophisticated identity tool out there.

However, it requires the use of biometric authentication tools to obtain user data to generate a unique hash value, which raises concerns from a privacy perspective.

Spruce ID — DID

Spruce ID solves the problem of identification in a broader way, aiming to realize the framework of complex and sophisticated decentralized identification and verifiable credentials.

The purpose of Decentralized Identity is to get rid of centralized databases that store identity records, as it implies the risk of a single point of failure.

The core idea is that the credential to be stored is the user’s address, which is kept in the wallet and associated with the user’s identity. This particular credential can be verified by a so-called proxy.

Spruce has a wallet called Credible and a solution called DIDKit that provides a cross-platform decentralized identity and credential verification framework.

The term DID means Decentralized Identity, whose function is to provide a data registry for a specific kind of identity. The way DIDs work in practice is rather complicated. Protocols vary, but generally include namespace rules, cryptographic signature schemes, and specific blockchain data models and algorithms, as follows:

Why do DAOs need better decentralized identity tools?


Using DIDKit, it is possible to sign and verify a certain type of credentials, known as W3C Verifiable Credentials. It corresponds to information related to the identification of the credential subject, such as a photo, name or ID number. DID is a complex and sophisticated blockchain identification method, but it still requires further research and development due to the need for a large amount of infrastructure and service support to be fully realized.

in conclusion

Decentralized identity tools are invaluable for DAOs. We need more tools to improve resilience and safety in the face of Sybil attacks.

The DAO community needs decentralized identity tools to help individuals accumulate credentials, experience, and reputation. Increasing the adoption of decentralized identity tools and improving the user experience will require more investment, and we do already have some early, promising candidates.

In my opinion, the implementation of Proof of Humanity (PoH) and Proof of Existence (PoE) is particularly exciting, but much more work is needed for widespread adoption. I look forward to seeing some DAOs take the lead in integrating some of the early authentication tools mentioned in this article into their architecture.


Buterin, Vitalik. “Soulbound.”Vitalik Buterin’s Website,26Jan. 2022, https://vitalik.ca/general/2022/01/26/soulbound.html.

“Decentralized Identifiers (Dids) v1.0.” W3C


James, Stuart. “Proof of Humanity — an Explainer.” Kleros, Kleros, 12 Mar. 2021, https://blog.kleros.io/proof-of-humanity-an-explainer/.

Mueller, Thomas. “Dao Series Part 2: How to Use Decentralized Identity to Build Trusted Communities.” Medium, Medium, 23 Apr.2022, 


“Proof of Existence Documentation.” Poe Overview — Governor Dao Docs, Governor DAO, 2022, https://docs.governordao.org/proof-of-existence-documentation/poe-overview.

“What Is Decentralized Identity?: Spruce Developer Portal.” Spruce Developer Portal Blog RSS, https://spruceid.dev/docs/primer/.

“Your Dao Guide — the Most Important Dao Categories Defining the Space.” Ledger, 24 Dec. 2021, https://www.ledger.com/academy/your-dao-guide.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/why-do-daos-need-better-decentralized-identity-tools/
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