Since its introduction to the world stage in 1945 in the form of the first atomic bombs, Nuclear Energy has fundamentally changed how humanity views conflict.
Like the classic Spider-Man quote, “With Great Power Comes Great Responsibility”, we saw the power we had at the dawn of the Atomic Age and became acutely aware that this new technology could be used to either bring about our doom or accelerate us into a more prosperous future.
Fast forward to today, with the Cold War behind us and Nuclear Energy being seen as one of our best paths towards a green future, things are hopeful. But just like at the beginning of the Atomic Age, we’re quickly seeing the rise of an equally promising but also equally terrifying new technology, Digital Identity.
In this article I hope to share just why I believe Digital IDs have as much chance for prosperity or destruction as Nuclear Energy (albeit in more subtle ways) and will drastically affect the future of our societies.
Just like the first introduction to Nuclear Energy showed us its potential for harm, we’re beginning to see how Digital Identity can be used in nefarious ways with the likes of the Chinese government’s social credit system destroying its citizens’ lives for not being loyal towards the ruling party.
But before diving too deep into the rabbit hole, let’s cover some basics…
What are Digital IDs? v1 vs v2
As their name suggests, Digital IDs are a form of digital identity given to users. These users can vary between individual people, machines, or technology masking as either.
v1
Digital IDs are found everywhere in Web2 (the internet as we know it today) and are used by pretty much every website or service that needs to identify a user like email, website accounts, application logins, etc. For the purpose of this article I’ll refer to these as “Digital ID version 1” or DIDv1 for short.
The most common examples of DIDv1 that you’re likely familiar with are your Google or Facebook accounts. Since these two conglomerates own much of the internet today, your DIDv1 with them can be anything from your email, to your Instagram account, to your browser fingerprint which they collect. Whether you know it or not using the web today means that you have a DIDv1 in some capacity, and the data associated with it is likely going to one of these two companies.
v2
“Digital ID version 2,” or DIDv2 for short, is the latest evolution of the digital identity concept mentioned above. It takes many forms but can simply be described as “a unique identifier associated to a real user”. The primary distinction between DIDv1 & DIDv2 is the key word real being associated to a user. It may sound trivial, but as we’ll discuss in the next section, this distinction unlocks a near infinite number of possibilities.
Unlike DIDv1, a DIDv2 can also be owned by its respective user. This ownership is powered by distributed ledger technology, also commonly known as blockchains or DAGs. Much like physical asset ownership & property rights have been a driver of individual prosperity for generations, digital asset ownership will enable those same opportunities and more within the newest evolution of the internet — Web3.
DIDv2’s differences from their DIDv1 counterparts can be briefly summed up in the below comparison table.
This only scratches the surface of what Digital IDs are, so stay tuned for more content discussing the different types of Digital IDs and their features in upcoming work.
What makes Digital IDs so powerful?
Before diving straight into the future of Digital IDs, we’ll need to understand how impactful Digital ID is in its current Web2 form.
DIDv1
DIDv1 has been the driver of the internet as we know it today. Google & Facebook, two of the largest tech companies in the world, have built their empires off data collected from their users’ Digital Identities. The data on your user profile, along with every action, interest, and search done online is collected through their services (Facebook, Google) either explicitly or implicitly, then repackaged and sold to advertisers or used to train their AI; ultimately expanding their services and feeding into their monopoly power.
All of this is done without you, the user, seeing any compensation for your data aside from the privilege to use these platforms. That, however, is a massively one-sided trade when you look at the value of the data extracted from each user vs. the service provided. Collectively, over the last 15 years, we have essentially let a handful of companies control the internet and wield more power than most nation-states. In return we got the ability to view & share photos with friends, or conveniently look up cat videos online.
The classic saying “If you’re not paying for the product then you are the product” perfectly sums up these business models.
So now that we know how powerful DIDv1 is in fueling the internet today, what possibilities does the new DIDv2 offer?
DIDv2
As shown in the table below, DIDv2 includes all of the power and capabilities of DIDv1, but with the addition of verifiable credentials, user-based ownership and zero knowledge proofs. All of these items unlock enormous potential for DIDv2 and allow us to avoid the most heavily criticized parts of DIDv1. However, these don’t come without their own unique challenges, as we’ll cover in the next section.
User-Based Ownership
User-Based Ownership is the concept of non-revocable ownership rights for digital assets. It became popularized in 2020–2021 when NFTs went mainstream and is made possible by the underlying technology distributed ledger technologies (DLTs) and Smart Contracts enable.
User-Based Ownership in the context of DIDv2 differs from Web2 based “digital ownership” systems where owning an asset on a centralized platform means that your ownership status could be revoked at any time by that platform. Instead, it more closely resembles our relationship with buying physical goods, where you truly own the item you have and can use it however you like.
Why This is Powerful:
Digital Ownership from both the user & creator level completely flips the Web2 model on its head. Creators/owners can directly sell their content to users, and users can save money from reduced overhead costs. Instead of licensing things from middle-men, users can purchase them directly from the creator/owner. In short, this takes the best elements of physical ownership and digital distribution, and combines them so that everyone (except greedy middle-men) benefits. See one of a potentially infinite number of examples below.
Example 1/∞: Buying, Subscribing to, & Selling Music.
Today, Joey buys his favorite songs on iTunes and has a Spotify Premium subscription to listen to a variety of other music. He pays $1 per song purchased on iTunes and $10 for a monthly subscription on Spotify. Each of these services have their own logins, so his music access is spread across two different DIDv1s.
Darius is an artist who is signed to a record label and creates music that is available for purchase on both Spotify & iTunes. iTunes sells his songs for $1 each, but after the record company & iTunes fees he is only paid $0.10 of every sale. For Spotify, Darius will be lucky to make $0.005 per stream of his songs, with incomes likely being much less.
With User-Based Ownership, Darius can bypass the centralized distribution systems and sell his songs directly to Joey for $0.50, or allow them to be listened to ad-hoc, free for the first 5 listens and then $0.01 each time afterward. This new model gives Darius 2–5x his previous income and saves Joey at least 50% of his monthly music costs (provided he listens to 500 songs or less per month).
To top it all off, if Joey purchased Darius’ song and has those ownership rights attached to his Digital ID, he could in theory re-sell ownership rights of that song to someone else to recoup his initial investment (much like re-selling a used CD), and Darius could be paid a royalty off the price of the re-sale to ensure he’s fairly compensated.
It’s a win-win for both creators and users. User-Based Ownership + DIDv2 makes economies of scale for anyone selling digital assets, from songs to event tickets, much better — allowing creators to build a small business and livelihood much easier than the Web2 model, while also saving users money and giving them one convenient ownership location for it all in the process.
Verifiable Credentials
Verifiable Credentials are information like personal data (age, name, address, etc.), certificates (university degrees, proof of inspection, etc.), permissions (private group membership, security clearance, etc.), and much more which can be verified as authentic via consensus algorithms. To do this, consensus algorithms like FPC validate data from a credential’s issuer and ensure it is matched with the same information users have associated to their Digital ID.
Example: Say Alice gets a law degree from Harvard University and wants to prove it. Today anyone can post a photo of a degree (fake or real) and claim that it’s theirs with a relatively high chance of being believed. With Verifiable Credentials that degree can be verified by checking Harvard’s issuing signature with Alice’s Digital ID, letting her prove to anyone she wishes to share her credential with that it’s real.
Why This is Powerful:
Verifiable Credentials have the power to eliminate most forms of digital fraud that we’ve become accustomed to. Concepts that sound great but are highly unadvised with DIDv1 like “Online Voting for Elections” become safe, secure, and reliable with a DIDv2 that has verifiable credentials that prove it’s actually you who is voting. These credentials combined with Zero Knowledge Proofs (covered below) are an extremely powerful combination.
Zero Knowledge Proofs
Zero Knowledge Proofs allow you to share information without giving any details to the person you are sharing that information with. This may sound like an oxymoron but having Zero Knowledge Proofs combined with Verified Credentials make it possible for only you to know the details of data associated with your DIDv2.
For example: You want to buy alcohol but need to also prove that you’re 21 or older to do so. With Zero Knowledge Proofs, the seller of alcohol can scan a barcoded version of your DIDv2 and instantly get confirmation that you are older than 21 without ever knowing your age, birthday, or other personally identifiable information about you.
Going back to the election example mentioned with Verified Credentials, we can see how Zero Knowledge Proofs are an essential part of the equation — making sure every vote is made anonymously while also being verified so that no person can ever cast more than one vote.
Why This is Powerful:
In DIDv1’s, the concept of true privacy never existed. This is what allowed Facebook, Google, and the other tech giants of today to collect all of our personal data and build the empires they have.
Zero Knowledge Proofs change that entirely and allow users to truly own all of their online data, only sharing it when they wish. All of this is only possible because DIDv2s enable User-Owned Digital IDs to exist.
DIDv2’s with built in Zero Knowledge Proofs have the chance to revolutionize how we enter the newest age of the internet in Web3. Unlike the Surveillance State/Surveillance Capitalism model many a dystopian Sci-Fi writer or recent political pundit have thought we are destined for; this combination of new, ethical, & private DIDv2’s owned by the individuals themselves lets us enter a future where a parallel Metaverse exists that is built “by the people and for the people” instead of one controlled by governments or large corporations.
The fine line between good & evil use cases
Going back to the Nuclear Energy analogy, what makes Digital IDs as equally (or even more) exciting or terrifying?
Throughout human history we have never had as sophisticated data collection, attribution, and delivery mechanisms as we do now — which will be dwarfed by what we’ll have in the future.
Why does this matter? Well, information is power, and bad actors who wish to do harm can do exponentially more damage the more information they have.
Take extremely common examples like identity theft, SIM swaps, or any number of other potentially life-ruining crimes that can be committed with as little information as your name, address, and birth date.
Now extrapolate that to all of the information you give either explicitly or implicitly online. This opens an endless stream of opportunities for criminals and bad actors to do irreparable harm to you if they so choose.
Don’t think this is likely? Well think again. Over 36 billion online records were exposed from Cyber Crime in 2020, with a litany of other overwhelming and frightening statistics that put the cybersecurity industry on track to spend $1 trillion between 2020–2025 in the United States alone.
Coupling these stats with the increasing geopolitical tensions we see around the world, and nation-states treating the internet as another theater of war, means that personal information about an enemy nation’s citizens found online becomes just 1 more weapon that can be used in a Cold War-esque toolkit.
So why even bother with Digital IDs if there’s so much potential for harm?
Short answer is that it’s too late. The technology already exists and is being actively worked on around the world. Digital IDs, and DIDv2s that have personal information tied to you through verified credentials are already being planned or implemented in many parts of the world.
The most well known example is China and their authoritarian regime’s social credit system. But there are also trials being run in many Western countries which have only been accelerated with the recent COVID pandemic.
With the cat already out of the bag on this technology, the best we can do now is to steer Digital IDs into a positive direction before ill-intended bureaucrats, want-to-be authoritarians, and power-seeking corporations turn the concept into something which would be the envy of Orwell & Huxley’s dystopian futures.
With the dawn of the Metaverse and our increasing dependency as a society on the internet, it’s not hard to see how Digital IDs that are used to track, control, exploit, and attack individuals en mass could have equally, if not more, impact than a nuclear weapon being detonated. Both have horrifying ways to destroy humanity, one is just much quicker than the other.
An optimistic path forward
Grim messaging aside, it’s not all doom and gloom. Just as horrific as the scenarios outlined above are, Digital IDs have the ability to be an even greater tool for propelling society forward, unlocking limitless opportunities, and enabling prosperity for billions of people that has never been seen before on a global scale.
Zero Knowledge Proofs allow us to have real digital privacy for the first time in modern internet history. An unfathomable concept for ill-intended governments and big tech vampires feeding off our every online action.
User-Based Ownership lets us own every aspect of our Digital Identity and create, buy, or sell digital goods in ways that were never possible before. Opening the door to fair compensation for our data and even more entrepreneurship opportunities than the internet of today.
Verifiable Credentials have the opportunity to eliminate most online fraud, creating a more trusting internet that rewards good actors for their information. Imagine the amount of overhead that can be saved in security and fraud prevention for individuals and companies around the world.
All of these elements together in Digital IDs allow us to be the truly free pioneers who set off to found the 21st century’s equivalent of “The New World” — Web3.
By charting a course for the future that empowers individuals in this digital New World, we can create even more opportunity to grow and thrive than the discovery of the Americas did for the world hundreds of years ago.
Build for the future you want
It’s possible today to start building for the future you want to see.
Open source and decentralized projects like IOTA’s Digital Identity are some of the most technically advanced solutions that exist today. This technology is designed from the ground up to empower individuals, enable builders, and be transparent.
With the entire Crypto industry booming as it becomes more mainstream there is no shortage of opportunities to get involved to help build and promote these new solutions.
Privacy enabled at the core
Knowing how easily our data can be abused, it’s important for Digital ID projects to not recreate the same problems we see with Web2 today. Avoiding structures that allow power to concentrate towards a small handful of companies who control the space will be key to keeping Web3 open and full of potential.
Zero Knowledge Proofs are one of the best first steps that Digital IDs can make to ensure user data cannot to be collected as indiscriminately by these power-seeking actors as it is in Web2. If users choose to disclose their data, they should be rewarded for it.
A “Privacy First” mentality enabled by Zero Knowledge Proofs and other promising technology is key to making sure Digital IDs aren’t hijacked in dystopian ways by large organizations or nation-states.
A new digital frontier
For the first time in human history, we have the potential of limitless space where the freedom to build, own, experiment, communicate, and be private can be codified into its structure.
Web3 can be everything that we believed the internet could be and much more. It’s our responsibility to make sure technology that enables it like Digital IDs isn’t hijacked along the way.
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