Current application scenarios and cases of the Web3.0 identity system

Author: Youfei, Distributed Capital

Recently, the ENS airdrop has drawn people's attention to centralized domain names. Indeed, decentralized domain names can serve as a Web3 identity identifier. However, in both the real world and in Web2 or Web3, identity systems encompass not only identifiers but also authentication and management. For example, in the real world, identity credentials such as ID cards, driver's licenses, and student IDs require centralized institutions (attesters) for processing and issuance. When someone wants to enter a bar to drink, the security guard (verifier) checks their ID and verifies it against their face. People typically keep physical credentials in their wallets for safekeeping. During this period, individuals still have autonomy over identity management.

When entering the Web2 world, the rules for authentication and management are quite different. Since the World Wide Web was born 30 years ago, there was no design for digital identity in its underlying protocols, leading to a norm of anonymity. The digital identities people possess are primarily created through traditional internet account models. The IDs and passwords created are managed by service providers, and all of the users' online activities are completely monitored by them. The resulting issue is that internet service providers are aware of users' online behaviors and engage in targeted marketing and advertising. They even sell users' personal information for profit.

As identity and privacy breaches become increasingly severe, various sectors have explored third-generation digital identities such as DID (decentralized identifier) and SSI (self-sovereign identity). The exploration has concluded that blockchain and zero-knowledge proof technology are the best solutions. Since entering the blockchain era, wallet addresses have become new identity identifiers for users, and possessing the keys means having full control over this identity identifier. However, this identity identifier seems imperfect; first, it is not human-readable, and second, it cannot be linked to Web2 identities or physical world identities. Currently, most blockchain projects aim to address these issues.

With the development of DeFi, NFTs, and DAOs, simply building an on-chain identity system will effectively regulate the chaotic industry. Web3 is built on top of Web2, and how to associate existing social identities from Web2 with Web3 identities is one of the main issues. Additionally, identity systems covering various blockchain sectors have also generated different use cases.

1) One-click login. The login method in Web3 will allow users to manage their accounts and keys themselves, disrupting the traditional internet model where centralized servers manage accounts and passwords. Recently, Spruce ID launched Sign-in-with-Ethereum in collaboration with ENS and the Ethereum Foundation, allowing users to log in to internet applications like Google and Twitter using their domain names and private keys. As ENS has the potential for mass adoption, it can innovate the Web2.0 identity system.

Recently, Ontology also launched the decentralized identity universal login component ONT Login, allowing users to log in with addresses or DIDs while quickly authorizing related information, further simplifying the login authentication and authorization process.

2) Verification for NFTs and artists. Currently, many NFT platforms link artworks with the Web2 identities of creators. However, aside from unreadable blockchain addresses, the Web2 identity information corresponding to users on social media and websites cannot be displayed effectively over the long term. At this point, NFT artists need to register DIDs to verify their Web2 identities.

Currently, SertoID has already implemented use cases in this area. The DIDs created by NFT artists (one DID can correspond to multiple social accounts) can be displayed on NFT works and will not disappear with the platform.

In addition to DIDs related to virtual identities like social identities, NFT artists also need to undergo real-name verification. Ontology has already implemented use cases in this regard. Recently, Ontology has been collaborating with the decentralized music platform ROCKI to verify artists' identities. Artists on ROCKI need to complete the initial KYC/AML steps to verify their identities; once verified, they will receive a verifiable digital credential that they can manage themselves. By applying the registration management SDK of ONT ID, ROCKI can prevent malicious actors from impersonating artists and avoid users purchasing counterfeit music NFTs.

3) DAO organizations' member selection. DAO organizations are recognized as a group of individuals with good on-chain reputations and a spirit of contribution. DIDs can be used to select members based on their on-chain behavior while matching contribution values with corresponding incentives. Disciplined DAO organizations may also require a one-person-one-vote system for voting on proposals.

BrightID can prove that a user's account exists and is unique; any fake accounts or bot operations will be identified. Currently, BrightID has been applied in many dApps, such as Rabblehole, 1Hive, and Gitcoin. These dApps can better prevent users from voting with fake identities by integrating BrightID, ensuring a fair and just participation environment in the blockchain.

4) Sub-sectors of DeFi: DIDs will enhance users' credit systems and open up corresponding use cases for DeFi. This credit system is similar to Sesame Credit; after verifying users' on-chain reputations, it will affect their borrowing collateral rates and interest rates.

Ontology's Oscore has begun building an on-chain credit system. Oscore calculates a user's on-chain credit score based on their on-chain behavior and asset statistics. This score will also influence the interest rates and collateral rates when participating in DeFi projects.

Teller Finance uses Mina's zero-knowledge proof technology to verify whether a user's credit score exceeds a certain threshold to decide whether to lend to that user. Users log in to a credit score inquiry website, generate a zero-knowledge proof locally to prove their credit score is above a certain threshold, and then put this proof on-chain. In this process, users do not expose their credit scores, social security numbers, or any other private information.

MetaFinance is also laying out the ecosystem for identity systems. MetaFinance will use native on-chain data records to define identity profiles, opening up more detailed application scenarios based on users' on-chain profiles (borrowing and repayment records, transaction records, etc.).

5) Putting verifiable credentials on-chain. Currently, as underlying infrastructure, projects like Polkadot's Kilt, Ontology, and SpruceID are building their own verifiable credentials to replace physical credentials. For example, Kilt introduces various roles from the real world, such as claimers, attesters/trust entities, and verifiers, to achieve credential verification without centralized institutions.

For instance, suppose you want to register for an application that requires verification of your residence. Under the current system, you need to prove your residency by providing your passport or other official documents. In this case, the service provider can access not only your residence but also any other information contained in those documents. This information is stored on the attester's server.

In systems built on the Kilt protocol, users will be able to prove their residence without providing any information about themselves. The claimer will not share the entire passport but will only share a so-called credential that can represent any verifiable information or attributes about the claimer. This credential will be stored on the claimer's device, and when presenting it to the verifier, the claimer can show only the necessary information (e.g., residence, but not the address).

Recently, Kilt has been collaborating with the project Centrifuge to put real assets on-chain. In the early stages of development, Centrifuge will provide official KYC for users to authenticate. As the project develops, Centrifuge will introduce a SocialKYC solution, allowing users to ensure their privacy while completing KYC and investing in projects in the Tinlake pool. At the same time, the Kilt solution can authenticate the identity of financing targets in Tinlake.

The above are just use cases of DID applied in blockchain scenarios. When DID is combined with trusted hardware and physical world oracles, it can open up more offline application scenarios. DIDs do not necessarily represent human identity identifiers; they can also represent the identity identifiers of machines or vehicles to record their usage. The application potential of DIDs in the Internet of Things is enormous, with industry leaders like Ontology and IoTex having implemented use cases in this area.

Returning to the beginning, decentralized domain names like ENS make our wallet addresses readable, marking a significant step forward for the Web3 identity system. How to expand on-chain identity identifiers into profiles, how to derive more detailed use cases from identity identifiers, and how to associate Web3 identities with Web2 identities and physical world information are all directions the industry is exploring and striving for. In summary, as people's perceptions continue to shift, they have transitioned from advocating that "holding the private key means holding the property" to "holding the private key means holding the identity." Privacy protection will become a consensus in Web3, and this consensus will not only promote the integration of on-chain and off-chain identity systems but also lead to the next phase of explosive growth in DeFi, DAO, and NFT projects.