Detailed Explanation of the Decentralized Identity Track: Building the Social Passport for Web3

Author: echo_z

1. Introduction

In the Web2 world, we are accustomed to logging into different applications with dozens of usernames and passwords, and our browsing history and friend lists are controlled by centralized company servers. Personal accounts essentially do not belong to users but to the platform, which can set its own rules for account recovery. Tencent has even directly reclaimed a batch of five-digit QQ numbers that were obtained through normal channels (see appendix for details).

The logic of Web3 is entirely different. The open, transparent, and permissionless nature of blockchain returns data ownership from companies back to users, making the previous profit model reliant on monopolizing user data untenable. Popular applications that already exist in Web2, such as WeChat, Twitter, Facebook, TikTok, etc., will be rebuilt in Web3 with a completely new model.

In the Web3 domain, we already have wallet addresses as a shared account system for Dapps, but wallet addresses are like bank account numbers, only satisfying functional financial activity needs. We cannot use them to chat with friends, attract followers, or apply for jobs.

People need a plaza to showcase their achievements in Web3, to build their identity brand, and these achievements must be real and verifiable.

In fact, the concept of DID (Decentralized Identity) has existed for several years, and organizations like DIF and W3C have attempted to establish DID standards. However, early definitions mainly focused on establishing identity verification systems through cryptography. With the rise of NFTs, GameFi, and more forms, users need to incorporate more on-chain data into their DIDs to enrich their decentralized identities, giving rise to a new on-chain identity track.

The construction of Web3 identities is of great significance. First, on-chain data inherently guarantees the transparency and immutability of user identities and behaviors, establishing the foundation of identity trust; second, Dapp data can be read and called across projects, unlike Web2, where data is isolated and stored on centralized servers. This ensures the universality of user identities in the on-chain world, much like how a skin in Fantasy Westward Journey can also be used in Honor of Kings.

As the ecosystem of the crypto circle continues to enrich, Web3 identities will also become an indispensable module in the crypto space. Content and social applications popular in Web2 will be rebuilt based on Web3 identities in the future.

It is easy to imagine that in the future, users can log into different social/content/game applications with the same account, and their on-chain behaviors can be synchronized to these applications, continuously accumulating identity value. Such an identity application ecosystem is something Web2 lacks, representing a brand new native track of Web3.

Many applications are already attempting to build users' on-chain identities, each project has different ways to depict user profiles. The Chain Teahouse has selected some typical projects, summarized as follows.

2. Typical Projects

2.1 ENS: Web3 Accounts and Domains

ENS (Ethereum Name Service) is a naming system built on Ethereum that maps machine-readable identifiers like wallet addresses to human-readable text such as 'alice.eth', which can be resolved both forward and backward.

After users purchase an account, in transfer scenarios, they can simply input the account to correspond to the wallet address, enhancing user experience; at the same time, the account becomes a customizable identity marker in Web3. An account that displays the same as a Twitter account on Mirror is certainly more recognizable than a long string of 0x characters.

As a veteran project in Web3, ENS launched its test version in 2017, initially allowing the purchase of domain names with a minimum of 7 characters through blind auction; the official version was launched in 2019, allowing the purchase of domain names with a minimum of 3 characters and adopting an annual rental model to limit speculative ownership.

The project originated from the Ethereum Foundation, which received a grant of one million dollars and later became independent. Due to early funding and the annual rental fee model providing cash flow, it has not sought further financing. In November 2021, 50% of the tokens were airdropped to users and contributors, a volume of airdrop that is quite rare.

In addition to ENS, there are other projects working on Web3 account systems, such as Namecoin, Handshake, Unstoppable Domain, and early projects like Das launched in 2021, but currently, the largest and most diverse ecosystem is still ENS.

According to a dashboard created by project members on Dune, there are currently 276,000 independent users owning 640,000 domain names (https://dune.xyz/makoto/ens), supporting several mainstream projects like Metamask, Uniswap, and Opensea, with an FDV (Fully Diluted Valuation) of about 2.4 billion dollars. A brief overview of its history suggests that the relative success of ENS (the project is still in its early stages) may be due to the following points:

First: It has gained authoritative recognition from the Ethereum community. As early as 2016, project founder Nick Johnson defined ENS in EIP - 137 (https://eips.ethereum.org/EIPS/eip-137), establishing the .eth suffix as a naming standard. This proposal was later approved, and Vitalik even changed his Twitter name to vitalik.eth, marking ENS's authoritative recognition.

Although many people now question the practice of using the .eth suffix as a universal standard, arguing that it goes against the spirit of decentralization and that users cannot freely set other suffixes, there is no doubt that this recognition has greatly contributed to the promotion of early domain names.

Moreover, ENS has indeed expanded the domain name space. In August 2021, it launched DNS name integration, allowing users to input their owned DNS addresses into ENS as transfer addresses. ENS no longer solely uses .eth as the only suffix but also includes .com/.org and other Web2 address suffixes.

Second: The social demand brought by the bull market. Observing the registration volume since the official version launched in 2019, it actually began to grow significantly around May 2021, peaking around the airdrop. The prosperity of the bull market provided the necessary conditions for the popularity of identity markers.

Dashboard created by project members https://dune.xyz/queries/5676/11222

Third: Actively expanding website domain name functionality. In February 2021, the team integrated IPFS, allowing websites stored on IPFS to be imported through ENS. ENS no longer only represents wallet addresses and personal identity markers but can also serve as Web3 native website addresses.

Of course, ENS still has various limitations as a website domain name. For instance, the relatively backward storage technology of Web3 means that the websites ENS can point to often have poor quality, but its breakthrough from personal transfer addresses to website addresses is undoubtedly significant.

Despite these advantages, ENS also faces some issues.

First, the expansion of domain name scenarios heavily relies on the compatibility of other wallets/applications/chains, which are currently achieved through centralized cooperation. For example, the MetaMask wallet supports resolving ENS on Ethereum but may not support resolving ENS on other chains. Polkadot even released a tutorial showing how to add KSM addresses to ENS, but at the bottom, it states that currently, no wallet supports resolving KSM or DOT's ENS, which is quite frustrating.

Polkadot official tutorial demonstration https://wiki.polkadot.network/docs/ens

Although ENS itself is actively expanding its boundaries and can now support storing addresses from over 100 chains, whether wallets/applications/chains support resolution is another matter. Currently, the main ecosystem is still on Ethereum. This dilemma is a common issue faced by all domain name projects.

Speculating on possible future development paths: either through persistent collaboration with wallets/applications/chains to reach the critical point of network effects from the bottom up, encouraging most Web3 developers to voluntarily support the resolution of ENS across various chains; or having authoritative organizations like W3C unify standards from the top down to popularize domain names.

Second, like DNS, ENS also faces the issue of domain name fraud. Recently, the design supporting "zero-width characters" in ENS has sparked a debate, which can be referenced in two articles in the appendix. Here is a brief summary.

Some have pointed out that the "zero-width characters" supported by ENS can insert invisible characters into .eth domain names, leading to phishing websites. Although some application interfaces may alert users to the existence of "zero-width characters," this issue cannot be eradicated, thus rendering ENS worthless in the long term.

Opponents argue that this is a low-risk/medium-risk vulnerability, with plenty of handling experience in Web2; and that supporting "zero-width characters" is to showcase a richer character set. While there is indeed a phishing risk, this is a design trade-off that the team has made by weighing risks and benefits.

MetaMask wallet alerting about "zero-width characters"

The claim that security vulnerabilities render ENS worthless may be exaggerated, but the risk of domain name fraud in ENS is indeed a risk that cannot be ignored, and currently, it can only rely on application-level alerts.

Furthermore, ENS as a website domain may conflict with the current global domain name system: the top-level domain name registration of the internet is managed and issued by ICANN (Internet Corporation for Assigned Names and Numbers). Currently, .eth is not on the list of registered top-level domains, so ENS domain names will not conflict with DNS; however, if a naming conflict arises with DNS in the future, ICANN has the right to reclaim it.

Interestingly, "eth" is also the country code for Ethiopia, and the team hopes to collaborate with Ethiopia to avoid conflicts in the use of "eth." As ENS develops and grows, it will inevitably need to negotiate with ICANN to formally establish its top-level domain status without harming the global domain system. Besides .eth domain names, popular domains like .crypto may also face a competition in the future.

In addition to product features, the token distribution and DAO governance of ENS are also important reasons for its acclaim. During the airdrop in November 2021, a total of 100 million $ENS tokens were distributed. Of these, 25% were allocated to users holding .eth domain names, another 25% to contributors, and the remaining 50% retained in the DAO's community treasury.

All $ENS token holders can apply to join the DAO, which has the authority to decide future domain rental fees, treasury usage, and more.

Additionally, due to the high fees on Ethereum, which create a barrier for users, the ENS team is also considering migrating to L2 in the future, but this is expected to take a considerable amount of time.

2.2 DAS: The Latecomer in Web3 Account Construction

DAS is a decentralized naming system built on Nervos, providing a globally unique naming system with the .bit suffix. DAS shares many similarities with ENS: it also aims to provide human-readable address symbols to serve as identity markers for Web3 residents; it supports storing addresses from different chains, Web2 social accounts, and other content; and it adopts an annual rental model to limit speculative permanent ownership, with annual fees being roughly the same as ENS.

However, DAS differs from ENS in several key aspects:

First, the registration threshold is low. On one hand, DAS has low transaction fees, and when paying with CKB, no additional fees are required. Compared to ETH, which often incurs fees of over a hundred dollars, this greatly lowers the barrier for users, and DAS supports multiple payment methods including ETH, TRX, and BNB.

On the other hand, DAS technically supports registering with any public chain address, currently only allowing ETH/TRX/BSC/Polygon addresses for registration. In contrast, ENS requires registration with an ETH address first.

Second, DAS emphasizes that .bit is just an account address, not a domain name, to avoid conflicts with ICANN. DAS focuses on the association between addresses and identities without expanding into website domains. However, DAS automatically assigns a .host domain name to each account, displaying associated accounts, NFTs, and other information.

Third, since DAS does not support zero-width characters, it is safer in address display compared to ENS.

DAS also faces some issues:

First, the DAS ecosystem is still not rich, with few application scenarios. Currently, it has integrated with dozens of wallets/applications but has not yet connected with particularly mainstream projects. The account system inherently cannot achieve permissionless functionality, and like ENS, DAS will face cooperation issues with wallets/applications.

While ENS has already gained mainstream recognition in Ethereum and integrated with leading wallets like MetaMask, giving it a strong first-mover advantage in market capture, if DAS cannot gain recognition from mainstream wallets/applications like MetaMask, its expansion will be very difficult.

Cooperating wallets/applications on DAS official website

Second, DAS has defined a reserved range for domain names, which is somewhat centralized.

This issue has sparked considerable debate, as detailed in the appendix. Here is a brief summary: after pointing out the zero-width character issue in ENS, some directed criticism towards DAS for marketing opportunities, and then to DAS itself, with the most mentioned issue being the lack of transparency in domain name reservations, citing three cases:

1) Selective reservation of country code domains; 2) bitcoin.bit being removed from the reserved list; 3) some celebrity accounts being reserved without explanation. Subsequently, the DAS team clarified that the discussions about zero-width characters were unrelated to the team, and other clarifiers responded to the domain reservation issue: DAS reserved accounts of well-known individuals/institutions based on some foreign data sources.

In the above cases: 1) it is not selective reservation, but rather that certain country names matched the celebrities in the data source; 2) the removal of bitcoin.bit was the result of early community discussions; 3) there are indeed issues with the reservation of some celebrity accounts, but this can be understood from the perspective of being a Chinese citizen.

In summary, except for case 3), the individual cases raised by critics do not demonstrate a lack of transparency, as they were indeed handled according to DAS rules. However, compared to ENS and DAS's handling methods, DAS's rule-making process is relatively closed.

In essence, both ENS and DAS hope to inherit well-known domain names from the real world, allowing new domain holders to align with user recognition, so both have implemented certain domain reservation measures. The following two images illustrate the intentions of ENS and DAS, with sources available in the appendix:

However, the specific approaches of the two differ. ENS set a protection period of about one month before launching the official version in 2019 and opening registration for 3-6 character names, during which anyone could claim ENS domain names based on their owned DNS domains, with final verification and decision made by the ENS team; after the protection period, unclaimed domain names were opened for a one-month auction.

Subsequently, all 3-6 character domain names were opened for registration. In contrast, DAS defined a protection list based on foreign data sources, allowing corresponding individuals/institutions to apply for free during a protection period of about one year. The main difference between the two is that ENS only set a protection period without defining the scope of protection, providing weak protection for all domain names; DAS defined a scope of protection, offering strong protection for domain names within that scope.

Taking "google" as an example illustrates the actual difference. The holder of google.eth on ENS owns multiple rare domain names, likely a domain squatter rather than the official Google; looking at the transaction record on Opensea, it was bought from ENS for 52.9 ETH on October 16, 2019, indicating that Google did not claim it during the protection period and thus lost it during the auction. In DAS, google.bit is naturally a reserved account, likely with no opportunity for squatting for at least a year.

In summary, the domain name reservation issue in DAS shares the same intention as ENS, both aiming to inherit naming conventions from the real world. However, DAS autonomously defines the scope of domain name reservations, unlike ENS, which only sets a protection period and treats all domain names equally. ENS's approach is indeed more open and decentralized, but it also leads to some domain squatting, resembling a free market.

DAS launched in July 2021 and currently has 25,000 independent addresses owning 57,000 DAS accounts. To promote itself, DAS has made various attempts, such as launching a referral discount policy where both the referrer and the referred can receive a 5% cashback; in September, it collaborated with Binance to auction the ok.bit account name, which sold for $45,000.

Official data dashboard https://das.la/

DAS has completed a seed round of financing, led by HashKey and SNZ, with other investors including SevenX and Nervos Foundation, though the financing amount has not been disclosed. Its core team comes from Tencent.

2.3 Project Galaxy: On-Chain Qualification Proof Platform

Galaxy is an on-chain behavior qualification data platform that provides on-chain qualification proof by collecting user behaviors. The main use cases are to help project parties distribute NFTs and conduct community gatekeeping through user behavior for marketing operations, and to help end users establish their own on-chain resumes.

In terms of data collection, Galaxy's data includes both on-chain and off-chain. For on-chain data, Galaxy relies on project parties or other volunteers to provide on-chain query data, while for off-chain data, Galaxy pulls public data from sources like Snapshot.org, Twitter, and GitHub.

In serving B-end directions, Galaxy has achieved a relatively rich NFT-as-a-service infrastructure, enabling project parties to implement operational marketing activities through various NFT functionalities. For instance, project parties can use Galaxy's plug-and-play NFT facilities to distribute NFTs specifically to users who have held tokens for a certain period or are on a whitelist.

Galaxy offers a wide variety of NFT functionalities, including: randomly distributing NFTs, merging multiple NFTs into one for upgrades, financing through INO (Initial NFT Offering), and adding exclusive content within NFTs.

Project parties can also use Galaxy to cover all users' NFT minting fees (currently only implemented on Polygon), enhancing user experience. As shown in the example below, users who meet the NFT holding conditions can use the Galaxy platform to mint a new NFT for card upgrades.

Example of NFT minting upgrade activity https://galaxy.eco/pendle/campaign/112

In addition to relatively complex NFT activities, Galaxy also provides lightweight badge NFTs, which function similarly to POAP. Users can receive a badge proof by participating in activities, making the process simpler. For example, by participating in Galaxy's AMA event and filling out a question form, users can receive an event badge.

Lightweight NFT activity example https://galaxy.eco/galaxy/campaign/GC4gZUULZD

For C-end users, Galaxy has launched the Galaxy ID feature, allowing users to set their usernames, with qualifications generated on Galaxy collected on the Galaxy ID page. The team hopes that as more data is collected, Galaxy ID can showcase users' resumes in Web3, achieving a professional social platform function, evolving into Web3's LinkedIn.

Galaxy launched in March 2021 and has collaborated with over 70 projects as of December 2021.

Some collaborative projects of Project Galaxy

According to Crunchbase, Project Galaxy received $8 million in investment from Syn City and $7.5 million from Saddle Finance in November 2021. In the same month, Galaxy also received investment from the BSC fund.

2.4 CyberConnect: On-Chain Social Graph

CyberConnect intersects with RSS3 in social aspects and has a following feature, but CyberConnect focuses more on building social graphs, i.e., putting social relationships on-chain.

Every follow/unfollow action by users is recorded on-chain, requiring user signatures but not gas fees. CyberConnect hopes that on-chain social relationships will become a universal facility for other Dapps, such as reading user social relationships in games or allowing users to see friends' purchase lists on NFT trading platforms. It has already collaborated with some projects to integrate on-chain social data, and users can see social relationships implemented by CyberConnect in Project Galaxy's Galaxy ID.

In contrast, the following feature provided by RSS3 is not built on-chain but is merely for user subscription convenience.

Additionally, while CyberConnect has integrated user dynamics, it does not display the dynamics of multiple followed objects like RSS3; instead, it only allows viewing of individual dynamics. However, CyberConnect's integrated content is diverse, including POAP, Mirror, Twitter, and Galaxy Credentials, which RSS3 has not yet integrated. The first-time user experience may feel somewhat similar to RSS3; the following image shows Vitalik's CyberConnect homepage:

CyberConnect has also developed an end-to-end communication application called Cyberchat, allowing communication between ENS/ETH addresses. However, the project team has not particularly promoted this product, merely showcasing it as an application based on the social graph.

In November 2021, CyberConnect raised $10 million in funding, led by Multicoin and Sky9. Its development has been rapid, with approximately 100,000 users since its launch (the 400,000 shown on the official website is based on recommendation algorithm data, which may be larger due to publicly available information).

CyberConnect plans to launch a DAO organization and platform governance token $CYBER in the future, with a total supply of 100 million tokens. CyberConnect DAO members will consist of $CYBER holders. The early role of $CYBER will mainly be for DAO governance, with staking mining being introduced later.

2.5 RSS3: The Information Flow of Web3

RSS3 is a decentralized social and content protocol, defined by the project team as "The Feed of Web3." As the name suggests, RSS3 inherits the legacy of RSS information reading aggregators, but in a more decentralized manner.

The current front-end form resembles an on-chain version of Weibo, where users can follow others and see their recent dynamics, which are the core content supported by RSS3, integrating content from multiple decentralized platforms, such as articles published on Mirror, purchased NFTs, and also including public content from Web2, like Twitter. For example, the following image shows the homepage of the RSS3 founder:

On the information flow homepage, users can see the integrated dynamics of all followed objects, creating a user experience similar to viewing the dynamics of followed objects on Douyin/WeChat on Weibo's following page. Users can also perform simple content filtering, such as filtering Web3 content or including dynamics from Twitter and other Web2 platforms, and like mainstream apps, it distinguishes between Featured and Explore.

RSS3 also provides an RNS service, allowing users to claim a unique account with a $PASS, converting long strings of addresses into readable text.

RSS3 launched in May 2021 and currently has approximately 40,000 registered users.

The governance token of RSS3 is quite unique, composed of non-fungible tokens called RSS3 Fruit Tokens (RFTs), each of which is unique, with a total of only 294, and a 1/7 chance of obtaining a rare RFT. Its distribution is as follows:

73.8% of the share is allocated to the community, with the community's subdivided shares shown in the image below, the vast majority going to developers, community contributors, etc., with only a very small portion (0.5%) available for public sale.

RSS3 has not disclosed the investment amount, but investors can be seen on the official website. Among them, Sky9 Capital and MaskNetwork are also investors in CyberConnect.

3. Conclusion

We can see that each project is constructing users' on-chain identities in different ways.

ENS and DAS are both working on the most basic account applications, mapping human-unreadable addresses to customizable account names. ENS is also expanding its website domain name functionality, while DAS focuses on the account system and emphasizes security.

Project Galaxy builds an on-chain qualification data platform by collecting user on-chain and off-chain behaviors, with the core being the accumulation of user behavior data. Based on this, the team attempts to expand various scenarios, currently mainly providing tools for B-end NFT distribution, community gatekeeping, and for C-end users to integrate qualifications and showcase Web3 resumes. As long as the accumulated data holds value, the team may expand into more scenarios in the future.

CyberConnect provides an on-chain social graph, offering users universal social relationships on-chain and aiming to become the infrastructure of Web3.

RSS3, on the other hand, resembles a C-end application, integrating the on-chain dynamics of followed objects for users, creating the information flow of Web3.

On-chain identity is still in a very early stage. These projects are entering the DID field through different entry points, and in the future, they may converge or develop in different directions. We do not know what the final model will be, but the state of competition and innovation is always exciting.