Beyond Worldcoin, what potential does the emerging DID hold for Web3?
Recently, Worldcoin — an iris biometric cryptocurrency project founded by OpenAI’s CEO, Sam Altman — has garnered widespread attention both within and beyond the cryptocurrency community. However, as Worldcoin allows other organizations to utilize its iris scanning and identity verification technology, it has begun to face increasing regulatory pressures on privacy and security in various countries. Reports of investigations and business suspensions in multiple nations have rendered the project’s future prospects uncertain.
The Wave of DID Behind Worldcoin
The rising prominence of Worldcoin suggests the growing significance of the DID (Decentralized Identity) sector. Widely regarded as a fundamental infrastructure for Web3, DID aims to return individual privacy and data control to users’ hands.
In the traditional account-based system, internet giants hold user privacy and data that rightfully belong to the users themselves. However companies employ users’ information to engage in financing, going public, and other profit-driven activities, often without giving adequate compensation.
DID, on the other hand, offers blockchain users a unique identity and utilizes blockchain technology to ensure that digital identities are truly owned and controlled by individual users. In this way, the system returns personal privacy and data rights to users. It eliminates the control over user privacy and data by internet giants for profit.
Most importantly, DID can construct a native identity system for Web3 and can thereby serve as the future’s decentralized identity credentials. It can also extend the boundaries of Web3 innovation beyond existing tracks such as DeFi, NFTs, and GameFi to provide critical support for broader Web3 application scenario innovations.
As Gavin Wood wrote in “Why We Need Web3,” “Web3 is a set of inclusive protocols that provide a new way for application developers to build programs.” From this perspective, DID plays a pivotal role as the underlying protocol driving decentralized trust calculation and identity generation within the Web3 network. It can create a transparent, scalable, and open individual identity cognition system, thereby functioning as a crucial infrastructure for the Web3 network.
DID is a natural need, especially for users in underdeveloped regions such as Asia, Africa, and Latin America. That is, most third-world countries on these continents lack a mature and usable identity system, making it difficult to massively popularize Web2 tools such as financial, entertainment, and social applications.
By utilizing blockchain technology, DID can make digital identities truly low-cost and convenient for new users in these underdeveloped regions to own and dispose of. They can thus enjoy a wide range of financial and entertainment services, without involving any intermediary (even the DID technology provider). They can fully own their identity data.
DID-enabled imagination space
In addition to providing users with vital identity services in the real world and across Web2 platforms, the imaginative space of DID in SocialFi and the broader Web3 world can not be overemphasized.
In Web3, data is the value carrier, and it belongs to users. Each of our on-chain actions will serve as future identity verification:
Actions such as using DeFi products like Uniswap, 1inch, Compound, and Aave, purchasing NFTs like CryptoPunks, playing blockchain games such as Axie Infinity, participating in governance voting on Snapshot, or donating to projects like Constitution DAO with ETH, etc., will generate a significant amount of user data every day.
These data resources are our personal assets and will accumulate over time. DID can enable users to leverage the on-chain data accumulated, along with the identity credit behind the data.
Facing the personalized needs of different DApps, DID can directly help project parties such as DeFi, NFT, and GameFi, embed their social connections in their existing products at any time and any place. This enables flexible and changeable on-chain social network empowerment.
For example, it categorizes users into different risk levels to enjoy different on-chain credit benefits by taking into account different factors, such as the assessment dimensions of credit card systems, and the most direct on-chain factors, including the on-chain asset status and behavioural data of corresponding addresses.
In the current DeFi paradigm, platforms like Compound and Aave rely on “trustless” mechanisms by using over-collateralization and risk liquidation to address the lack of on-chain credit factors (due to the inability to create user credit profiles based on on-chain data). This traditional approach allows users to complete the entire on-chain lending process merely by staking encrypted assets.
With the introduction of DID, Compound and Aave will be able to provide users with diversified credit-based lending services: ordinary users’ asset status and behavioural data on the chain, which have always appeared to be useless, will be able to play the role of credit leverage, and the collateral rate will be lowered to varying degrees by virtue of the level of the individual’s score so that the flexibility of lending out assets will be increased.
The most direct application is to comprehensively score and classify users’ on-chain asset status and interaction behaviour through an on-chain credit system. Users with different scores can enjoy credit loan modes or receive different levels of preferential interest rates for traditional overcollateralized loans.
In short, as long as DID is available, combined with comprehensive statistical dimensions and detailed differentiation mechanisms, it is possible to derive a chain-native risk credit system in the future, and DApps, such as DeFi, and NFT, are fully capable of providing different grades of services for different users. In addition, not only the blockchain, personal social accounts, email addresses, personal profiles, personal preferences, and any other data ready to be made public can be added to the DID account. Everyone can have a thoroughly censorship-resistant personal information homepage. This is tantamount to having a relatively comprehensive identity system. It also means that ‘big data profiling’ can be performed on individuals, which extends beyond on-chain asset records but derives credit assessments that encompass both on-chain and off-chain activities. It can be described as an on-chain credit system, just as the Sesame Credit system by Alipay.
In other words, with the help of a DID account, data can be bridged between on-chain and off-chain by integrating credit factors and even a complete credit mechanism into the Web3 world. This is also the greater potential that DID can bring to Web3 users and the Web3 world.
DID Deployments Across Major Blockchains
At present, the deployment of DID (Decentralized Identity) on major mainstream blockchains is in full swing, with Ethereum’s Ethereum Name Service (ENS) undoubtedly leading the way.
ENS on Ethereum
In terms of data, ENS has generated approximately $67.47 million in protocol revenue since its inception, with over 2.58 million registered domains and more than 740,000 unique users.
In the crypto world, it has become almost standard practice for project teams to purchase ENS domains corresponding to their project brands. Even traditional Web2 projects have started acquiring ENS domains, including
- Budweiser purchased beer.eth for 30 ETH.
- The luxury brand Gucci obtained gucci.eth for 12 ETH.
- The jewelry brand Tiffany acquired the tiffany.eth domain for 29 ETH.
On the other hand, on a personal level, since ENS domains support DIY registration and creation and enable a simplified representation of a user’s blockchain address, it is possible to set up recognizable on-chain names like in social media such as Twitter. As such, it is often seen as the personal on-chain business card of the Web3 era, such as vitalik.eth for Ethereum co-founder Vitalik and terence.eth for Ethereum core developer Tim Beiko.
In some ways, ENS has developed more than 5 years since it birth. It has evolved from an Ethernet address resolver to a calling card for the Web3 world. In the future, with the adoption of ENS and the changes in Web3, it is likely that ENS will become the core infrastructure of the Web3 world.
Worldcoin in the OP Stack
On May 11, 2023, the Worldcoin ecosystem wallet–World App, migrated from Polygon to the Optimism mainnet, bringing the World ID protocol to the OP mainnet.
Subsequently, the Worldcoin Foundation and the primary software contributor — Tools for Humanity, announced a partnership with Optimism Collective to jointly build a scalable blockchain ecosystem based on the OP Stack. Furthermore, Worldcoin ID revealed plans to develop an application chain on the OP Stack that focuses on the ecosystem building around on-chain identity systems.
As a result, after the WLD token distribution on July 24th, it directly boosted the on-chain daily transaction on Optimism, surpassing 800,000 counts at one point. It outperformed Arbitrum and set a historic high.
SPACE ID on BNB Chain
SPACE ID is a full-chain domain service provider on BNB Chain. It allows users to link their identities across multiple chains and to use the same domain name on different chains, which simplifies operations. The community can build its top-level domain service through SPACE ID’s network.
In August 2022, SPACE ID 1.0 launched “.bnb” domain services on BNB Chain, and quickly garnered around 361,000 registrations and 168,000 unique domain name holders within six months. In February this year, SPACE ID 2.0 was introduced, supporting more top-level domains. Just last month, SPACE ID 3.0 — an upgrade to a permissionless domain service protocol for the entire Web3 community, was officially released.
CNS on Cardano
CNS (Cardano Name Service) is a social and DID (Decentralized Identity) service on Cardano. It is supported by EMURGO, Cardano’s commercial incubator, and Adaverse, Cardano’s official global incubator.
Earlier this month, CNS partnered with Adaverse and committed to expanding CNS in Africa and Asia to provide decentralized identity infrastructure for underdeveloped places on these two continents.
In addition to the aforementioned mainstream blockchains, many others are also making a similar move, such as Algorand with NFDomains, Dfinity with IC Naming, Telos with Telos Name Service, and Terra with Terra Name Service.
Overall, DID is a significant business opportunity and plays a critical role as a “new infrastructure” in Web3:
From decentralized identity frameworks to data management applications and data exchange platforms, it can logically form a closed loop. This allows users to have complete decentralized identities, control their data, effectively utilize and unlock the value of data and lay the foundation for a diverse range of applications.
As the Web3 era approaches, DID is beginning to build a new network system and innovative practices based on individual identities. It is becoming an indispensable core component of the Web3 era and a crucial “infrastructure” in the industry.