Introduction

In the era of web3’s unfolding potential, the significance of decentralized identity has transcended from mere KYC compliance. Considered the missing piece in the puzzle, decentralized identity stands as the cornerstone that can empower blockchain ecosystems and dApps to realize their full potential and generate new use cases. Facilitating the widespread adoption of decentralized identity in web3 has become a necessity in creating a more secure, user-centric, and thriving digital environment that delivers on the principles of connectivity and transparency. 

Julio Santos, Co-Founder and CTO of Fractal ID recently spoke at the XRPL panel discussion – Beyond Transactions: Harnessing the XRP Ledger for Decentralized Identity – at Apex with co-panelists Aanchal Malhotra from Ripple, Julian Vergel de Dios from Heirloom and Aaron Sloup from The & Company  – moderated by Jas Takhar from Ripple. 

The conversation dives into the critical need for decentralized identity for the maturation of blockchain innovations, current use cases for Decentralized Identity, the increasing relevance of pseudo-anonymous identities in the digital world, and the future of user-owned identity management in web3 with specific reference to the idOS – the identity layer of web3.

Read the key excerpts in this blog post!

Julio, tell us some of the use cases that Fractal ID is jumping into and some of the advantages you’re seeing for Decentralized Identity

Julio Santos: “I’ll just start with the fact that we’re an identity verification company, and that means that we started our work by first mastering the boring work of identity verification. We’ve been doing this for a long time and we’ve learned a lot in that process.

I’m convinced that because we mastered this first, we’re not now in this ever-expanding graveyard of decentralized identity projects that never actually went anywhere. They might have had great UX, and great technological foundations and might have been built with amazing intentions, but they were deserts because nobody verifies identities.

Identity verification, regulatory compliance, and user support are messy. Somebody has to do it, and we did it. That is why what we build actually has usage and adoption for a change. For me, everything is about trade-offs. I’ve learned a lot of those trade-offs by serving hundreds of companies with their actual needs in the market of identity verification, rather than building a pie in the sky that I think looks great but doesn’t actually map to market needs.

So why is our platform beneficial for users? Because it’s self-sovereign, it’s your keys, your data – that is how it works. Your profile in the idOS is what you want it to be – you edit it, you create it, you delete it, you share what you want with who you want for however long you want, and that’s entirely under your control. There’s nothing I can do or anybody else can do about that. You don’t need to carry around an extra tool like a data wallet; your data is online and available if you want to share it with somebody else.

For dApps, we encourage them with new mechanisms to never copy data. Instead, they can get an access grant to access user data in the future, even if the user is offline. That means we don’t replicate honeypots everywhere and the best part of all this is that it is not a Fractal ID project. This is something that we’re building with a bunch of other partners in the space like NEAR, Gnosis, Kwil, and Aleph Zero. We’re building this because the space needs a chain-agnostic way to properly manage decentralized identities and respect the folks who use decentralized applications.”

What are the stand-out use cases that you are seeing for decentralized identity?

Aanchal Malhotra: Anything that would require access control – that is authorization and authentication on chain, needs to use decentralized identity. Specific use cases would include verified payments, for instance, other DeFi applications, and automated market maker permission pools with which you can think about participating in compliant and regulated pools. More broadly, decentralized exchange as well. 

How do you see decentralized identity really reshaping the area of consumer trust and corporate branding?

Julian Vergel de Dios: We always quote this funny stat that on LinkedIn there are more Harvard graduates than have actually graduated from Harvard. So, that’s one huge area that we think that decentralized identity can help because universities have a brand. If your brand gets diluted by people misusing your name online, it dilutes your ability to call yourself a prestigious institution. So in this LinkedIn case, where we would imagine decentralized identity would work is if you receive your degree as a credential, you’re able to then go, independently from your university but in a cryptographically provable way, to LinkedIn, present a proof and get a checkmark on your profile that people can rely on. 

In the context of web3, the concept of a pseudo-anonymous identity is gaining traction. Can you elaborate on that? 

Aaron Sloup: There are a lot of times when you don’t want an application to know who you are – not for nefarious reasons but for example if you’re on a shoe website, you don’t need it to know everything about you. That’s the world that we live in in web2 but that can change in web3. So you go to that shoe website, and maybe it knows some information that allows it to personalize the experience for you, but it should not be able to track your online behavior always. You could put something in your cart or browse and look at a bunch of shoes, and that history could be stored anonymously with your pseudonymous identity. You can be doing that on your laptop, and then later when you’re on your phone, that same pair of shoes is still in your cart, but they don’t know who you are until you want to be known. So there are a ton of cases like that, where you can apply a pseudonymous identity that allows you to be more private in the world but also have things personalized to you without these websites knowing who you are.

Summarize your thoughts on the potential of decentralized identity in the digital landscape over the next 5 to 10 years. 

Julio Santos: We’re at a pivotal moment now with decentralized identity and that is because most of our interactions have already moved online. That’s the world that we live in now and it opens up a tremendous amount of possibilities. But especially recently, we’ve become painfully aware of how hard it is to distinguish yourself from a bot or an impersonator. This is eroding trust in our communities and our society while making it very hard for us to coordinate – which is the whole point of blockchains. I think as this problem gets worse, for us to be able to thrive as humanity we do need a way where, in this decentralized context, we can still rely on others to know that we are who we say we are. 

TL;DR

• User profiles on the idOS are entirely under individual control. Users edit, create, and delete it, and are free to share their data with whoever they want to.
• The idOS is being built because web3 needs a chain-agnostic way to manage decentralized identities. 
• Specific use cases for decentralized identity include verified payments, DeFi applications, automated market maker permission pools, and exchanges. 
• A pseudonymous identity allows users to be more private in the digital world but also have things personalized to them without revealing unnecessary data. 
• We’re at a pivotal moment now with decentralized identity because the complexity of distinguishing a human from a bot or an impersonator is eroding trust in communities. 

Watch the full panel discussion here.

Explore more about the idOS — the identity layer of web3 — on the website, Social Media, GitBook, and GitHub.