The protocol is dead, long live the protocol! – by Julian Leitloff, CEO – Fractal ID


Today we are announcing that the Fractal Protocol will be discontinued, giving way to a new protocol: the Identity Operating System (idOS). Iterations — and sometimes even pivots — are necessary to learn and evolve. We took the learning we gathered since Júlio and I envisioned the protocol in the fall of 2020 and came to the conclusion that a pivot is necessary.

Back to where it all started

The idOS is what we should have started in 2021. It is core to what Fractal ID set out to do since we founded the company in 2017 — to bring a user-owned identity layer to web3. It is a separation between Fractal ID, the company that now has over 1M users and is one of the most-used onboarding providers in crypto today, and the open-source protocol that is cross-chain, compliant, self-sovereign, and decentralized.

Why did we start Fractal Protocol and why are we pivoting now?

We wanted to make a push for the user-owned internet. User data is valuable, which is why the biggest internet monopolies offer great services for free so they can harvest and monetize people’s information. Power is concentrated with a few companies, users’ data gets siloed and the diversity of the internet suffers as a result.

With the Fractal Protocol, we wanted too much too early. The internet wasn’t accelerated by brick-and-mortar stores, neither will corporations and web2 behemoths be the catalyst for web3 adoption. The web2 ad tech market isn’t going all-in for a user-owned internet anytime soon. We need to do it ourselves.

Paying users will get you an army of mercenaries

Ironically, when the Fractal Protocol was introduced, I referenced a ‘Market for Lemons’ which was unfortunately true for the ad market as well as for the Fractal Protocol. We wanted to share the information rewards with the user. Unfortunately, paying for users will get you users quickly, but leads straight to Akerlof’s problem. The Fractal wallet that recorded people’s browsing history on their local device rose to 80k users quickly. However, being paid a couple of bucks a month doesn’t draw in the type of users that advertisers find very valuable, and with this dynamic, the race to the bottom begins.

Tokens are not a great replacement for utility, but a way of capturing it. Great people will use your product because of the utility it provides, not the amount you pay out each month. This is an insight we are afraid others in the web3 identity and data space will learn the hard way like we did.

Navigating the path forward

We realized that the only way forward is by building in and for web3. We realized we needed a web3 native community that was in for the utility of the protocol, not just the incentives. But there was also something else that we needed to realize:

The base infrastructure still wasn’t there yet

Going seamlessly cross-chain with your identity attached to your wallet was as much a promise as it was when we started in 2017. Even today, monolithic identity frameworks dominate the narrative with a big marketing budget and zero traction. Back in the day, we shied away from tackling the primitive because others had huge war chests that seemed to be on the verge of flipping the whole ecosystem towards adopting decentralized identity. Moreover, some of these projects were quite close to us. So we tackled users’ personal data instead.

This isn’t an excuse, we should have gone after it as far back as 2020. But it’s also an easy epiphany in hindsight.

The Fractal Protocol is dead, long live the idOS.

Finally, tackling the identity problem

We took all our learnings building the Fractal protocol to tackle one of the biggest problems in web3 and the broader internet today: Identity. We are building a decentralized identity storage system that allows users to manage their own identity in a self-sovereign way — a system that offers real utility for real users, not just a way to collect a couple of bucks a month by sharing your personal data. We are proud to say that NEAR is building its native identity solution on the idOS. Aleph Zero is trusting in the idOS to enable core use cases that are privacy-preserving. We love what Gnosis Pay is building with their self-custody credit card and are grateful that they see the need to expand the concept to identity as well. We are building together for and with the web3 ecosystem (and for no one else).

At last, we are tackling the core problem that we set out to do when we started in 2017: bringing the user-owned, decentralized identity layer to web3.

When we started we had giants like uPort and Sovrin around with unbelievable war chests, experience, and talent. We saw the next generation of well-funded, high-reputable teams aiming to build the universal decentralized identity framework. Yet, it’s 2023 and we have still not seen any operational adoption of decentralized identity.

With a little help from our friends

The idOS is built on the learnings of the Fractal Protocol. We are grateful for the support that we have received from you.

The idOS isn’t just limited to Fractal ID, it is about more building partners and ecosystems coming together to make decentralized adoption a reality. Building a real open-source protocol means seizing control. This will be our next challenge.

We believe the time is ripe and we know what it takes. We are pragmatic to build a holistic solution that works for everyone involved. The identity market isn’t a first-mover but a first-scaler: We are proud to have 1M users and ecosystem support (more being released soon). Also, we have you, who stuck around all the way since 2017 or even earlier.

So now it’s our turn. But it’s not just us alone.

Long live the idOS!

TL;DR our learnings

  • Brick & mortar didn’t build the internet, web2 won’t help us build web3 either. We need to do it ourselves.
  • Direct incentives don’t scale: They get you an army of mercenaries that lead you to make wrong product decisions.
  • It’s 2023 and decentralized identity is still not adopted. It’s a missing infrastructure piece in web3.
  • A lot of money and prominent teams didn’t solve it, because it’s not a first mover-advantage

Stay tuned for more developments and information as we move forward, and thank you for being a part of the Fractal ID community.

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