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Rowan Spencer, Editor In Chief
The State of Web3 Identity
The internet simultaneously offers an uncharted universe of experiences that shape the core elements of our identity, and expands the set of ways we can represent our identity to others. Yet, the many challenges of digital identity have long eluded those who have tried to solve them.
Digital identity is a dynamic collection of data that is associated with an individual, group, or object, and gathered based on the performance of certain actions. The data can then be used to prove accomplishments, validate membership, or express interests and values online.
In today’s Web 2 world, this data is centralized among a few dominant companies and platforms, siloed within their walled gardens, and thus, remains out of our—the user’s—control.
So in order to reinstate individual agency and autonomy, brilliant minds have been busy building decentralized identifiers (DIDs) and decentralized data storage, which include a host of blockchain-based web3 solutions.
The intention of this essay is to present an update on the state of web3 identity — the new ways individuals and organizations are leveraging blockchain technology and crypto assets to address the problem of decentralized digital identity.
After a brief introduction to the underlying infrastructure, I detail how we at Myosin are approaching digital identity. Through insights gathered from three primary applications within the Myosin DAO’s own identity stack — Charmverse, Fractal, and Station — I explore how web3 builders are thinking about digital identity and shaping the future of internet communities.
Digital identity can be broken down into two components: identifier and data. While the identifier consists of a unique set of characters or numbers that *gasp* identifies the subject, the associated data constitutes the subject’s digital identity.
Simply put, this data reflects what we do online—our tweets, subscriptions, transaction history, etc. However, when these core pieces of our digital identity remain in control of entities whose primary interest is to hoard and protect them, we lose the power to determine what data is collected and how it is used, as well as the ability to carry our identity across platforms and contexts (or even retain our identity if—dare I say—the platform shuts down, taking all of its proprietary data with it).
Without question, this system has long been broken.
As a result, DIDs emerged, differing in that they may be decoupled from centralized registries, identity providers, and certificate authorities. Specifically, the World Wide Web Consortium (W3C), states, “The design enables the controller of a DID to prove control over it without requiring permission from any other party.” Instead, DIDs are issued and verified against verifiable data registries (VDRs), of which general-purpose blockchain (e.g. Ethereum), peer-to-peer (e.g. IPFS), and decentralized storage (e.g. BitTorrent) networks are all subsets.
Right now, you may be asking yourself, “So what role does web3 play in all this?”
Unique identifiers resolve to a DID document, which expresses the DID’s verification methods—that is, the ways the DID can be authenticated. One of these methods are cryptographic public keys—the same public keys your favorite crypto wallet uses to perform transactions on a blockchain. Because of this, blockchains, and the public key infrastructure (read: wallets) that operates on top of them, present a solid foundation for DID systems.
This environment precipitated the wave of blockchain-based platforms, protocols, and applications currently being added to the top layers of the digital identity stack, represented here by the “Three A’s”: authentication, authorization, attestation.
Legitimacy and the Evolving Role of Tokens
The top layers of the identity stack are what we, as users, are most interested in. The combination of authentication, authorization, and attestation equates to how we prove who we are in order to do stuff, including validating claims we make about ourselves and others. Therefore, the Three A’s represent how we are actually able to wield our digital identity on the Internet. A low-hanging IRL analogy is how a passport allows you to board a plane by confirming that the name on your boarding pass does, in fact, belong to you.
In order to create a socioeconomic system that runs on credible digital identity, the Three A’s require ways to accrue legitimate reputation. The current state of things is as follows: in the physical world, the legitimacy of reputation is dependent on credentials issued by large centralized institutions, while in the digital world, the legitimacy of reputation is dependent on information housed within large centralized databases.
Notice a pattern?
Turning our attention to web3, the difficult task undertaken by builders in the space has been to make the assignment of reputation permissionless—meaning, the relevant data is not controlled by any one entity—while retaining its legitimacy. This design requires another mechanism—beyond centralized control—that drives social consensus around the performance of digital activities and their perceived value.
By assigning ownership on the transparent record provided by blockchain technology, tokens have emerged as powerful accounting tools for crucial elements of our digital identity and reputation, such as membership and contribution. For example, within the Ethereum ecosystem, ERC-20 tokens accrue to the wallets of participants in certain communities as rewards for certain activities.
However, tokens did not go very far without encountering yet another complication.
Due to their availability on the open market—a problem that also plagues NFTs and ENS domains—unaligned, non-participant actors are able to purchase the same assets without making any value-added contributions.
Consequently, this first wave of tokens have served as poor proxies for digital identity and reputation, resulting in plutocratic governance systems that mirror the centralized web2 structures the industry aims to transcend.
It didn’t take long for projects to become fed up with “one-token-one-vote” governance and realize that a reliance on transferable financial assets does not produce effective mechanisms for accruing reputation and managing digital identity.
As a result, major changes are underway with regards to how tokens are used to shape the identities of social actors within web3.
Web3 Credentialing and the Myosin Identity Stack
Perhaps the biggest recent trend in the web3 digital identity space is the rise of credentials. In general, credentials are social verification (i.e. attestation) of claims made by issuers about the specific attributes or qualifications of individuals and groups.
This way, credentials serve as the building blocks of reputation, facilitating the distribution of rewards for actual contributions and the creation of more equitable governance systems within distributed digital organizations.
Station recently rolled out GroupOS, a modular toolkit for coordinating and incentivizing networks onchain. At the core sits the “Members” tool, which empowers digital-native collectives to “curate members, track contributions and reputation, and engage stakeholders through evolving onchain accounts.”
To accomplish this, GroupOS leverages the new ERC-6551 token standard on Ethereum, which introduces “Non-Fungible Token Bound Accounts” and greatly expands the utility of NFTs.
Because each NFT has a globally unique identifier stored on a blockchain, NFTs have increasingly become a form of onchain identity. ERC-6551 simply advances the possibility that data, such as asset ownership and transaction history, can be “bound” to NFTs, allowing them to accumulate their own unique attributes and qualifications.
This technical improvement promotes the legibility of individual accomplishments—information required for credible reputation building and credentialing—thereby making NFTs a fully-fledged digital identity solution.
Accordingly, Myosin has engaged Station’s GroupOS toolkit to issue membership NFTs for our DAO. The ERC-6551-based NFTs will dynamically update their metadata following member actions—data that is reflected in “badges” (i.e. credentials) that level-up with increasing value-add contributions.
As such, these digital ID cards attest to a member’s onchain reputation, portraying their standing within the DAO, enabling programmatic and trustless DAO operations, and demonstrating their experience to other organizations and communities.
The data that ties to unique identifiers and comprises individual digital identities is only part of the equation. In order for digital identity to be useful (read: to increase adoption), Charmverse co-founder, Alex Poon, believes that it needs to tie to a strong ecosystem of applications that drive social interactions and collective action.
Referred to as “web3 Notion,” Charmverse is a community operations platform to help members build relationships, work together, and vote. For our part, Myosin uses Charmverse as an information and project hub—an application where members share ideas and collaborate.
To create a collaborative digital environment full of engagement, Charmverse incorporates the social side to digital identity, uniquely implementing all of the Three A’s at the top of the digital identity stack.
Like all web3-native applications, the Charmverse platform allows users to log in with their crypto wallet. This step is authentication, whereby a community member proves their identity through their wallet’s digital signature.
But unlike other applications, if the individual is logging in for the first time, they are asked to complete a profile. Similar to Station’s DID solution, which allows individuals to adjust which badges they want to display, Charmverse asks users to divulge only as much information as they want. A directory is then generated from the aggregated member profiles within the organization’s Charmverse page, promoting intra-community identification and communication.
Token-gating within Charmverse authorizes individuals to access specific information, or contribute to certain conversations, based upon roles assigned—attested to—by the tokens in their wallet. With strong reputation systems secured by role-based access controls, Charmverse builds the legitimacy and credibility of individual reputations—traits that engender the trust required of successful collaboration.
Charmverse calls this building social capital for token communities, which boosts member engagement and encourages both internal and external network growth. Just like in the analog world, individual and group identity formation within distributed digital organizations, such as Myosin, will continue to motivate human behavior and drive collective action.
Recently released on the Ethereum mainnet, Fractal is an application and framework for DAOs to manage their governance and operations. While applications like Station design systems to link tokens to member identity and reputation, Fractal allows those identifiable entities to then form larger internet-native organizations and work together through composable structures, permissions, and transactions, such as voting and revenue sharing.
This way, Fractal provides the tools to join individual identities and drive collective action and community ownership.
Myosin used Fractal in the most recent $MYO airdrop to reward our community members. Iterating upon previously inflexible, highly gameable airdrop processes, Fractal is able to design token allocations based upon community-defined measurements of worth—the set of a community’s values.
Among other factors, $MYO tokens were allocated based upon Discord activity (community engagement), number of projects worked on (individual contribution), and total GIVE received (perceived value-added, as determined by peers and facilitated by Coordinape's GIVE token).
These metrics greatly overlap with the data corresponding to the membership card badges, thus completing a virtuous cycle where member activities and accomplishments influence their digital identity within the organization, which then determines their ownership share—their amount of “skin-in-the-game.”
In the future, Myosin will leverage Fractal to distribute $MYO at a Guild level, further increasing decentralization and guild autonomy.
Conclusion: Towards the Distributed Internet Communities of the Future
Operating better internet-native organizations requires the right mechanisms to motivate contribution, develop relationships, and foster trust—all of which require an effective way to build, display, and employ digital identity.
So far our identities in web3 have been restricted to the monetary realm, formed solely by the financial assets we hold in our digital wallets. By bringing various forms of DIDs into the mix, we make web3 digital identity more expressive—more reflective of the true multiplicity of our identity.
And so, what does the future of web3 digital identity look like?
Blockchain technology does certain things very well, such as maintaining transparent data and attributing distributed ownership. However, blockchain-based digital identity poses many problems, such as data mutability, privacy, and costliness.
The good news is that many possible solutions to these problems—such as, Ceramic’s dynamic data network, Disco’s offchain verifiable credentials, and privacy-preserving zero-knowledge proofs—are currently being built.
As such, I see a future of web3 digital identity as a mix of onchain and offchain data. But even more importantly, blockchain technology will accelerate the selective permissioning of identity data, enabling the separation of who you are and what you do. Among other things, this allows users to carefully choose what information to share—including how related they want their digital and meatspace identities to be— and organizations to granularly decide what information they need to validate member credibility.
Ultimately, while users will be able to retain control over a single composable identity across applications and platforms, each community or DAO will have its own authentication, authorization, and attestation requirements determining who gets access and rewards.
In other words, composable identity in an environment of differentiated permissions. In the meantime, let’s keep building.