Web3 has provided a breakthrough in the coordination of machines and capital. No prior technology, incentive scheme, legal system or coordination mechanism has ever scaled and aligned networks of capital and machines so rapidly. This, on its own, represents a “killer use” for crypto and is a base layer to build on. 

To break through with mass market applications - web3 will also have to prove itself as an incredible (user) data coordination system. Of course bits and pieces of an emerging decentralized data stack exist. From ETH, FIL, Arweave on the downstream infrastructure side to ex. Tableland, The Graph on the data handling side, up to ex. Ocean protocol, Numerai on the application layer and lastly ex. Dune on indexing and analytics. However the perceived tensions between the web3 values of transparency (examples include: open sourcing code, wanting all data on chain, everyone and no one being accountable for decentralized autonomous organization (DAO) administration), speed / scalability and privacy are preventing mass coordination.

This is because most builders are at ends of the spectrum – some that believe all data should always be on chain, allowing everyone to have access to it. Some who optimize only for speed, regardless of structural set-up and cost. And others who believe centralized databases, normally built in a non permissionless and non publicly accessible way, will always prevail given the fact that individuals both don’t want their data available to all and don’t want to have to manage it themselves. This lack of middle ground is preventing optimal digital collaboration conditions in peer to peer systems like that of web3 because many are building according to ideology instead of economies of scale or what works best for the user. If anything, web3 should be the most optimal space for effective digital collaboration because of the quantity of open source and permissionless technology available. We think selective identity is one way to reach this potential.

Selective identity, or the process of presenting a specific version of one’s self and/or work in order to optimize for certain outcomes, is one of the ways to unlock data coordination systems at scale in my opinion. For example you could be a well endowed trader, whale, who wants to join another decentralized exchange in a new crypto ecosystem, but your data (ex. reputation, earnings potential, transaction history) does not transfer. There should be a standardized protocol that allows you to confirm all of your data to a decentralized entity that verifies your reputation onchain; allowing you to curate your identity to showcase only relevant onchain events to other crypto holders.This is also a helpful safety precaution to prevent whales from becoming the target of hacks. Another example could be wanting to participate in a token gated social media platform, but being new to crypto and having few other blue chip tokens or a strong understanding of crypto interfaces. Let’s say you want to find groups that are relevant to your interests. You may want to present a selective background that highlights your relevant experiences to communities you want to be part of instead of your asset holdings in order to both not get adversely treated once joining those communities and to have a better user experience on the platform.

A universal standard in selective identity is a key piece of infrastructure for the future of web3 for a few reasons, including though existing contributors to the crypto ecosystem engage in platforms and protocols according to their values (for example wanting to stay anonymous), the average new contributor to web3 may not care too much about expressing their values through how they engage. Instead they are coming to use this technology because they believe blockchains enable users to become the co-owners of every platform they contribute to. They are coming to financially benefit from how they engage with this ‘new’ ecosystem. Many have no desire to struggle through complex user experiences that they cannot customize. Selective identity solves for that. Another reason this is exciting is because it provides a solution to credentialing and verification for both hardware and software access without having to forgo anonymity. It is the answer to the tough regulatory problems of keeping wallets safe and not allowing users of blockchain technology to be part of a surveilled state, while providing institutions and entities with the open data they require. It becomes a buildable layer on-top of infrastructure that can provide holders/contributors/end users the ability to curate not only themselves in digital spaces, but also their experiences. Lastly verified identity, even in anonymity provides a faster access pathway to existing applications and data storage.

But though we are bullish on the idea of selective identity we still had questions around implementation. This is because in our minds the solution(s) would need to be part of a protocol orchestrated standard. Multiple identity solutions with varying structures would not be interoperable and the key to adoption will be seamless universal adherence. This infrastructure would also have to be available and easy to access in a plethora of use cases (web3 social networks, DAO onboarding projects, bridging CeFi to DeFi etc.). Some additional questions we had were::

• What is the future of identity protocols and how (if at all) do they create value for their contributors? 
• Do zero knowledge (zk) proofs solve our existing conundrum? Given the goal of zks in cryptography is to establish a way for one party to prove to another that something (i.e. a written or mathematical statement) is true without conveying any additional information apart from the fact that their statement is correct.
• What does the creation of all these communication and coordination tools/products unlock with better ux and an eye towards a composable future?
• Does it help or hurt for teams to start with DAOs as their first user base? -- How big will DAOs become and what does the signaling show? Are there ‘riper’ and denser user groups to work with on user testing?
• What could be harmed by us moving too fast?

We decided to set up the twitterspace to have this discussion in public. We invited the teams at Privy, gm, Violet and more including Anastasia Uglova, a privacy researcher who works at Lighthouse to talk through our questions. The recording is here. TL;DR; these were some of the take-aways:

• Privacy is hard to accomplish with good UX and a decentralized technical stack
  • This sentiment was shared by Anastasia - we can’t make substantial progress on privacy without rearchitecting identity to be more user centric
• Consent needs to become embedded in our vocabulary around credentialing and reputation
• Identity is a coordination problem
• A large number of existing crypto users are here for pure financial incentive, but the next billion users onboarded will need something more (ex. Long term ownership prospects, new-age future of work structures, data autonomy etc.) and they are used to delightful user experiences 
• Decentralization can and (for me especially) should be thought of as a range 
• Blockchains are overused and that overuse can lead to latency and poor usability**
  **

We will continue to monitor this area by creating more spaces virtually and in real time (see you at Mainnet and Eth San Francisco!). Also we recently did a series of talks at EthCC with the teams from Disco, Privy, Violet, Fission and discussions move ahead with relevant teams like Tableland. Lastly, we want to keep writing about what we learn and do especially when it comes to data coordination.