In part I we discussed the commoditization and control of identity by centralized parties, how our identities are not really our assets but rather a right in someone else’s ledger, and how that’s unraveling in the digital era. Practically, how will the decentralization and re-definition of identity - as communally additive but individually mobile - impact our lives in the near and far term?

For someone born in a stable society at the nexus of the centralized identity system, questioning the authority of centralized entities seems unintuitive: Why wouldn’t you trust governments and corporations to control your identity, unless you are a criminal or a member of a sanctioned country? Why not allow the parties that perform related services to collect fees?

The fees being charged by the ledgers of the assets and identity have become egregious. The impact on privacy and freedom has become unsustainable. The powerful and ultra-rich have already understood this and are operating in a parallel system - they register their companies in a tax-haven (effectively de-centralizing them), they have dual passports from small Island countries, and are having conversations with countries as sovereign individuals. The tools being built today, and the pressures on society, are democratizing that access to a sovereign identity to the masses.

For example, we base financial trust and opportunity on an identity formula that we call a “credit score”. Try moving from any country to the USA and see how hard it is to rebuild your credit score. It doesn’t matter if you are a 65-year-old billionaire, the moment you land in a country, you have the same credit history and access to capital as an 18-year-old. You have built your identity in one country's system, but the US doesn’t accept that system’s ledger, and you are stuck in the middle trying to explain that you are creditworthy.

A large number of startups are trying to solve this by creating their own version of your identity in their database and allowing you to use it in the country you arrive at; however, this is a patchwork solution to a systemic problem: one where your identity in one country is not portable around the world because it isn’t trusted by other countries.

This system would be different if from the onset, the identity you used in your country of origin was a global digital identity owned by you. You would interact with your bank, car dealer, online service provider, and others with this identity building your credit history directly to the identity you own. By building your reputation on your sovereign identity, you could easily move it from one place to the other and be able to easily navigate a globalized financial system.

Another example: the work visa system was built on a territorial basis, to allow people to travel the world and trade without hurting the local working population while making sure you pay taxes to the local country. If you want to work in your country, you have the government-issued citizenship that comes with a right to work. If you want to work anywhere else, you need to apply based on your country’s relationship with that country. If your country doesn’t have a good relationship with the other country, then you will have trouble getting that visa. The receiving country doesn’t look at you as an individual with unique skills but rather as part of a multi-million person population that is all boxed together.

In a global digital world, this system is falling apart. Digital nomads are working from anywhere without really asking permission (all breaking the law). Countries, like Costa-Rica, are inventing new permissioning systems (nomad visas) so that people can work remotely without worrying about work visas. Companies are being built remote-first, with positions moving between countries at a weekly rate, necessitating that legal departments constantly scramble in search of a solution.

Imagine a world where a country deals with you directly as a sovereign individual. You own your identity: your portfolio of work, experiences, and interests, such as your university degree and the financial assets you directly own. The receiving country can decide that it gives visas to all graduates from university X or people with profession Y without looking at their country of origin. Suddenly a country can interact directly with a person and rebuild the work visa system in a way that fits a digital global economy.

Some countries are already operating this way with the Ultra-rich. They are talking to them directly and negotiating the terms of allowing them to move, work and build a business in their country, on the basis of entrepreneurship or direct investment.

This isn’t theoretical, there are real-world examples where the shift from a right to an asset changed the power dynamics in an industry. Until relatively recently (2008), telecom companies were under no obligation at all to port your number if you switched carriers or moved. Your number was the asset of the phone company, and they leased the number to you.

In 2008 the FCC changed the power dynamic. Your phone number was suddenly your asset (still in the government's database, so not yet fully decentralized), and the Telecom companies had to convince you why you should park it in their system. At any point that you chose, you could leave with your number to another service provider. If you moved, you carried your identity with you to the next provider without having to go back and communicate the change directly with everybody you know. This shift in structure changed the power dynamic in the Telecom industry: when the easy movement of numbers is allowed, there is a 34% increase in customers choosing to switch numbers and a 14% drop in prices paid (link). Moving the power to the customer, by shifting the ownership of the asset, changed the power dynamic.

We can extrapolate that to your friend's list on FB, your Gmail address, or even your social security number. If countries and corporations need to compete every day to convince you not to leave, they need to constantly up their game and provide value.

There are more examples, but the core concept is the same.

We need to rebuild the global identity system from the ground up, and it needs to be built in a way where the individuals are in control, not the governments or corporations. A sovereign identity, recognized by different countries and companies, could allow people to move around with their personal identity and use it wherever needed, without relying on a specific country of origin for approvals. This isn’t a call for anarchism or extreme socialism/capitalism but rather how we can reimagine a global merit-based system that is fit for the digital age. Where individuals are in control and the system is working for their benefit.