Digital Identity and the Future of Social
February 9th, 2022

Imagine investing in the content of someone’s tweets

Blockchains and Non Fungible Tokens (NFTs) are paving the way for an era where we can truly own our digital identity. Up until now, citizens of the internet have established online personas by making tradeoffs with centralized platforms, which promptly turned around and built trillion-dollar advertisement empires with no value shared with the users.

Owning your digital identity, on the other hand, flips the traditional social model on its head and allows the value you generate to accrue to you.

Understanding what “ownership” looks like and how an identity would accumulate value first requires us to address a simple question: “What is identity?”

Who Am I?

How would you answer when someone asks, “who are you?” Likely, it depends on the person. To a colleague, you are a business analyst. To a friend, you are an avid card collector. To a stranger seeing you read this article, you are a brilliant genius who consumes interesting content. The facets of your personality are yours alone to represent, and they give you the freedom to craft an image that suits your audience.

This idea of contextual identity bleeds into our digital lives as well. Anecdotally, the Alex Otsu on LinkedIn is a totally different person from the Alex Otsu on Twitter, even though they both are versions that the Alex Otsu behind the screen wants the public to see. Alex Otsu’s alternate Twitter profile, however, is an entirely different version shared only with close friends.

Identity can therefore generally be defined as a selectively exposed subset of how you spend your time, based on who you are interacting with.

Centralized Online Identities

Online identity builds off the above definition, but adds two components:

  1. A creation and authentication process, whereby your digital property is given an endpoint and you provide proof of the right to access that endpoint’s permissions.
  2. Content timeline, where a history of your interactions is kept.

Centralized platforms typically require users to sign up with some form of (real-world) identification and use passwords to authenticate account ownership. The type of content that is produced usually depends on the form factor that the platform encourages.

However, if you wish to project the same identity across multiple platforms, you must undergo multiple signup processes. Likewise, if you wish to project different identities on the same platform, you must provide two different identifiers. In all cases, the platform is the ultimate arbiter of your account status and will actively use the content you produce to boost its own value. In exchange, it serves as a custodian of your digital identity, maintaining your profile page, password, and timeline.

The result is that accounts on centralized platforms all ultimately exist to benefit the hosts. To these platforms, each users’ identity is a proprietary asset whose purpose is to generate engagement and advertisement revenue. It is akin to renting digital real estate (your profile URL) and paying with the attention that it drives.

Decentralized Online Identities

A key feature of blockchains is their ability to reliably track asset ownership. A key feature of NFTs is that they can represent arbitrary data. Many today represent ownership of JPEG images, but it is a short logical step to understanding that they could just as easily represent ownership of a certain set of personal characteristics.

…a different NFT for each persona.

In other words, an NFT can represent an identity, with its existence in your wallet serving as irrefutable proof that you are the owner. This circumvents the need for passwords, but more importantly, removes the need for trusted bodies that store those passwords. A wallet can hold many of these assets as unique tokens, which is tantamount to holding the passwords to many different accounts; a different NFT for each persona.

NFTs on public blockchains can serve as access keys to a set of permissions without a central body and the tradeoffs associated therein. Below are two diagrams that compare how identity ownership affects a user’s experience with centralized versus decentralized platforms:

Note how the footprint of what the platform owns shrinks to only the interface in a decentralized system. Moreover, this interface does not hold any authority. It is merely a conduit for the user to interact with data living on a distributed database.

Because NFTs are on a public network, using them as access keys has another major advantage: it allows the same token to be used as identification across many platforms. One can easily envision a future where decentralized versions of Twitter, LinkedIn, and Instagram all exist. Although they are designed for vastly different styles of content, the advantages of logging in with the same NFT are evident. First, it virtually eliminates scammers who try to emulate popular accounts across platforms. More importantly, it allows users to build continuity in their online identity. The NFTs will then accrue a track record of all the content attached to them, regardless of platform.

Liquid Personas

The inherent transferability of digital assets allows the market to reach a consensus on the price of reputation.

As a user builds this history of demonstrated value through content, the fact that their access key is a token also creates the opportunity for a liquidity event for the token holder; they can “sell” their account just like any other token. The inherent transferability of digital assets allows the market to reach a consensus on the price of reputation. Compared to today’s NFTs that derive their value from rarity or exclusivity, NFTs as access keys gain value proportionate to the effort that the original holder put in.

The idea of sellable identity, somewhat counterintuitively, is not at odds with online personas. Through the lens of viewing digital assets as property, it makes perfect sense. The NFT can be likened to a house; some people plan on spending the rest of their lives there and want to build it completely to their tastes. Others want to buy one, renovate it, and flip it at a profit. As a thought experiment, consider all the pseudonymous accounts on Twitter with hundreds of thousands, sometimes millions of followers. How much would it be worth to collectors or brands to own those accounts? There would be no cost too great.

Tokenizing identities also exposes them to the rest of the DeFi stack, so expect them to be fractionalized, DAO’d, staked, and more. Such second-order effects will be explored in a later piece.

NFTs as identity are already on the market. One popular project is Yats, which allow you to purchase an NFT represented as a unique combination of emojis. Leveraging the expressiveness of emojis is perfect for building an identity around. For example, the Yat “Renewable Energy” could be used by an ESG specialist to seed it with interesting carbon data. Once it has built a following, the owner may auction it off in an environmental fundraiser to donate the proceeds to a carbon capture cause.

Understanding that NFTs are more than just pictures of rocks, and actually represent the ability to turn data into an asset, it becomes clear that access control is only scratching the surface of their potential.

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