http://id2020.org

With companies already spending tens of billions of dollars authenticating identities for everything from bank transactions to car rentals and peer-to-peer boat sales – off chain, it’s no surprise big companies are seeing the enormity of the opportunity around identity authentication on the blockchain.

It will be interesting to see how blockchain – which is rooted in decentralization, reacts to ID2020.  It won’t be surprising to see it be very popular on private blockchains, but for the public blockchains, that may be another matter.

Where it all needs to go is automation of the identity authentication and that will probably come through smart contracts in ethereal and now Tezos.  AuthenticID is the best positioned to deliver on this because it supports a multi-dimensional set of requirements and regulations (see graphic) where many others are much more one-dimensional.

Given how huge the server farms of Amazon AWS and Microsoft Azure are, it seems that they could declare all of their servers to be nodes on the blockchain and that would, overnight, change the landscape.  That’s very unlikely to happen, but if you are looking at the long term on the blockchain – playing out some of these what if scenarios around what the opportunities and risks are – it seems foolish not to include awareness of this to that list.

Food for thought.

https://www.ethnews.com/uport-announces-zug-digital-ethereum-id-pilot

UPort announced their new identity app.  This is a great idea and a long time coming, but there’s a lot more to identity than what the app supports.  They need to partner with the likes of KnowYourCustomer (for automated KYC functioning) and AuthenticID (for an array of items ranging from the basics of age, gender, postal code, as well as key verifiable claims and health data and other things).

UPort is a necessary step in the advancement of identity – and it’s great to see.

Yesterday’s much ballyhooed code fork is going to seem trivial when the blockchain world divides between the anonymous and the not-anonymous (authenticated).  There will be a bright line, and the people who participate in the authenticated ecosystem will find that all of the business rules and requirements related to identity are executed within the smart contracts of the very blockchains they are using (the same logic will also run off chain where it makes sense.

So this is a small but important step for the blockchain community.

Go UPort.

ICOs are about to slow way dow and investments in token sales are about to get back to a much more rational pace.

Lots of people have been talking about the ccde fork (today) as being a potentially big deal to the world of blockchain/cryptocurrencies, but it’s starting to look like the SEC ruling last week is the bigger reasons ICOs are about to slow down dramatically (see Perkins Coie report on it here – https://www.virtualcurrencyreport.com/2017/07/blockchain-and-digital-token-update-sec-releases-investigative-report-and-investor-bulletin/)

UNIKRN, the gaming gambling site, had their CEO Rahul Sood issue this statement on their slack

“As many of you know the SEC came out with a strong position on certain ICO’s and token sales. Our lawyer Perkins Coie just came out with their position. Along with them we have seen positions from Cooley and Debevoise & Plimpton. We know that some tokens are in fact securities, while others are real tokens of value or currencies. Unikrn is confident that our token is not a security, it’s never been a security, and will never be a security. We are also happy that the SEC came out with their position, they are absolutely doing the right thing. The cryptocurrency space needs regulation to protect consumers and the broader community.”

This graph says a lot.  VC funding has been behaving rationally all along and with the ICO spike it’s no surprise the SEC issued their ruling.

What that means is that companies like Civic, KnowYourCustomer, Tezos, and AuthenticID who have really clear value they are adding to the blockchain, will be just fine.  It’s the ICOs that have white papers that read like they were written by a college kid (because they probably were) are the ones that are not only about to come to a screeching halt, there may be some legal ramifications.

AuthenticID could end up playing a key role in this – they are attaching the identity of the participants (on chain and off chain) – even when the participants want to stay anonymous – and that will probably allow some ICOs to survive that might otherwise not have.

August and September have some pretty interesting token offerings if you watch sites like TokenMarket- it should be pretty interesting.

After the recent SEC ruling about ICOs, we are scaling back our use of that term – so we are taking it out of the title of our blog as we think more companies will pivot to do a token offering instead of an Initial Coin Offering.

OK

Trust and identity are really broad terms and a lot of ICO/token offerings use these words as though they mean one very specific thing.

We think there are many types of trust and identity because there are lots of ways to use them.  Whether you need to verify that someone is 21 years old to buy alcohol, or that someone is who they say they are (peer-to-peer) when selling a boat on a site like Craigslist, or whether you are trying to move cryptocurrency into US dollars into a bank account – those are all different use cases with different needs for trust and identity.

With Identity, some like the folks at UPort seem to associate that with an ID/Password, but to not actually link it a person with a government ID or any other variable information age, gender, address, etc. It looks like Civic will do that with the help of an authentication service and Tezos probably supports that in their smart contracts, but they don’t do that.  That’s where things like self-sovereign, verifiable claims, attestations, and privacy go from being somewhat one-dimensional to taking on multiple dimensions.

Similarly with Trust – if you read William Mougayar’s “The Business Blockchain” which is great, he tells you blockchains are built on two basic concepts of trust and decentralization. While the trust is true for the block itself – there is nothing about trust of the individuals, the participants – which is part of the reasons banks and other organizations aren’t part of public blockchains – they can’t comply with anti-money laundering (AML) and know your customer (KYC) requirements.

To be clear – you can authenticate the identity of the participant of a blockchain through a trusted third party like AuthenticID, and still remain anonymous on the blockchain. You can also create a “handle” or nickname for yourself that’s tied to the authenticated ID and still be anonymous.

We aren’t saying anyone is right or wrong about Trust and Identity, as we get through various layers and levels of defining trust and identity, and who does what for on-chain and off-chain activities, we started this table and we would love to hear your feedback on who the other players are and where this is wrong, or if we should add more rows to defining trust and identity.

Since the last entry, we did extensive research on which ICOs have been doing well, and as part of that we read a lot of the white papers out on TokenMarket (https://tokenmarket.net).  While many of them are not well written (typos, no specifics on their technology, what problem they are solving, etc.) some like Civic, Tezos, and UNIKRN did a great job.  We also talked with a number of experts like Andy Singleton who has helped us understand some of the blockchain topics like attestations and Byzantine Fault Tolerance (see previous blog about that).

What we found is that there are some known big issues and limitations to blockchains which inhibit growth, such as speed and scale  (that’s where Tezos comes in, UNIKRN solves a specific regulatory issue in the esports industry).  Until those limitations are addressed, industries such as healthcare, which holds great promise for blockchain, will be slow to move.  While those are solvable problems, and there is opportunity there in the short term, there are some bigger issues around the corner for blockchains and cryptocurrencies that hold even more promise – and that’s where we have been focused with the ICO we are looking at for AuthenticID and their ATHID tokens.

Right now the blockchain private key is great for what it is, and allows people to remain anonymous if they want to – but that’s a very two-dimensional solution for something that has promise in so many industries.  Blockchain and cryptocurrencies make so much sense the coming wave of adoption is likely to be on the same scale as the internet itself.  And as part of that – one of the things that will emerge is the value, use, and importance of being able to authenticate the identity of the people involved with all of the events, transactions, and interactions in a blockchain – that is going to be major – and it will be key in both private and public blockchains.

Some of the obvious things that will happen is that financial services organizations will be able to meet the requirements of Know Your Customer (KYC) and Anti-Money Laundering (AML) specifications – those are very big markets that will take off very fast.  Then there are things like self-sovereign data, privacy, verifiable claims, and attestations which take authentication from a two dimensional matter to three-dimensional overnight.  People can still stay anonymous as like as they want – and they can even come up with some clever or funny name / handle they go by, and as long as their identity has been authenticated, all sorts of things become possible that are not possible today.  Verifiable claims is something from the business side, where someone needs your driver’s license, or a bank statement or something, even a credit card number, if you have authenticated the identity of the person in question, then the information they are transmitting is that much more trusted.    Privacy and self-sovereign are more at the individual and what they want to reveal about themselves. A good example is when someone is buying alcohol and they need to prove they are at least a certain age, like that they are 21.  In a self-sovereign model, the person may not want to share their name and address, they may only want to prove that they are over 21.  There are countless use cases like that in healthcare and logistics and financial services that are going to happen and in a few years we will look back and be amazed that all we had was private key.

Technology is important here, but customer experience matters a lot in all of this.

So there are probably 100 different businesses that could be started today to enable the use of identity in public and private blockchains and enable all sorts of useful and legal transactions using cryptocurrencies.  That’s where we think the real promise is in ICOs and that’s why we think it makes sense that so much money is pouring into them right now.  We know that some of the funds are coming from Chinese markets for well understood reasons, but we also know money is coming from other places as well, and we think it’s all going to be a pretty exciting ride.  There will probably be a bubble like there was with the internet, and that’s fine as long as the companies you choose to start, or back (or both) are focused on real value – you’ll be fine.

So that’s where we have landed with ICOs and cryptocurrencies and blockchains.  There are some pretty wacky ones, and some are just being done because so much money is flowing, but there are some with really clear value and that’s why we think the one we are working on will also be well received.