Coinbase foucus on establishing Digital Identity

EARLIER THIS YEAR, the executors of #DeleteFacebook engaged in a form of decentralized group therapy. Catharsis came in a zip file downloaded before deletion, containing the data you shared with Facebook—your friends, your photos, your posts—and with it, the data Facebook shared about you: the ads you clicked, the list of businesses that know where you live and where else you shop. A portrait of the modern digital identity—or, at least, part of it. But what if Facebook never held onto any of that data in the first place? To some enthusiasts, blockchain technology holds that promise: a way to return ownership of personal data to the individual, along with the power to share that data with others and revoke it as they please. On Wednesday, Coinbase, one the world’s largest exchanges for buying and selling cryptocurrency, announced it had acquired a team working to do just that. The five employees of Distributed Systems, a San Francisco startup, will join Coinbase’s Identity team, which spun out as a dedicated engineering unit last winter. Coinbase, which did not disclose the terms of the deal, says the new arrivals will help the company explore ways to integrate decentralized identity across its services. The startup had been at work on an open identity standard for users of Dapps, or “decentralized apps,” computer programs that run on a blockchain’s network of computers. B Byrne, a product manager for Coinbase’s Identity team, envisions decentralized identity as part of a more robust blockchain ecosystem that extends beyond cryptocurrencies. The basic premise: Personal data could be verified once by a third-party, like the government agency, and then retained securely by an individual. Rather than sending your Social Security number to a company or service, for example, the Social Security Administration could put an unalterable stamp of approval on the blockchain that can be verified on request. A user could provide proof that they’re a real person without ever revealing the Social Security number itself. Replacing a system where sensitive information is copied into multiple points of weakness—like, say, Equifax’s servers, or even Coinbase, which itself requests Social Security numbers from its users—has obvious appeal in a time where corporate hacks of sensitive data are a constant occurrence. But how that technology would work in practice remains unclear, says Ari Juels, a Cornell University professor and former chief scientist at RSA. Storing personal data on a public blockchain, like Ethereum, would require people to manage their own encryption, chiefly their private key, the lengthy alphanumeric string that allows someone to sign blockchain transactions. “People are notoriously bad at key management,” says Juels. An identity system would have to account for secure recovery of private keys if they’re stolen, lost, or destroyed, lest someone lose access to proof of their identity. Decentralized identity could also exacerbate the very privacy issues it tries to solve. If a user relies in a single identifier, as some identity systems have proposed, that ID could become a kind of “supercookie,” says Juels. And even when measures are taken to increase anonymity, researchers have proven adept at tracing blockchain transactions.

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