Web3, the Metaverse and how NFTs will shape the evolution of Identity

Newsletter #3 - December 21, 2021

It’s time for the holidays, and what better time could there be for our third Newsletter.

This week I’ve been thinking a lot about ‘identity’ in the Metaverse and how NFTs offer solutions to many of the IRL problems that plague identity today. Their potential to fuel decentralized identity and give people control of their own data could be one of the most socially disruptive and beneficial innovations to come out of Web3. I’ve written up a few of my thoughts below. Please do comment as I would love to hear your views as well.

And as usual, at the bottom of the newsletter, I’ve also added links to some of the biggest and most interesting Metaverse and Web3 stories of the past week.

---

Web3, the Metaverse and how NFTs will shape the evolution of Identity

Identity is the one thing you own that can’t be taken away. Right?

It’s yours and no one else should be able to define it for you.

As much as we might like to believe this to be true, it’s not the case. Today we “happily” outsource identity to a wide range of providers. The Government provides proof of nationality and other certifications such as a driver’s license, Experian and the other credit bureaus manage financial identity, LinkedIn has a small window into your professional achievements, Google accounts for a portion of your online behaviors with Facebook, Twitter, TikTok, Netflix, Amazon, and many other online brands each making up a portion of a patchwork quilt to make the rest of your digital identity. Together those brands are passively building a view of who you are, but there are also many other brands with whom you might be actively sharing a part of your identity: for example, you might share your fitness habits with Nike, Amazon might know your consumption habits, Apple might know your sleep habits, etc.

In short, your identity today is divided up into many facets with each one being centralized and managed by a single provider – and none offering a fair representation of what you might define as your identity. The challenges with this way of doing things are significant, but they can be summarized through the following four points:

1. People don’t know what all these identity providers really know about them, and what they share with others. (Yes, in some cases we may be able to get access, but most people never check)

2. The information that is shared can often be out of date

3. No one offers a complete picture

4. You are not in control and of what data exists about you, how it is shared with others, when it is shared with others, what others can get access to, etc.

Photo by Vadim Bogulov on Unsplash

These problems are all inherent to the centralized systems and approach that gained traction and scale through the growth of Web2 brands. Interestingly, despite many of the consequences of identity data being felt offline, it’s the emergence of Metaverse and Web3 technologies like NFTs that offer the promise of new decentralized identity structures designed to put the power back into the hands of the individual.

How you might ask? Think about your identity a file cabinet, or in Web3 terms, think about your identity as a Crypto Wallet, but instead of only storing data about what you own, it would also store data about who you are, your nationality, your criminal and health records, and everything you have done – all in the form of NFTs.

Images are edits of an actual MetaMask Wallet. All the NFT images portrayed are fictional and for illustrative purposes only

While the illustration above might appear trivial in nature, the reality is quite profound as it represents a move towards individuals having complete control of the whole of their identity, and to the following three benefits.

A MORE COMPLETE PICTURE EQUALS A MORE COMPLETE UNDERSTANDING

Today, if you want to borrow buy a house, get a credit card, or borrow money from a bank for any other reason they run a credit check on you. In doing so, the lender can evaluate the risk of the loan based on a narrow window into your past financial transactions. So, if you were late to pay some bills, or if you missed a few payments, they would see you as a higher risk and increase your interest rate or potentially decline your application altogether. This occurs regardless of what the circumstances were at the time versus what they are today.

Now imagine instead a system where instead of asking Experian for a record of your financial transactions, you were able to provide them with data directly. Sure, they would see the missed payments from a few months ago, but you might also be able to show them a token that highlights your new job or promotion. It might even include new work certifications and POAPs (Proof of Attendance Protocol tokens) that demonstrate the frequency of your attendance in classes to get that certification. In short, while they would see some of the unfortunate actions of your past, they would also get context around the favorable circumstances of the present. This doesn’t mean that your past should be ignored, but simply that more balanced decisions would be made possible based on a more complete picture being shared.

IDENTITY LINKED TO ACTION

It’s often said that you are what you do. While this is logical and in the offline world it feels very true, the reality for many people can feel very different.

Let’s imagine you are applying for a job. You have a two-page resume that is supposed to list all your accomplishments. The sad truth is that in many cases today no one will ever even read your resume. Instead, it will be scanned by AI software looking for the right keywords and experience to indicate a higher propensity for success in the role. The question is, did you write your resume with the AI in mind? Did it understand what you were trying to communicate? While this type of evaluation software is getting a lot better, there are still stories every year about inherent bias within the tools.

Now imagine a simple scan of your identity data. It’s stored cryptographically, it’s well-indexed, and it lists a complete picture of your accomplishments. From your education to the articles you’ve had published, to platforms you launched at work, and even the charities where you have donated your time – it’s all there – even if it wouldn’t have all fit onto the two-page resume.

This means quite simply that the algorithms that are in place to evaluate you as a prospective candidate (which are not going away) can judge you not based on your ability to write a machine-readable resume but based on the actions and accomplishments of your past. And per the previous point, a more complete version of those accomplishments as well.

GOVERNANCE AND CONTROL OVER WHO SEES AND LEARNS WHAT ABOUT YOU

This is potentially the most important point of all. Decentralized Identify governed through a Crypto Wallet would put the power to govern who gets access to what data about you into your hands. The nature of the data being stored on a blockchain means that access would be governed, and a full audit trail could be made available in the same that Etherscan does today (although in a more user-friendly format) Let’s think about what that means through a few different scenarios.

First, let’s think about the loan application mentioned above. The lender would request information about you to evaluate the loan. At the minimum, this might be your financial history but could include other elements around employment, etc. All of this and more would be stored within your Identity wallet. This system would however mean that the request for data would come to your wallet, and what data was shared in response would be selected by you.

You would get full transparency of the request, and they would have complete trust in the data as authentic.

But the transparency and trust created by this type of Governance system have broad benefits that can be seen through all sorts of interactions:

• Imagine you are pulled over by a police officer and he decides to run your license. Your criminal record (if any) would all be attached to your Identity so while you might not have the ability to prevent their viewing it, you would have an audit record of their doing so. In fact, the audit record would likely even include the name of the police officer who pulled the data, which for privacy reasons you would likely not be able to see. That said, just having an audit system where this data was tracked and recorded on a blockchain would likely reduce the prevalence of biased and prejudiced investigations.

• Or perhaps something is wrong and you go to the hospital. It wouldn’t matter where you are in the world, it would not matter if you were conscious or not, any known medical allergies would instantly be found allowing doctors to act faster and with greater confidence.

In the above three benefit examples, I have used offline benefits to make the case for NFT powered Decentralized Identity, the value is likely to be even greater in the Metaverse and the online spaces that we increasingly inhabit. In that space there is no human to trust, in fact when you interact with others, there is a strong likelihood that you will be interacting with AI-powered bots. So, without knowing who is real, what is real, what will identify you, what will provide the trust you need. Decentralized Identity.

While I have thought about this subject quite a bit, I am not alone. While the completeness of the technology is still quite far away, there are several companies working on different aspects of the proposition:

• Everest is building a wallet solution to connect disparate parts of your identity from Government to finance, to health.

• Violet is working to connect off-chain PII with on-chain identity.

• Nuggets has developed an award-winning identity solution to enable trusted transactions

• Polywork is helping you put your professional accomplishments on-chain.

  

---

Outside my thinking about identity, there has been a lot happening in the Metaverse this week. Here are a few of the most important stories shaping the evolution of the Metaverse.

• Gemini and Nifty Gateway launched their headquarters in the Metaverse - I think there is more to this story than meets the eye as the promise of virtual offices and HQ provide some real promise in a world where the role of the office is very much in question. Think about it, most offices are thinking about how to bring their people back, but most people (especially millennials and GenZ) still want to maintain their ability to work from home. The challenge with this for business is that by giving people the ability to work in the location they want, are you also putting too much distance between them and the culture and the people that help you retain them as talent and promote them through your organization. The Metaverse office could potentially offer the best of both worlds. Allow people to work where they want, but help your upcoming talent build strong relationships and find career growth within the organization.

  

• Nike acquired RTFKT – After launching a partnership with SNAP for Augmented Reality, then with Roblox around their Metaverse gaming and sales ecosystem, they acquired the NFT Studio RTFKT and in so doing cemented their ambition to be recognized as leaders in the Metaverse. RTFKT had just launched their new Avatar NFT CLONE X which shot up in value to a floor of over 4.5 ETH on the news.

  

• L’Oréal calls out the lack of female representation in NFTs – Partnering with five female artists to create a new NFT series inspired by the six shades of red in their new lipstick line, L’Oréal is not only drawing attention to the problem but supporting these female artists by giving them 100% of the proceeds from the mint. Prices started at $1500 per NFT.

  

  Above are images of the NFTs from artists Amber Vittoria, Luminary, and ArinaBB

• Adidas and Bored Ape Yacht Club launch their much-awaited NFT – The well-hyped partnership between Adidas Originals, Bored Ape Yacht Club, Punk Comics and GMoney includes access to events, exclusive merchandise, and other yet to be named service benefits. The project sold out quickly and lays out a foundation for community development and the future of CRM.

  

  Image via Adidas

• Yield Guild Games raised over P12.5 million to support the victims of typhoon Odette – The Philippine-based play-to-earn company Yield Guild Games has been taking crypto donations in support to the people suffering in their country after the damage from Odette. Donations can be made in the cryptocurrencies ETH or RONIN at the addresses found in this link. It’s great to see examples of the web3 world taking care of the IRL communities.

• Shopify partners with Giglabs to allow vendors using their platform to mint and sell NFTs – Shopify might not have the same brand name awareness as Amazon, they are the superpower behind a huge number of the world direct to consumer websites. The program is still only available in the US, but as NFTs evolve from collectible PFPs, to art, to service enablers this new service offers small businesses around the world new ways to innovate around loyalty and community.

---

I hope you enjoyed this week’s Newsletter. It is free, but I am still trying to add value through every new issue published. So if you enjoyed it, please share it.

And if you haven’t already, please subscribe.