5 Things Blockchain You Need to Know for October 3, 2022
Are decentralized digital identities the future or just a niche use case?
TLDR: Do you wish to have control of your own data and choose what to disclose? Then decentralized identity is the solution. Decentralized identification can make sensitive data more portable while keeping it secure, allowing for universal logins across a variety of applications without the use of passwords.
Although digital identity management systems are very useful, they depend on centralized intermediaries that manage and store user information. Personal identifiers and attestations are in their control, which means they can willingly or be forced to share this information with other parties. Blockchain provides a solution in the form of decentralized digital identities. These allow people to manage their own information, generate identifiers, limit who gets access to them and vouch for themselves without depending on a central authority like a government agency.
Too many centralized digital ID providers are in competition with each other rather than working together. This lack of collaboration slows down adoption rates, as users need a different ID for different government services, such as banking, and work applications. Decentralized ID enables individuals to cheaply and easily create a distributed repository of personal identification data for which only the user is responsible. This Repository can be integrated into any service, including but not limited to KYC providers, digital signatures, and online or identity services.
Decentralized identity may make identifiable data more portable while keeping it secure. Centralized organizations that manage digital IDs usually provide a set of services at once that improve user experience. There are several use cases for decentralized identities, including the potential for universal logins across numerous apps without the need for passwords. After a single sign-up, service providers can issue attestation tokens that grant users access to their platforms.
Although decentralized identity management has several positive aspects, there are some negatives as well. Centralized entities establish standards of regulation and offer users protection while they work on the web. If these central bodies did not exist, it is possible that decentralized identities would be less secure. Zero-knowledge proofs are a method of proving the validity of a set of data without revealing the data itself. Users could use this technology, combined with decentralized identifiers, to prove who they are while using pseudonyms and ensuring their security isn’t affected.
California Moves Forward to Allow Vital Records to be Issued on Blockchain
TLDR: No more relying on 10-day postal delivery! Californians will be able to access their birth, death, and marriage records in the form of a PDF immediately, thanks to blockchain.
Californians will soon be able to receive their vital records through blockchain technology after a new law was approved making it an integral part of state recordkeeping. The state is currently debating a few crypto-related bills, and though one was shot down this week, another was approved that would allow county records offices to use blockchain technology and verifiable credentials. With this technology, birth, death, and marriage records would be sent immediately as PDFs rather than waiting the usual 10 days for postal delivery.
This secure and convenient process will allow Californians to easily access their vital records, proving that the state is still a leader in innovation. In addition, a bill that would establish a governmental task force on digital identity was approved by the Senate Homeland Security committee this week in the U.S. Senate. The legislation — which is also reflected by a similar effort in the House — is intended to promote work at the federal and state levels toward setting up interoperable, government-approved digital identities.
DeFi needs appropriate regulation before expanding to retail
TLDR: With DeFi becoming more popular among retail customers, the need for regulation is increasing.
The decentralized finance industry has been gaining a lot of momentum lately, and Federal Reserve Chairman Jerome Powell suggested it needs to be carefully regulated due to its lack of transparency. From a financial stability standpoint, the interaction between DeFi and the banking system has not been significant, limiting the repercussions of the “DeFi winter.” However, it showed the areas that need improvement. As DeFi gradually starts to involve retail customers, the necessity for proper regulation is growing stronger.
The message that has been repeated for years gets further reinforcement: the same rules that apply to traditional finance apply to digital currencies and assets. There’s no avoiding the law, and the biggest players in the financial system have already addressed this. A week after the International Monetary Fund urged for worldwide digital currency regulation, Powell made his statement. The fact that the Wild West era of digital currencies has come to an end is clear and unmistakable now. Only blockchains that are compliant with regulatory rules and offer genuine value will endure and flourish from this point forward. As the new era of innovation, economic efficiency, and utility grow stronger, blockchains that were designed to avoid regulatory compliance will slowly disappear.
This new era of regulation should be welcomed, not feared. While anarchists may have hijacked Bitcoin in its early days, it has since been kneecapped by big-money interests who want to see it fail. However, the new regulatory environment repeatedly touted by Powell and many other regulators across the world is a good thing. It will allow Bitcoin to be used to its full potential, resulting in a world of micropayments, traceability, and economic efficiency never seen before. With the recent industry shift to micropayments, many applications like DeFi will have to adapt to survive. These applications will take on different forms and be hosted on blockchains that are compliant with legal regulations.
Web3 Is the Solution to Web2 Apps’ Problem with Hackers
TLDR: With users trusting various consumer apps with more and more data, hackers have an increased number of targets to go after. The only way to fix this problem is for consumer apps to fully adopt Web3 technologies, which will give users heightened security and privacy features.
With how commonplace data breaches have become, it’s no surprise that even Web2 apps like Facebook and DoorDash haven’t been able to avoid them. As Web2 apps become more common, we will see more of these types of incidents. The problem lies in the Web2 architecture of apps. They have a natural inclination to create honeypots with users’ sensitive information, such as payment details and consumer behavior. The only real answer to the issue is also the most drastic one — consumer apps should embrace Web3, restructure their data and payment networks to provide users more security and privacy, and accept this new internet era.
Verifiable ownership is at the heart of Web3, and it’s something that has never before been possible through the Internet. This refers to having a value in the form of cryptocurrency, but for Web3 ride-sharing it also means keeping your data and owning the apps, networks, and vehicles. In practice, Web3 ride-sharing applications would employ peer-to-peer networks, and allow customers to limit how much data they supply to who and when. With Self-Sovereign Identities or decentralized digital IDs that you independently own and control, people and machines can both have digital passports not requiring any centralized authority for proper function. In a fully peer-to-peer manner, drivers and passengers could validate themselves on the Web3 ride-hailing app using their SSI. They would also be able to select what data they want to share or sell and to whom, demonstrating full control over their personal information and digital footprint.
Decentralized governance will result in another large change. This means that anyone with a vested interest in the success of the application, like drivers, passengers, and investors, will have equal say over how it’s run as well as earn rewards for their contributions. It would be a ride-sharing app created by those using it rather than outside developers. With Web3, a brand-new sharing economy is created where people worldwide can possess the vehicles being used by ride-hailing apps or any other vehicle-based app through machine non-fungible tokens (NFTs) — tokens that show ownership over pools of actual physical vehicles. Ownership rights will be granted to the communities where these vehicles operate, allowing them to vote on how they are utilized and providing a source of income. As more intelligent machines give services and products to the community, the community earns money. The notion of web3 is turning everything upside down.
Web3 consumer apps will shift the landscape so that we no longer need centralized data honeypots — the root cause of persistent breaches. This change won’t necessarily make things more complicated for users. In fact, data sovereignty is just one advantage that Web3 ride-sharing apps would have over their Web2 counterparts. In the future, blockchain will be as unknown to the average person as the inner workings of Google Pay — just available to those who want to look at it. It will be something users unintentionally engage with when ordering a pizza or requesting a taxi — yet utterly essential to a more equitable, democratic society in the digital era.
Russia unlikely to choose Bitcoin for cross-border crypto payments
TLDR: While Bitcoin may appear to be a good option for Russia’s cross-border payments in cryptocurrency, there are several factors that indicate this option is extremely risky.
As a strategy to avoid foreign sanctions imposed in response to its military intervention in Ukraine, Russia has focused on cryptocurrencies as a payment method. According to the head of the Financial Market Committee of the State Duma, Russia’s major stock exchanges are prepared to begin utilizing cryptocurrencies as soon as government institutions establish legal parameters for cross-border crypto transactions. However, the government’s choice of digital asset for such transactions has yet to be determined. The fact that Russia would allow Bitcoin or any other comparable cryptocurrency to be utilized for cross-border payments is highly doubtful, given the difficulties inherent in such currencies’ regulation.
Russia should choose a cryptocurrency for cross-border settlement that is not subject to any additional global pressure. As a result, cryptocurrencies produced in the United States, including major stablecoins like Tether (USDT) and USD Coin (USDC), will not satisfy such criteria. Bitcoin, being the world’s most decentralized cryptocurrency, might appear more appropriate in such a scenario. However, BTC is also linked to multiple issues including high volatility and limited scalability. Additionally, it is vulnerable to global sanctions. When dealing with an entire array of addresses, the coins may be deemed “dirty”, and counterparties may choose not to deal with or trade with such addresses or currencies.
Decentralized cryptocurrencies like Bitcoin would only be a stable choice for Russia’s cross-border payments if they were less volatile. Given that foreign companies will be able to convert any currency into Bitcoin or Tether in a single click to do business with Russia, it’s unlikely they will opt to use Russian ruble-pegged cryptocurrencies.
Following the invasion of Ukraine, the Russian government became increasingly interested in adopting cross-border payments in crypto as a result of Western economic sanctions. The Bank of Russia and the Ministry of Finance have been working together to develop policies and regulations for allowing crypto payments while stressing that domestic crypto payments and exchanges will not be legalized.
But what if there was a way to use the internet without giving up your privacy? With blockchain-based identities, your information is secure and tamper-proof, and you can access it from any device or location.
Learn about this and more in this week’s episode of Blockchain Brief!
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