In the rapidly evolving landscape of cryptocurrencies and blockchain technology, a novel concept has begun to take shape – the integration of identity verification and authentication through crypto coins and tokens. This paradigm shift, referred to as “Identity Cryptocurrencies,” marks a significant stride towards bridging the gap between digital financial transactions and the need for secure, transparent, and compliant identification processes.
Identity lies at the heart of every financial interaction, ensuring trust and accountability between transacting parties. Traditional cryptocurrencies have revolutionized financial systems by introducing decentralized and secure transactions. However, they often grapple with concerns related to anonymity, fraud, and regulatory compliance. The emergence of Identity Cryptocurrencies seeks to address these challenges by infusing blockchain-based transactions with identity-linked attributes.
This article examines the intriguing intersection of cryptocurrency and identity verification. We will explore how the fusion of cryptographic security and personal identity could potentially revolutionize not only the financial sector but also sectors such as cybersecurity, digital voting, and supply chain management. By examining the underlying technologies and real-world use cases, we aim to shed light on the promises and complexities that arise when these two dynamic realms converge. As the world seeks more seamless, secure, and transparent modes of digital interaction, the exploration of crypto coins and tokens designed for identity holds profound implications for the future of technology-enabled trust.
What are identity cryptocurrencies?
Identity cryptocurrencies are cryptocurrencies explicitly designed solely for identity verification.
The concept of integrating identity verification into blockchain and cryptocurrency systems has gained attention and experimentation especially because of the rise of artificial intelligence (AI).
Types of Identity cryptocurrency projects
Self-Sovereign Identity (SSI) Projects
These projects aim to give individuals full control over their personal data and identity information. They use blockchain technology to enable users to store their identity attributes in a secure and private manner. Sovrin, uPort, and Evernym are examples of projects working on self-sovereign identity solutions.
Decentralized Identifiers (DIDs) and Verifiable Credentials
DIDs are a new type of identifier that enable verifiable, self-sovereign digital identities. Verifiable credentials are digital attestations about the attributes of a subject (person, organization, etc.) made by an issuer. These concepts are being developed within the World Wide Web Consortium (W3C) and are often linked to blockchain technology.
Token-Based Identity Verification
Some projects have explored the idea of using tokens or cryptocurrencies to facilitate identity verification processes. These tokens could represent verified attributes, such as age, nationality, or professional certifications. These tokens could be traded or presented as proof when needed.
Blockchain-Based KYC Solutions
Know Your Customer (KYC) procedures are essential for financial institutions and regulated industries. Some blockchain projects aim to streamline and secure the KYC process by allowing individuals to control their own identity information and grant access to it as needed.
Government Initiatives
Some governments have explored using blockchain technology to issue digital identities to their citizens. Estonia’s e-Residency program is an example of a digital identity initiative that utilizes blockchain.
Popular identity cryptocurrencies in 2023
Worldcoin (WLD)
Worldcoin is centered around the concept of World ID, a globally-connected identity network allowing users to confirm their online identity while safeguarding their privacy. This process, known as “proof of personhood,” is enabled by an iris-scanning device called the Orb.
By scanning users’ unique iris patterns, the Orb generates distinct identification codes called IrisCodes, unconnected to personal data. These codes thwart attempts at acquiring multiple World IDs. The Orb issues a World ID after saving the IrisCode and subsequently erases iris images. This approach eliminates the need for repetitive eye scans for identity verification.
World IDs are stored on the Worldcoin blockchain, while the World App serves as a secure repository for them. The app functions as a crypto wallet and allows users to verify themselves on third-party applications. In addition to World IDs, the app supports cryptocurrencies such as Bitcoin, Ethereum, and USDC, with plans for further integration.
Upon creating a World ID and downloading the World App, users gain access to the WLD cryptocurrency token. WLD was initially distributed during the beta program and experienced a significant airdrop during the official launch. The token is tradable on exchanges like KuCoin and Binance.
The project’s white paper outlines the issuance of 10 billion WLD over 15 years. At the launch on July 24, 2023, approximately 143 million WLD were in circulation. Verified World App users received 43 million WLD, while 100 million were allocated to market makers for trading facilitation.
Space ID (ID)
Space ID (ID) functions as a cross-chain name service network tailored for various blockchains, enabling users to register personalized web3 domains across platforms like BNB Chain and Arbitrum. Similar to Ethereum Name Service, Space ID facilitates domain trading and management, offering human-readable names to access decentralized applications (DApps), smart contracts, NFTs, and blockchain resources. Developers benefit from the Web3 Name SDK and API, simplifying the incorporation of web3 domain functionality into applications.
ID, the governance token, was launched on Binance Launchpad in March 2023, granting holders the ability to partake in the project’s governance processes.
Comprising three key elements โ the Space ID protocol, the Space ID platform, and the Space ID DAO โ Space ID is underpinned by a modular and scalable architecture.
The Space ID protocol incorporates smart contracts central to web3 domain functions like registration, resolution, management, and governance. It supports multiple top-level domains (TLDs), including custom ones, enabling cross-chain compatibility.
The Space ID platform offers an intuitive interface for users to engage with the protocol, providing domain-related features, seamless interaction with DApps and wallets, and a Web3 Name SDK and API for developers.
At the core of governance lies the Space ID DAO, a decentralized autonomous organization steered by the ID token. This token not only governs the protocol and platform but also incentivizes user involvement, fostering project growth and sustainability.
Civic (CVC)
Civic emerges as an identity management solution rooted in blockchain technology, equipping both individuals and businesses with the essential tools to safeguard and regulate personal identity details effectively.
This platform introduces a paradigm shift in the way identity verification is perceived, offering users heightened authority over their private data. This empowerment allows seamless access to diverse services, all without the necessity of divulging excessive personal information.
At the core of Civic’s approach lies its identity verification solution, harnessing the prowess of distributed ledger technology to instantaneously authorize identity usage. This technology, used judiciously, facilitates the controlled sharing of information with Civic’s trusted partners post-user authorization.
Diverging from conventional identity management services, Civic has users store their sensitive information locally on their mobile devices. Empowering users to retain control, Civic’s app enables the sharing of specific personal data by means of biometric verification.
Central to the Civic ecosystem is its distinctive utility token, the Civic token (CVC). This token serves as the cornerstone for settling identity-linked transactions within the Civic network, fostering interactions between participants such as customers and service providers.
The engagement within the platform extends to users who earn CVC tokens through a range of activities, including enlisting for services on the platform and referring new users. Validators, on the other hand, can accrue CVCs by verifying documents on behalf of service providers, enhancing the vitality of the ecosystem.
SelfKey (KEY)
SelfKey operates as a blockchain-driven identity platform, catering to a diverse spectrum including individuals, enterprises, exchanges, fintech startups, and banks, by furnishing a comprehensive environment for identity data management, often involving Know Your Customer (KYC) protocols.
With a core team boasting a background in decentralized identity stretching back to 2014, including roles in esteemed entities such as Standard Chartered Bank, Bitmax exchange, EQIBank, and GSR, SelfKey bears a rich pedigree in the field.
The SelfKey wallet (accessible at SelfKey.org/selfkey-wallet) stands as a freely accessible, open-source, and non-custodial repository that offers users a secure avenue for storing and transmitting digital assets and their digital identity. Additionally, users can seamlessly engage with the SelfKey marketplace, facilitating streamlined applications for services such as real-world bank accounts or company incorporation, all while transacting via the KEY cryptocurrency.
While conventional KYC procedures often incur high costs and harbor security vulnerabilities due to centralized data storage, SelfKey diverges by embracing decentralization and cryptographic solutions. This concerted approach endeavors to substantially reduce costs, enhance security measures, and amplify the user experience associated with identity interactions.
SelfKey has embarked on a mission to revolutionize the KYC onboarding process, all while upholding the core principle of Self Sovereign Identity. This principle posits that every individual has the right to possess and manage their identity autonomously.
uPort (UPORT)
uPort (UPORT) is a pioneering blockchain-based identity platform that empowers individuals to control their own digital identities and personal data in a secure and decentralized manner.
Built on the Ethereum blockchain, uPort aims to redefine how identity is managed and utilized in the digital world, giving users the ability to manage their identity attributes and share them selectively with various services and applications.
uPort operates on the premise that the challenge of safeguarding private keys can be circumvented through blockchain technology. To achieve this, uPort leverages the blockchain as an identity certification authority, utilizing smart contracts to establish a user’s digital identity. This framework further enables the management of key revocation and replacement.
Within the uPort ecosystem, identities manifest in various forms, encompassing individuals, devices, entities, and institutions. These uPort identities uphold the principle of self-sovereignty, implying that their ownership and control reside entirely with their creators. Notably, uPort identities are liberated from the need for intermediaries, ensuring autonomy during their creation and validation processes.
A pivotal capability intrinsic to uPort identities is their capacity to digitally sign and validate claims, actions, or transactions. This feature fosters secure interactions and transactions within the uPort framework, reinforcing the platform’s commitment to identity empowerment through blockchain innovation.
Galxe (GAL)
Galxe, formerly known as Project Galaxy, stands as a prominent player in the Web3 landscape, championing the realm of credential data networks. It embarked on its journey by making its debut on April 28, 2022, through the Binance Launchpool platform.
Positioned upon a foundation of openness and collaboration, Galxe distinguishes itself by furnishing Web3 developers and ventures with a conduit to harness the potential of credential data, thereby fostering superior product creation and community establishment.
The ingenious design of Galxe brings forth a rewarding mechanism for data curators. Their contributions find recognition and compensation as users deploy their credentials across the spectrum of Application Modules, Credential Oracle Engine, and Credential API within Project Galaxy’s ecosystem.
Central to its ethos, Project Galaxy operates as a cooperative infrastructure tailored to empower brands in cultivating enriched communities and elevating product quality within the Web3 paradigm. Project Galaxy seamlessly integrates within open and collaborative frameworks, equipping Web3 developers and endeavors to harness the prowess of digital credential data and non-fungible tokens (NFTs) to construct elevated products and communities.
The native utility token of Galxe is GAL whose versatile usage includes governance, facilitating application module fees, powering the Galaxy Oracle Engine and Galaxy Credential API, and fostering the curation of Digital Credentials.
Are identity cryptocurrencies good investments?
Before investing in identity cryptocurrencies or any other investment, it’s important to conduct thorough research, understand the project’s goals and technology, consider the team’s track record, evaluate market trends, and assess your own risk tolerance.
Thast said, investing in identity cryptocurrencies, like any investment, carries both potential benefits and risks.
Benefits
- Innovation Potential: Identity cryptocurrencies are often associated with innovative projects that aim to address challenges in identity verification, data privacy, and security. Investing in such projects could contribute to the development of solutions that could have far-reaching impacts.
- Early Adoption: If a particular identity cryptocurrency gains widespread adoption and proves its utility, early investors could benefit from price appreciation as demand for the token grows.
- Diversification: Including identity cryptocurrencies in your investment portfolio can provide diversification, allowing you to hedge against risks associated with traditional financial markets.
Risks
- Volatility: Like many cryptocurrencies, identity tokens can experience significant price volatility. This can lead to substantial gains, but it also exposes investors to potential losses.
- Regulatory Uncertainty: The regulatory landscape surrounding cryptocurrencies is still evolving. Identity cryptocurrencies that are linked to identity verification and personal data management could face regulatory challenges related to privacy laws and financial regulations. Worldcoin, for example, is facing regulatory scrutiny in various countries including Kenya.
- Market Adoption: The success of identity cryptocurrencies largely depends on their adoption by businesses, institutions, and users. If adoption is limited or fails to gain traction, the value of the tokens could be adversely affected.
- Technology Risks: New technologies, even in the blockchain space, come with technological risks. Bugs, security vulnerabilities, and unexpected technical challenges could impact the performance of the identity platform and its associated token.
- Competition: The field of identity-related cryptocurrencies is becoming increasingly competitive, with multiple projects vying for attention. Not all projects will succeed, and the presence of numerous competitors can make it challenging to predict winners.
- Lack of Regulation: While the blockchain and cryptocurrency space is evolving rapidly, it still lacks the level of regulation and oversight that traditional financial markets have. This can expose investors to potential fraud or scams.
Conclusion
The investment potential of identity cryptocurrencies is a dynamic landscape that presents both opportunities and challenges. These tokens offer innovative solutions to pressing issues surrounding identity verification, data privacy, and digital security.
While their early adoption could yield substantial gains and diversification benefits for investors, the volatile nature of the cryptocurrency market demands cautious consideration. Regulatory uncertainties and the need for widespread adoption remain critical factors in determining the long-term viability of identity cryptocurrencies as investments.
As with any investment endeavor, thorough research, understanding of the technology, risk assessment, and consultation with financial experts are essential. While the promise of reshaping digital identity and data management is alluring, prospective investors should weigh the potential benefits against the inherent risks and be prepared for a market that continues to evolve rapidly.
