Web3 is touted to be the next generation of the internet, promising a landscape where individuals not only have read and write capabilities on the internet, but also the ability to own and control their data, including digital creations, digital assets and digital identities. In this article, we dive deeper into what exactly digital identity is, what the building blocks that constitute one’s digital identity are, and how digital identity can enable a new way for consumers and organizations to interact online. This is the second article in our series on digital identity.
What is digital identity?
Digital identity can be defined as the way an individual or organization is identified and represented online or in the virtual world. A digital identity consists of the attributes that make up a legal identity (name, date of birth, etc.), as well as other aspects that relate to how a person or organization expresses themselves online. Currently, most data relating to our online digital identities is stored in and accessed through highly centralized or federated third-party systems. The promise of Web3 is that it allows users to retain control and access to their data and identities by leveraging decentralized networks and Web3 applications, protocols and technologies.
Digital identity could not only improve current identity ownership and verification processes, but it could also reduce fraud and enable new use cases that allow for greater self-expression and verification in Web2 and in Web3. Over the past few years, Onyx by J.P. Morgan and the wider digital identity community have been exploring Web3-compatible solutions to enable the melding of identity and ownership.
How Onyx has experimented with decentralized digital identity
Over the past few years, we have seen tremendous growth in the digital identity space. The above digital identity building blocks will contribute to the shift from centralized systems and honeypots of data to an era of self-expression and autonomous ownership of our own data and digital identities. Since the beginning of our exploration into the decentralized identity space in 2017, Onyx has built concept solutions for a number of use cases that benefit from the ideas of digital identity. These range from Supplier Onboarding, VCs for document signing, issuance of verifiable legal entity identifiers (VLEIs) and most recently, Project Guardian.
As part of Project Guardian Phase 1 – a joint initiative between the Monetary Authority of Singapore, Onyx by J.P. Morgan, DBS, and SBI Digital Asset Holdings (SBI) – we explored how digital identity can be used to enable financial institutions to safely gain access to DeFi protocols on public blockchain networks. In the project, Onyx created a VC-based digital identity solution and institutional wallet that enabled traders from J.P. Morgan and SBI to execute trades on the AAVE protocol in a way that allowed them to prove aspects of their identities whilst still preserving privacy. A trader’s identity attributes, represented using VCs, were ‘attached’ to trade instructions at the time of placing a trade. The identity attributes were then verified in real-time, on-chain, and used to determine whether the trader was actually authorized to trade on behalf of their institution or not. We showed how utilizing systems with real-time identification verification, without the reliance on large honeypots of personal data, could reduce the risk of fraud, and simplify the process of identification across applications.
While Onyx has experimented primarily with VC and DID technology, we remain open to exploring other methodologies should they be the best fit for a given use case. The digital identity space is rapidly evolving, and individuals and companies are invited to collaborate, join the community and work together towards the greater good.
This article is part of a series on digital identity.
By Tyrone Lobban, Head of Blockchain Launch and Onyx Digital Assets, Onyx by J.P. Morgan and George Kassis, Vice President, Digital Identity Lead, Blockchain Launch, Onyx by J.P. Morgan.