Digitally Native Identity and Value Transfer Will Shape the Future of Web 3
The integration of the digital space into every sector of our society has created a diverse set of protocols and applications by both established and emerging organizations. Within the landscape of Web 3, Hypernet Labs is focused on digitally native identity formation and digitally native value transfers, or payments. We have built the Hypernet Protocol to support Web 3 consumer and enterprise applications that will need seamless identity and payments functionality. We are building applications on top of the Hypernet Protocol, and will soon make the Protocol available so that third parties may develop their own applications.
How users interact online is going through a big shift. The first iteration of the internet (Web 1) was primarily about content that was read-only, similar to older broadcast methods of communication but digitized, plus some new communication methods such as email and chat. In the next phase, known as Web 2, users moved to actively interacting and sharing much more personal data sewn into the digital landscape over time through social media services such as YouTube and Facebook.
As problems such as data privacy have confronted users of Web 2 services, a community of developers has been building the next major series of innovations collectively known as Web 3. The Web 3 ethos emphasizes openness (accessible software for developers fully transparent to the public), trustlessness (the obviation of third party middlemen for facilitating interactions on the network), and permissionlessness (anyone can participate).
Digitally Native Identity
Identity has always been a set of data points assigned to a specific individual. These data points are inherent (such as eye color) or designated by others (such as a first name or a Social Security Number). Web 2 created new opportunities in which users could contribute and interact in the digital world, provided the users were signed in, or authenticated, to the system in question. Unlike in the physical world, where a physical credential like a driver's license or passport issued by a government is trusted more or less universally, there was no unified system to reliably identify someone online across all experiences. This led to the creation of a splintered system of online credentialing. Google, Facebook, and others invested huge sums in building out their sign-on systems across many third-party properties. Even so, we use our email accounts to verify our identity on some websites, that Facebook ID on others, and enter our personal information to create new identities for still other systems.
The average person has 100 online accounts requiring passwords. This fragmentation of identity combined with the synergy of our physical and digital identities has created a new set of societal and individual problems. The first is the monetization of a user’s digital identity. While a user should only have one driver's license, she will have a different identity profile with each online service she uses. The resulting massive amount of information collected by tech companies led to the data economy valued at over $215 billion last year alone. The current system of Web 2 created a Catch-22: gain access to online information at the loss of control over your private information. The centralized storage of information and numerous overlapping sets of personal user data that online service providers create has opened up new opportunities for digital theft. Last year there were over 37 billion records stolen in 4,000 data breaches in the U.S. alone. Because users are unaware of who has access to their personal information, it becomes impossible to maintain sufficient control.
How can I prove my identity to others? Is there a way for a personal identity to be created and maintained through a trustless ledger that is flexible enough for divergent use cases?
Concerns about privacy and security have become top priorities for users. A recent poll found that 97% of consumers consider privacy and the security of their personal data a top concern when interacting online. This, coupled with the technological innovation in blockchain’s distributed ledgers, has created an opportunity for anti-hegemonic formation and control of digitally native identities.
The implications of a decentralized identity extend beyond the individual concern of privacy and protection. Organizations looking to access decentralized finance protocols and applications need seamless customer journeys, streamlined workflows, and up-to-date compliance within a shifting regulatory landscape.
Digitally Native Payments
The twin pillar of digital identity is online value transfers. The notion of a “cash-less society” has existed since the early 1990s and online payments have been commonplace for many years. Yet, while innovations by payment services providers have streamlined payment processing for online merchants and end users, every Web 2 payment system still requires a centralized corporate or government intermediary to verify transactions and transfer value among participants.
On the other hand, decentralized networks for payment processing and access to digitally native processing radically restructure financial control in favor of the individual end user. The emergence of a peer-to-peer system for decentralized finance and digitally native currencies would mean that value transfers no longer require users to trust a third-party intermediary. Blockchain secured payment systems are inherently well suited to addressing the needs of decentralized marketplaces because they are peer-to-peer, adaptable, borderless, and can settle microtransactions as efficiently as large transactions without the friction and cost typical of intermediary payment processors.
Use Case: Hypernet Protocol powering Galileo’s cloud services marketplace
The rollout of Web 3 services for identity, value transfer and more can only happen if easy-to-use, scalable and cost-effective computing infrastructure is made widely available to developers. The decentralized nature of blockchain applications and peer-to-peer transactions empowers new business models and less reliance on powerful intermediaries. More people and businesses will choose to run their own infrastructure, such as validator nodes and end points. Still, others will look for ways to monetize their own computing resources, or to set up exchanges of goods and services based around a special use cryptocurrency, like Storj is doing in the data storage space.
Easy access to scalable, low-cost computing infrastructure that supports digitally native payments and digitally native identity is a precondition to the widespread adoption of Web 3 technologies by developers. Indeed, reducing the barrier to entry to running infrastructure will correlate strongly with the rise of decentralized Web 3 solutions that do not rely on the powerful intermediaries that characterize Web 2. For this reason, we have developed a new marketplace for buyers and sellers of compute resources, Galileo. It’s an example of a Web 3 enabled marketplace that runs on top of the Hypernet Protocol.
Developers tend to choose new technologies by assessing the expected power of the technology against its difficulty to implement and/or ongoing ease of use. And systems that require less developer resources, in turn, empower teams with less developer resources to accomplish their goals anyway. No code and low code environments will accelerate Web 3 adoption by helping each developer do more. In our next post, we’ll dive deeper on how the Hypernet Protocol will enable developers around the world to create brilliant new products with built-in Web 3 identity and payments.