The technologies that are directly related to crypto assets are continuing to evolve against the background of a falling market. The American exchange Coinbase is actively engaged in designing new models and ways of authenticating users. The developments are aimed at ensuring that each trader fully owns their personal data and can trade all the coins on the exchange without thinking about security.
The Experiment Starts in August
Coinbase, one of the largest cryptocurrency exchanges, is experimenting on how to give its users more control over personal information. The startup Distributed Systems was acquired in the summer for the development of a new unified authentication means.
Before joining Coinbase, the Distributed Systems project has already begun developing “decentralized identity solutions,” wrote Coinbase Identity project manager Byrne on his blog.
“Blockchain can help people maintain full control over their digital identity, ensuring that their personal information remains secure. The technology can be applied to Social Security Numbers (SSN) for Americans, thereby adding protection for users,” says Byrne.
A group of 17 professionals is currently studying decentralized identification solutions. Coinbase Identity product managers say that they want to “help people find out who they are on the Internet.”
The manager of Coinbase also gave an example that every time a user wants to confirm their identity, copies of documents must be submitted, which have equal power with the originals. Therefore, when personal data is leaked from copies, it jeopardizes the user’s identity.
“A decentralized ID will allow you to prove that you are the owner of this certificate or that you have a relationship with the authority that issued it to you without the need to make copies of documents. If you think a bit more, you can imagine how the violation of personal information relates to your photos and social media posts,” says Byrne.
The Need to Invest in Identification Technology
In a comment for CoinDesk on December 6, Byrne explained that Coinbase is starting a collaboration with the W3C Credentials Community Group. Therefore, in January 2019, as the W3C co-founder and crypto evangelist Christopher Allen said, decentralized identifiers (DIDs) will be launched that can recommend standards through the World Wide Web Consortium.
Allen now calls on Coinbase to play a more active role in the standards development agreement, arguing that at least 5% of the exchange budget should be directed to user contributions. Emily Choi, vice president of corporate and business development at Coinbase, said that there are currently no plans to delegate $300 million to “academic developments that are not useful yet,” but the company will test all proposals for user identification in the future.
When commenting on the news about the Coinbase experiment, Joseph Weinberg, the chairman, who is responsible for transferring data to Shyft, said that the entire industry must find standards and come to general conclusions on digital identity. Shyft, which is also ideologically connected to Coinbase, is already working with government agencies in Bermuda and Mauritius and testing data sharing and privacy technologies.
“We need to focus on the data management part because people are working with our system. The identification problem is still the most important issue in our field,” said Weinberg.
The Experiment Started in December
In early December, Byrne’s team hopes to find niche groups that can benefit from partially decentralized identification solutions in specific cases, for example, in collaboration with government agencies.
“We want to protect Coinbase users and make sure that our identity model is truly secure. I am devoting a lot of time to developing and ensuring that the Social Security Administration or DMV [Department of Motor Vehicles in the U.S.] uses the same database,” says Byrne.
Based on his own experience of building international and collaborative privacy solutions at Shyft, Weinberg said that decentralized identification solutions would never allow crypto users to control all their data. In addition, Weinberg is sure that users themselves must choose the method of transmitting confidential data because, for each organization, different information is needed.
Byrne generally agreed with the difference in the provision of personal information for different structures, although he pointed out that there is no clear standard in the world for identifying the problem of storing and protecting user data.
Specialists from companies that are engaged in analytics and the study of user data noted that the exchanges should transfer to one another the development and rules for collecting personal information for the most convenient passage of KYC/AML procedures. For example, if Kraken already worked in a Caribbean country, then Coinbase could use the Kraken infrastructure when it entered the region and simply request an international network ID to hide data.
If Coinbase manages to develop an unimpeded, unified method for identifying and collecting user data, cross-platform friction will decrease, and customer privacy will increase. These solutions are, however, likely to rely on publicly available tools and protocols that already exist outside of Coinbase.
A well-known example of the Heartbleed vulnerability, which affected several types of open-source software in 2014, shows that a typical database could endanger the information of the entire community. Then the bug in the system occurred since one user had not updated the OpenSSL code for a year.
In addition, official working groups, such as crypto exchanges, can create international standards that are referred to by the authorities of regulators and technologists.
Without commenting on any specific resources and priorities, Byrne agreed that Coinbase would have to pledge to maintain the infrastructure for future decisions in a “healthy state.”
“The way to abandon the past thinking of identity is trying to force out new technologies. We need to work in standardized ways that decentralize and distribute this power. The future is still ahead,” as Byrne writes on his blog.
Other Coinbase News
The exchange is actively developing and offers many initiatives to improve the industry and expand the crypto portfolios of its users. Coinbase intends to register the trademark BUIDL. The popular term “buidl,” which is an intentionally misspelled word “build” is formed by analogy with the term “hodl” and implies the creation and development of new blockchain products and not just storage of crypto assets. Coinbase’s BUIDL will be related to software using the SaaS model (software as a service), which provides the tools for “performing transactions using virtual currency.”
Back in late November, the American platform announced that it had invested in a startup called Flipside Crypto with the company Digital Currency Group. The amount of investment in the project, which, as representatives say, will become a new method for evaluating cryptocurrency, was about $4.5 million.
At the same time, Coinbase announced the release of a new version of the Coinbase Wallet. It now has support for Ethereum Classic (ETC) and the ability to work with all the ERC-20 tokens on the market. This did not, however, much affect the exchange rate of the coin.