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Exploring the imagination space of DID: an indispensable part of Web3.0 and the metaverse

星空价值投资

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The development of DID directly affects the ultimate outbreak of DeFi.

Original title: 《 DID, the most important piece of the puzzle of web3.0 》

Original author: Akong, Starry Sky Value Investment

Sometimes it seems not good to look too far ahead.

For investment, it is not wrong to emphasize looking further ahead, but it may also be necessary to take into account the current situation. Otherwise, it is very easy to fall into the dilemma of "high expectations and low skills", just like philosophy. I have heard a lot of news before that some people studied philosophy, learned Derrida and Baudrillard, and fell into nihilism, thinking that people are heading towards death, what is the point of doing anything?

Investment is a bit similar, but it may be more concrete. Recently, I saw that Vitalik and other industry leaders wrote a paper called "Looking for the Soul of Web3.0". The main theme of the whole paper is the conception of the web3.0 ecosystem, called "DeSoc", what does it mean? It is the "decentralized society" built around DID.

Regarding the significance of DID, I mentioned it in "My View on DeFi: What is 2.0?" and also mentioned it at a sharing session with traditional VCs. But it is only important to some people. For example, entrepreneurs see DID as a key puzzle of web3.0 and can start a business; for example, VC institutions can incubate more DID projects and make track layout.

But for personal investment, even including me, in fact, apart from paying attention to the development of the track, there is not much that can be done, because it is too early and there are no good investment targets (after all, because the amount of funds and energy are limited). In fact, it is not just DID, but also DAO. There are many things to see, but there are few things to do-----To put it bluntly, you can see the trend, but it is difficult to find opportunities to make money.

I have been thinking about it, until today, several friends in the community started some discussions about airdrops and DID. I realized that to resist the nihilistic influence of philosophy, we need to hedge with "experiencing the sense of existence in life", and for investment, too forward-looking ideas should also use immersive perception of the industry to find a breakthrough point that suits us.

Today, let's talk about some thoughts on DID;

1) Why do I say DID is the most important piece of the puzzle of web3.0;

2) What should we do when we discover this trend that has not yet arrived.

DID, called decentralized identity, is simply a decentralized "ID".

Everyone knows about identity. Your ID card, household registration booklet, social security card, driver's license, etc. are all your proof of identity. When you have no identity in the real world, it means that you cannot enjoy social welfare and have no power. Although you are alive, you are "no such person" in human society and are The Dead One.

In the Internet age, you need to have an "online identity", that is, an "online account". The account and password required to log in to Weibo, Zhihu, and WeChat are the "proof" of your identity. You can only have such an identity to "live" in the "small tribe" built by various Internet applications.

DID was not originally extended from the real identity, but from the "login account". Therefore, the initial definition of DID was very narrow. It was just that the "central control" of ID in the web2.0 era has become "decentralized autonomous control", and the target is nothing more than privacy leaks such as Facebook.

Of course, privacy protection is very important, but it varies from person to person. This can be understood from "common sense". You are just an ordinary person. You are going to use Pinduoduo to get a "life discount". Will you worry about privacy leaks? In fact, no. On the one hand, there is indeed a lack of awareness of privacy data, but more importantly, your own "privacy" is not valuable.

So, is the narrative that DID emphasizes letting users control their privacy data autonomously imaginative? Obviously not. So DID has always been tepid. But after the metaverse and the narrative of web3.0 unfolded, or the current predicament of DeFi, the pattern of DID has opened up.

The imagination given by web3.0 and the metaverse is to build a world, a virtual economy parallel to the real world. In this new economy, new and unimaginable industries will be born, and existing industries will be reshaped.

How big is this imagination? Web2.0 is a derivative of the real world, but the industry integration brought about by P2P socialization has changed the rules of the game. The market share of the leaders in traditional industries (such as women's clothing and gasoline cars) is only a few percent, but the market share of the leading companies in web2.0 generally exceeds 30%, which has given rise to Apple, Amazon, Tesla, etc. with a market value of trillions of dollars.

Web3.0 and the metaverse are a new world. Maybe we haven't seen subversive changes in the rules of the game yet, but it is definitely "late but late". Otherwise, top speculative institutions such as Sequoia, USV, Temasek, and Blackstone are crazy to "throw money" in the Crypto world?

However, in ERC20, homogeneity obviously cannot meet the basic attributes of the existence of the world (i.e. "uniqueness"). After the imagination of NFT is opened, web3.0 and the metaverse have the possibility of landing (even if it is still far away). But the question is, how to confirm human social relations in this new world? In the words of vitalik, how do people find the "soul" in web3.0?

The answer is DID, or a decentralized society built with DID as the core.

At this time, DID should not target the decentralization of web2.0 accounts, but the decentralization of "real identity". That is what I mean by the credit system and reputation system built around DID. In other words, what DID has to do is to create a unique "ID card" for everyone on the chain, rather than various APP accounts that are mostly worthless and can be applied for repeatedly.

The detailed framework is written very clearly in Vitalik's paper, but I won't go into details about some of the things involved, such as philosophy and technical issues (add WeChat at the end of the article to receive it if needed). As an investor, you should focus on what opportunities to make money can be provided. I see about three.

The first is the impact on DeFi.

I have mentioned this in "My View on DeFi: What is 2.0?" and Vitalik's paper has also mentioned it. Now that DeFi has no credit system, various DeFi protocols can only "recognize money but not people". In order to ensure that there are no problems with the project, over-collateralization is necessary.

The essence of finance is that water flows to lower places, from places with abundant funds to places with less funds. Over-collateralization is the opposite, so you will see that all kinds of blue chips in DeFi have performed very weakly after the AMM craze has passed. The key issue is to limit the number of users and TVL funds under over-collateralization.

But can we build a credit system on the chain now? How much value can credit have after it is done? Who will arbitrate if you do evil? Will you be expelled from the crypto community? Who cares in the face of interests? But in the real world, can you borrow money from a bank and not pay it back? Of course not. If you don’t pay back the money you borrow from a bank, you may be restricted from high consumption, you may be forced to auction your assets to pay off your debts, or even have more serious consequences.

But the execution certificate for all this is your identity. How important your identity is in the real world should be just as important in the crypto world. And only after a credit system similar to the real world is established around DID, and an arbitration system is established, can DeFi achieve credit loans, unsecured loans or insufficient loans.

The development of DID has directly affected the final outbreak of DeFi.

From this perspective, all blue-chip projects in DeFi, especially those on Ethereum, still have great room for growth in the future. Buying now is all undervalued. AAVE\SNX\UNI is fine, but the premise is that you have already hoarded enough BTC and ETH, and your money can be used for long-term investment.

Because all projects may fail, and how long will it take for DID to explode? Next year is good, but what about 3 years later, 5 years later?

The second is the impact on airdrops.

Starting from Optisism, everyone can find that it is getting more and more difficult to lead airdrops. The reason is to isolate the wool party, so the project party can only constantly fight wits and courage with the wool party to set more airdrop restrictions.

Before DID was established, the project parties could only do this, otherwise they could not guarantee whether the users were real. Here, I would like to say that airdrops will be very difficult in the future. Everyone must do fewer and more refined airdrops, and interact with projects in depth so as not to waste their GAS fees.

But after DID was established, the difficulty of airdrops will be reduced, because compared with DID airdrops, they are basically real users, and even with the improvement of DAO, there will be more unexpected combinations in the future. For example, the benefits and rights of the ecosystem to DID mentioned above, airdrops may be just one aspect of it, such as land purchase qualifications, NFTs, etc.

The third is the DID project.

In fact, many DID projects now, such as KEY and LIT on DOT, or BrightID on Ethereum, and even metamask, belong to the category of DID in a sense. But if we sort it out, from the first principles, many projects cannot be invested.

Because if DID is used as an identity credential, then most protocols and projects can only become technology providers, not "value" providers. The ecosystem should provide value for DID, such as the Ethereum community, or other public chain communities that provide a unique "identity" from top to bottom for each community member.

This identity is proof of your "survival" in this community, and with this identity, you can create multiple bank accounts (such as wallets), and you can also register multiple application accounts (such as games, social networking).

The reason why identity is important is that you can enjoy the benefits, rights, and obligations brought to you by this ecosystem through such an identity, just like if you hold an ID card of a certain country, you can enjoy the benefits of education and medical benefits.

But how can a single project realize the value empowerment of this identity? It is impossible, or it is very difficult. Because the current projects are not self-contained, and the number of users is very uncertain.

So DID is unlikely to be completed by a single project in the end, and it is even difficult to be completed by a public chain dedicated to DID, because the landing path is too long. It is far less suitable for various LAYER1s to do DID-------at most, the public chain will only ask the project party for technical support.

Then the DID of various public chains will also bring different rights and benefits to users due to the different strengths of each public chain, which will cause the value of DID to be differentiated. For example, American nationality, Ukrainian nationality, and Russian nationality may have different appeals to everyone.

The premise of this concept is that the future of Crypto is a multi-chain era. I think the multi-chain era is inevitable. All public chains will compete and develop in this decentralized world, and finally find their own positions to sit down.

Then my judgment is that DID may explode in the following places, which can be divided into the following according to the importance of attention:

1) Public chain. Ethereum>DOT>Cosmos>layerZore.

2) Protocol. Game>Social>Wallet>Validator.

Of course, nothing is absolute, maybe some projects can come out. Projects like BrightID and LIT that are still decent in the DID track can interact and wait for airdrops (no coins have been issued), or wait for indirect airdrops (ID is required). Oh, by the way, A16Z invested in a DID project called Spruce, which is still a little hopeful, and you can also interact with it.

To sum up, DID is an indispensable part of web3.0 and the metaverse. But this kind of thing is more inclined to the underlying architecture, which means that its value will definitely be captured by the upper-layer applications. Therefore, like DAO, the investment method is indirect.

It is undeniable that with the improvement of concepts such as DAO, DID, NFT, DeFi, layer2, and the improvement of the track, the story of web3.0 and the metaverse will become more and more certain.

But if you want to make money in it, it is best to be sure when everyone is still doubting.