Leading cryptocurrency exchange Coinbase has announced the acquisition of Distributed Systems, a San Francisco-based startup that is working on decentralized identity solutions. As a part of the acquisition, the five-person team at Distributed Systems will join the group at Coinbase involved in building identity solutions. Coinbase did not reveal the terms of the deal.
Blockchain System Helps User Control Digital Identity
With advancing technology, all key information related to an individual can be found on various online portals and systems. They include details of their identities, professions, habits and even relationships. While digitization has allowed easy access and sharing of such vital data points all across, it has also led to cases of data theft and misuse. Amid growing concerns around protection of user’s personal data, blockchain-based solutions can help individuals build their digital identities in a secure manner and retain complete control thereby preventing any possible misuse. (See also: Blockchain Could Make You—Not Equifax—the Owner of Your Data.)
The blockchain technology that underlies cryptocurrencies allows a new, reliable and secure method of user verification, keeping all the transactions and interactions safe in the digital world and assists in maintaining the necessary trust among the interacting parties.
Drawing a comparison with a Social Security number, Coinbase Identity project manager B Byrne writes that the “copy has exactly the same power as the original, so when there’s a data breach with copies of your data it puts your identity at risk.” Highlighting the benefits of a secure, decentralized digital identity, Byrne adds that “A decentralized identity will let you prove that you own an identity, or that you have a relationship with the Social Security Administration, without making a copy of that identity.” (See also: How Blockchain Technology Can Prevent Voter Fraud.)
Acquisition to Help Coinbase Build Digital Id System
As Coinbase attempts to help develop the financial ecosystem around cryptocurrencies and related transactions to bring them into the mainstream, building a secure method to host digital identities becomes important. At the same time, with many cryptocurrencies focusing on privacy and anonymity. A fine balance is required between anonymity, privacy and the immutability in the blockchain virtual world, yet keeping the transactions and identities open and secure. Coinbase is looking to leverage the expertise of Distributed Systems’ team to work on the digitized identity initiative and will explore its amalgamation with the various digital products.
While no plans have been revealed by Coinbase about how and when they will build, announce and implement any potential digital identity tools, Byrne wrote that the exchange will be “deliberate about how and where we apply this technology.” (See also: Microsoft Will Use Blockchain To Build New Digital Identity.)