The Internet’s Missing Layer

Every person needs a digital identity, and every company is a digital identity company. That’s because trust is the bedrock of a well functioning society. It’s also a requirement for democracy.

So having some form of identity verification emerged out of practicality. Here’s Scott Galloway:

Binding ourselves to the administrative state sounds ominous — “Your papers please” — but verified identity is a cornerstone of modern life. In the two centuries since Louis XVI inadvertently created himself a photo ID, we have institutionalized identification. In 1803, Napoleon introduced internal ID cards for workers, which reduced the levels of trust needed to transact and employ, unleashing economic growth. Other nations followed suit. In World War II, fear of saboteurs and spies spurred heightened ID requirements. The rise of the administrative state in the years after rendered persistent identification essential. Today, driver’s licenses, passports, social security numbers, email addresses, and a hundred other pins and flags of personal identifiable information tag us like endangered species in a reserve.

Nearly 90% of the world’s population has some form of official identification, and we couldn’t function without it. Keeping dangerous drivers away from our highways, psychopaths off our airplanes, and 14-year-olds out of our bars makes us safer and lubricates economic growth. Nobody likes paying taxes, but automation makes it (reasonably) fair and efficient. When we moved to London this year, I rented our house in Miami to a family I never met. And it didn’t occur to me to do so … because the infrastructure of banks and agents and bureaucrats knew both our identities, and they’ll track either party down if we don’t live up to our end of the bargain. 

But, as Scott Galloway points out, that’s not how the internet started. Missing an identity layer, the internet reinvented anonymity. We’re now living with the consequences of that core necessity:

In its early days, the Internet seemed like a haven for reinvention and anonymity. However, unchecked anonymity online is not working. The prevalence of anonymous accounts and bots has evolved into a sociopolitical scourge. It has threatened the integrity of our elections, divided our nation, and — as Jonathan Haidt put it — systematically made us more stupid. We should change course and require proof of identity online. Enforced ID won’t solve all these problems, but it would be a step in the right direction.

This has been further exacerbated with the rise of crypto. By solving the Byzantine Generals problem, crypto essentially enables trust where there isn’t any. You don’t need to trust each other. Instead, you trust the mechanics and incentives of the system. You trust the code.

That’s all fine and well, but the problem is that we’re human, and humans are flawed.:

KYC isn’t perfect, as we learn every few years with another document dump detailing how the rich and powerful use shell companies and lax jurisdictions to hide their wealth. But the complexity of those schemes is testimony to the robustness of the system they seek to circumvent. Just compare traditional banking with the “anonymous” crypto version, so-called DeFi, which suffers from a massive fraud problem: Over $12 billion was stolen in 2021 alone. The success of KYC proves we can build secure systems to confirm that a real live human is attached to every online identity, and to provide recourse if that human breaks the law.

The solution, then, is obvious. It’s long past time to build that missing identity layer:

Platforms could employ KYC directly, requiring ID for every new signup, and limiting the number of accounts each person can control. But not everyone wants to have to trust Meta with their personal information, because the company’s data security team is about as reliable as Man U’s back four. (Sorry, had to.) Social media’s untrustworthiness is a business opportunity, however. The solution to confirming online identity is a profitable layer/middleman in waiting. Users could set up a single identity account with a trusted provider, who’d then vouch for the uniqueness of that user with any social media company or other online business where they open an account. Sort of a Clear for platforms.

And whether or not Galloway realizes it, what he’s describing is the emerging self-sovereign identity movement and developments around verifiable credentials. You don’t want to trust Meta, but more importantly, you don’t have to when you own your own portable, digital identity.