A Stab at a (Hopefully Not Dystopian) Vision for (Multi-)National Personal Tokenized Identities

As the concept of money-transmitting continues to attract attention within the distributed ledger ecosystem when pertaining to digital currencies & assets, a global understanding becomes assumed about the necessity of know-your-customer controls. Know-your-customer, abbreviated and commonly known as KYC, is the process by which a business verifies the identity of its clients and assesses the potential risks of illegal intentions within the business relationship. While that serves as the “official” definition, the term has taken a new form since the formation of cryptocurrency discussions to also include the role of government in validating the identity of individuals for regulatory purposes.

In response to recent world events, some large incumbent players have galvanized the charge for digital identities on the distributed ledger. As this initiative gains momentum, we have to ask ourselves, “What are the advantages and hazards of universal digital identities?”

The Breakdown

While I imagine that there are many benefits to having a system of tokenized identities, where individuals can be assured of the authenticity of identities of one another, I have narrowed down some major use cases with regards to three categories: immigration processing, homelessness & statelessness reduction, and increased citizen consolidated data.

Immigration Processing Streamlined

Thesis: Currently, immigration has been a political topic all around the world, from the US to Europe to China to Japan and beyond. Many governments of countries face hardship in processing large amounts of immigrants coming from another country, let alone facilitating the integration of these individuals into native society. If each individual had a digital identity attached to them, it would be much simpler to process them through customs and set them up with government-subsidized housing & social programs.

Hazard: If we set up a system where individuals must get a digital identity set up, what’s stopping governments from putting laws in place that restrict ebbs and flows of individuals based on ethnicity, race, gender, age, social class, genetic makeup etc? What’s stopping governments from using this data to provide internal checks that give certain groups institutionalized advantages over other groups, and potentially even restrict exit or purge certain groups?

Diversity is a tense issue across the globe, as different countries have different histories and, therefore, different schools of thought behind population heterogeneity. At the root of it all is economics, because people are pragmatists when the light is shone on them. It’s no secret that even the most fervent ideologues act with economic incentives in mind, even at the expense of native conservative conception, if the payout is deemed greater than potential long-run detrimental consequences. For these reasons, people have pioneered the frontier and have entered into trade agreements with foreign countries unlike their own. Sometimes these ventures provided great wealth, sometimes these ventures provided great death. It’s a roll of the dice.

With this in mind: for creating a new system involving national tokenized, digital identities — strung together by a global network of interconnectivity functioning under a single system — there would need to be certain assurances (ie MAD agreements) between countries to ensure the safety of transpatriating and transitory nationals. While I don’t believe that launch of such a system as this should try to coerce countries into establishing “open borders”, I do believe that all of the national laws of each nation surrounding inherent discrimination should be made front and center (in a global database) to allow immigrants to know first-hand what they would be getting themselves into before entering a country. While some might be against the idea of inherent discrimination within a nation’s borders, I am of the greater belief that there is a reason that the society has set itself up in such a fashion — and so long as human decency is respected and there remains opportunity for providing more human rights safety nets — then people can coexist peacefully under a certain regime. As well, there would need to be checks in place to ensure that law changes pushing for discriminatory abuses of human rights cannot enter into effect (and especially not instantaneously).

Another big concern would be surrounding a countries’ ability to keep people in, as well as deporting unwanted visitors. Regarding keeping people locked into countries, I’m hoping that this becomes less of an issue as time goes on. In today’s geopolitics, North Korea comes to mind as a country that has gone down this road. While I imagine diplomacy will come into play to prevent this, I would hope that tokenized identities would allow for more of the free movement of people, and the rise of a trend in multi-citizenship. I imagine that war would be more difficult to begin if a bunch of people had multi-citizenship of both the native and rival nationalities but, on the flip side, if war did break out, then those individuals would be in greater danger than they would be under our current system. Looking at it from the deportations angle, while the ability for governments to act accordingly on deporting non-nationals to their native country would be made easier, political tensions and the moral hazard to deport on a discriminatory basis would increase given greater access to citizen profile data.

Moving into what we can see as potential solutions, I present the central theme: what if the government only has access to certain data, at certain times, and only through regulatory or third-party agencies. Suppose that each individual was the only one who had direct access to his/her own data (surrounding race, age, genetic makeup) via their own private wallet storing their token containing all of this data. This individual could then give up certain data voluntarily (ie setting up a bank account) or when mandated (ie signing up for public school). Given the sensitivity of certain data, there may be the opportunity to utilize zero-knowledge proofs, which verify the data but do not expose the data. Additionally, third-party auditors or watchdog agencies may be employed to verify data without giving the government direct access to it.

Statelessness and Homelessness Resolution

Thesis: With the prevalence of statelessness and homelessness across the world, the construction of digital identities would allow individuals under these circumstances to be best routed to proper government-subsidized resources that will get them back on track to continue to thrive within society.

Hazard: Given the potential negative perception of homelessness and statelessness within certain societies, individuals in these situations may be at risk of life (and with a large target on their back) due to politically- or economically-charged sentiment of a brutal regime.

I was watching a Vox documentary recently which discussed a Haiti-DR dispute that resulted in leaving a large number of Haitians homeless and stateless. These two issues are more common than we might imagine, even to the degree that both exist within domestic borders. Given that many face difficulty in “getting their bearings” in both statelessness and homelessness situations, often both sets of circumstances result in a downward spiral feedback loop that fuels the underground black market economies of illegal substances and activities. While some governments may want to fix this with increased funding to help struggling individuals in such situations, other governments may want to exterminate the problem in a more Draconian fashion.

The solutions to these problems through a digital identity, in large part, follow the same script as previously mentioned with immigrant processing & integration. Individuals afflicted with homelessness or statelessness need certain protections and certain accesses to government resources. I believe that government-subisidized rehabilitation programs (complete with educational & vocational aid), with supervised part-time employment, are a good step toward reducing this institutionalized blight of society. In many ways, this system could resemble the Sweden prison rehabilitation reform, although it would certainly require some serious funding. Given that there isn’t an infinite supply of free dollars, continued recidivism by bad actors within both unfortunate circumstances would require that they be put in jails/prisons. With digital identities, it will be easier for law enforcement to track offenders and escort them to the necessary facilities. In danger of becoming too Black Mirror-esque, we could start tying individuals’ societal performance to credit scores (in a much friendlier way than China has done), so that repeat criminal offenders have limitations on certain societal privileges. While I’m supportive of the idea of having “social welfare” programs to allow individuals to repent for misdeeds by volunteering their time and resources for public good, I don’t know to what extent we would want to go with this.

In a nutshell, there could be major advantages to providing these social outcasts government resources through not-for-profit charities and watchdog agencies that maintain certain custodial privileges over the tokenized identity digital rights of individuals as they assimilate into society. The agencies can validate or have visibility into the data of the individual, and can provide the audit link to governments who fund them without actually revealing the data of the individuals that they are helping.

Consolidated Data Repositories

Thesis: Many citizens, of even first-world countries, have difficulty record-keeping of their own personal data relating to government and financial resources due to data silos that exist between different government departments and the private sector. If individuals had a central portal where they could access all of this information from one location, citizen convenience and productivity would increase.

Hazard: If there is one location where individuals can access their entire profile about their state of being relating to the government and private sector, such a system could potentially be abused by governments and hackers seeking to infiltrate this data store.

As a citizen of the United States, I find it onerous to have to contact and submit data to different departments of governmental organizations and private entities in order to maintain certain benefits as a citizen. For instance, I need to prepare my tax form for the IRS, I need to go to the DMV to handle anything relating to my motor vehicle, I need to contact my financial institution if I need to make changes to my checking account, and I need to go to a Passport Office to renew my passport. These are just a few of the more regular operations, but even as it is, it’s a very disjointed way of handling affairs, given that I then need to track of all of this information manually.

What might prove to be a more consolidated solution is if there was a digital portal, that only I could get into, where I could renew my passport, file my taxes, work with my financial institution, and update my driver’s license all from one location. This would usher in the similar conversation as previous, about the personal-identity-linked token that provides secure storage of your data to which outside entities have limited default permissions. With many governmental agencies beginning with no permissions, until you allow them access, there would be a system of privacy that ensures that your rights are maintained. For government-mandated data retrievals, through the use of zero-knowledge-proofs, third party auditors, and watchdog agencies, particularly sensitive information could be filtered out to provide governments only the direct access to certain PII data.

Going a step further with this, your digital identity token can serve as your entire repository for your life (if you so choose). You can house digital assets in your portal (or just the replicated “ghosts” of your digital access, essentially showing others that you own an item (if you want to give them permission to view it) without actually housing that item in your centralized digital token repository. As well, an individual could grant relatives or successors certain custodial accesses to your own digital token profile and assets while placing conditional and non-conditional restrictions on certain permissions.

Through the use of mirrored “ghost” tokens that represent digital assets and the use of off-chain cold storage repositories for certain data and assets, government visibility and hacker influence will be limited to what you have in your on-chain central repository.

Conclusion

While time will tell whether the ID2020 initiative will be successful, the idea of universal identities is a concept that requires more attention from the distributed ledger community at large. There are considerable ethical discussions that need to be had, and I’m not sure the ecosystem overall is ready to have those conversations yet.

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