The decentralized blockchain technology underpinning cryptocurrencies provides high-level security with its distributed ledger. However, the crypto exchanges and trading platforms are still largely centralized jeopardizing the safety of investors’ funds. There is a growing demand for the crypto industry to move towards decentralization.
One of the world’s largest crypto exchanges Coinbase is now experimenting with decentralization in an attempts to give its user higher control over their personal information. Coinbase has formed a 17-member team to explore decentralized identity solutions, led by product manager B Byrne.
While speaking to CoinDesk, Byrne said that this new experimentation is an effort to bridge the gap between the company’s different products. He further said that they are trying to use decentralized applications (DApps).
“I’m looking at DApps, and which of our customers are using which DApps. That’s probably a good indicator of what types of activities [our customers] want to be doing in an on-chain way,” said Byrne. Instead of repeatedly submitting the KYC information every time across Coinbase’s suite of products, customers would rather have to do it once by getting better control over their data.
Over the period of next one year, the Coinbase team will devote its efforts to scale and expand the number of DApp users. Byrne says that it make a meaningful impact for customers not “getting access to things because it’s too hard as is.” He added: “We think it’s an important part of our future and we’re thinking about the tools we need to ship for that.”
Experimenting With a Few Selected Coinbase Wallet Users
According to Byrne, Coinbase will form niche groups initially, for the experimentation purpose. With them, the company will test some “partially” decentralized solutions in a regulator-friendly manner.
“We want to protect [Coinbase] users and make sure it’s really safe,” Byrne said. “I spend time thinking about the Social Security Administration or the DMV [Department of Motor Vehicles], because they are the purveyors of so much identity today.”
However, while conducting this decentralization experiment, W3C co-founder Allen believes that the emphasis should be on the importance of distinguishing authentication and authorization. By authentication, Allen means “the relationship between the digital data and a real person” and by authroization, he means “the ability to do different types of things,” like buying securities.
Byrne also agrees to this bifurcation saying “at this point, it doesn’t feel like there’s a clear standard that we’ve agreed on that solves a problem.” He further adds that Coinbase will need a deep commitment to engage with each groups knowing that many are already working on their own identity standards.
Keeping Up With the Infrastructure Safety and Standards
Suppose that Coinbase succeeds in developing decentralized tools and reducing the cross-platform friction, the solutions would still rely on protocols and public tools which exist beyond Coinbase. To ensure round-the-clock safety of its users, it is necessary to upkeep the developed infrastructure.
Byrne said: “It’s not a zero sum game at this point. Whatever standards we agree on, upkeep will be critical.” He further agreed that Coinbase would have to stay on its toes maintain the “healthy” infrastructure for all future solutions. He also highlighted how the company would take an active role towards community efforts.
“A failure mode of past identity thinking has been trying to win it and own everybody’s identity completely as opposed to working in standardized ways that decentralize and distribute out that power,” he said.
“Everybody is still just getting started.”