Ethereum co-founder Vitalik Buterin said in a new blog post that DAO-governed stablecoins backed by real-world values and zero-knowledge decentralized identities will form a crucial part of Ethereum’s future.
Buterin argued that the collapse of FTX has made crypto users aware of the benefits of decentralization. He also believes that a stable coin issued by an entity with a robust decentralized government will allow many users to benefit from saving and using it as currency.
Buterin supports interoperability of decentralized identity elements
While Buterin favors the concept of digital identity, he believes it is important to avoid combining different forms of blockchain-based identity into a unified platform. Instead, the focus should be on increasing the interoperability of different projects.
Several ongoing projects are already placed on different layers of the decentralized identity stack.
Arguably the most famous project is the Ethereum Name Service (ENS) which assigns a human-readable name to an Ethereum address. Names usually end in .eth and require users to pay an annual fee to secure their ongoing claim to that name.
Sign in with Ethereum (SIWE) allows a user to use their ETH address to sign in to websites without the website knowing any other information.
On the other hand, evidence of humanity’s tools identifies an entity as uniquely human. Buterin argues that this is useful for ensuring that a contributor to DAO governance is actually human.
Other protocols may issue a token attesting to a user’s participation in DAO governance or attending an event. Buterin argues that the Ethereum Name Service can be used in conjunction with the attestation technology to combat spam on decentralized chat platforms such as Blockscan. The chat platform can correlate the user’s on-chain activity with their ENS name to prove that they are a real participant in the Ethereum ecosystem.
Likewise, a decentralized version of Twitter could use certificates of on-chain activity instead of traditional know-your-customer processes to verify users.
Decentralized credit scores a possibility
Certificates can also be used to determine entities’ credit risk without centralized gatekeepers. This was an issue recently highlighted by Buterin’s fellow Ethereum co-founder Charles Hoskinson.
The main barrier to the progress of decentralized identities is maintaining user privacy on the chain, Buterin argues, and the development of ZK-SNARKs. ZK-SNARKS is a type of cryptography where an entity can prove data ownership to a verifier without revealing the data itself. The prover and the verifier do not need to talk to each other.
Buterin weighs in on sustainable DAO management
When it comes to the topic of DAOs, Buterin delineates between a decentralized governance structure and a decentralized implementation. The former refers to using the participants’ votes to make decisions. The latter refers to a decentralized platform such as a blockchain, free from the constraints of a “single nation-state legal system.”
Enhancing decentralized governance may involve the use of different classes of token holders, not just holders of governance tokens. This is similar to how decisions on legislation go through separate chambers in the parliament of a nation state, he argues.
On the other hand, this reduces the efficiency of the DAO, hindering its ability to change course quickly.
Deciding on the right balance between governance structure and implementation depends on the size and nature of the project. Choosing the right governance will become an important part of user adoption after the collapse of centralized entities.
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