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Before that what’s the primary need for blockchain? What problems does blockchain solves that are pain points in centralized system?
3 Major Usage of blockchain
1. Trustless transfer of value or assets. Central banks in control of the flow of currency can easily inflate the currency and lead to inflation.
2. User data privacy. Massive scandals happened in past like Cambridge Analytica.
3. Ownership of digital assets so that artisans are compensated for their work. Fake/Copies of digital/original art can be easily done with the advancement of technology.
Solution:
1. Good Tokenomic-based Cryptocurrency: Decentralization and payment without the involvement of third-party systems like banks.
2. Soul Bound Tokens(SBTs): The user is the owner of their data. In order to access personal information user has to grant permission.
3. Nonfungible tokens(NFTs): Digital Assets ownership and artists getting rewards for their hard work. Artisans can also get royalties based on the percentage of future sales.
Problem with the above solutions:
1. Cryptocurrency: the main issue with some cryptocurrencies like bitcoin is they can be used for Money Laundering and Terror funding. And it’s not easy to track the identity of the person.
2. SBTs/NFTs are attached to wallet(Public/Private key pair) and not to person’s identity. Results in loss/hack when the private key is compromised.
Identity is the major missing piece in the blockchain ecosystem. The major problem for Crypto-based Money Laundering, terror funding, and NFTs/SBTs is stolen because the identity of a person/group can’t be identified.
The main idea behind the creation of Cryptocurrency like Bitcoin was Decentralised and Trustless currency transfer. And it can’t be linked to a person in anonymous transfers.
Owners of digital assets are also at risk with the same problem as the identity is missing. And whoever has the private key is the owner.
The concept of decentralization is important because it doesn’t concentrate power into the handle of a few organizations. But it shouldn’t come at the cost of harming humanity and loss of personal belonging.
Web3 Identity is a key feature that will solve the issue and leads to the mass adaption of blockchain. This will truly develop trust.