Analysis of Trends in Blockchain Privacy, Credit, and Identification Verification Development

Recently, the cryptocurrency market has seen a series of liquidations, highlighting that demand in several areas may grow: privacy, credit, decentralized identification, and reputation systems. This article analyzes the development potential of these areas from the perspective of several projects.

1. Privacy Demand Growth

Although accounts on the Blockchain are a complex string of addresses, they can still be traced back to the underlying identification through analysis. True privacy protection requires the establishment of a complete ecosystem, including various privacy applications to serve users.

Zcash uses zero-knowledge proof technology to provide two types of addresses, privacy and transparency, which can be converted between each other. However, there is a trust issue with the master key.

Aleo not only achieves anonymous asset transfers based on Zcash but also includes privacy features for payments, liquidity provision, voting, and more. It offers a full-stack solution that makes zero-knowledge proofs programmable at every layer.

Secret Network adopts Trusted Execution Environment ( TEE ) technology, which may develop faster compared to zero-knowledge proofs.

2. Development of On-Chain Credit

On-chain credit is still in the early stages and faces several major challenges:

1. Lack of comprehensive middleware and infrastructure
2. The combination of on-chain and off-chain credit assessment systems
3. Reasonable on-chain credit algorithm model
4. Regulatory License

Projects like Maple Finance, TrueFi, and Goldfinch use different methods for credit assessment, but they all rely on centralized people/teams, making it difficult to address the debt issues of super whales.

On-chain reputation and credit risk scoring remain major challenges. Credit requires backing from powerful governments, laws, etc., and does not arise out of thin air.

Currently, on-chain institutional credit business is still seeking a product-market fit. However, during debt restructuring and the emergence of a new cycle, credit remains one of the important driving forces of DeFi.

3. Decentralized identification and reputation system

The flaws in the credit assessment system highlight the importance of the native identification system in DeFi and the decentralized reputation scoring system.

ARCx designed the DeFi Passport (0-999 points ), generating credit scores based on user interactions with various DeFi protocols. The assessment criteria include multiple variables such as loans, liquidations, airdrops, and user behavior.

4. Decentralized identification ( DID ) system construction

A reasonable decentralized identification system should have the following characteristics:

• Trustless: Operate on public network collections
• Flexible: applicable to any data structure defined by developers
• Accessible: Applicable to any open network and unique identifier
• Pseudonym priority: No need to create an account to use
• Generation: Information accumulates over time to form a complete identification
• Composable: Discover and share information across contexts
• Separability and Selectivity: Information can be encrypted, obfuscated, or segmented.

NFT3 allows users to conveniently establish an identification system, ensuring privacy and sovereignty. It provides an SDK for project integration, responsible for the DID gateway. Users can selectively share data, and applications integrated with the SDK can access according to user consent.

In the future, it is necessary to establish a minimum protocol for managing and routing trusted data, leaving the rest to the developers' creativity to achieve uniqueness and diversity.