Tokenized VCs with transparent and participative verification and governance using DAO

[cybereum]

Author(s)

Ananth Natarajan: Ananth has 20 years of experience in managing multi-disciplinary teams on large capital projects. He has led numerous complex engineering projects and technology development projects around the world. He has a BEng and MS in Mechanical Engineering, an MBA (IESE, Barcelona), and an MSc in Major Programme Management (Oxford). He is a Professional Engineer (PE) with the Texas Board of Professional Engineers and Land Surveyors, Project Management Professional (PMP), and a Chartered Engineer (CEng) with the Institute of Mechanical Engineers (UK). He is also an AI expert for the world's largest Project Management professional body, the Project Management Institute (PMI), and is helping them understand and educate future project managers on the role of AI and Blockchain in project management. He holds patents in blockchain and offshore wind technology.

Description

We will outline a scheme and method for incorporating W3C Verifiable Credentials (VCs) as for identity and credential authentication with the Baseline Protocol Standard. We will focus on implementing a VC for the Baseline protocol. We will create a minimal viable ecosystem (MVE) and build the pilot solution for this implementation.
Our goal is a transparent and participative model where VC holders, issuers, and verifiers can partake in the governance, voting, and evolution of the identity structures that they use. The baseline community will become a decentralized business network where VCs are participatively verified. We envisage non-fungible identifier tokens issued by DAO specific to each VC use case. The DAO will possess transparent governance and authentication rules. Governance tokens will be held by the issuing bodies and may also be held by issuers and verifiers depending on the VC use case. However, along with the rules, token ownership and voting will be transparent. A public registry will maintain the identity tokens and their associated public keys such that the association is revealed to verifiers to whom the identity holder grants access. This system will constitute a Decentralized Public Key Infrastructure (DPKI) for the Baseline Protocol and for other enterprise use cases where VCs are required.

We will describe a general scheme for using DAO to authenticate and issue VCs with transparency and security. We will describe a method to VC that can work with the Baseline Protocol.
The design of Identity DAO for the VC use case will be customized for that use case.
The properties of the DAO are as follows:

• Decentralization: Participative governance by identity issuers, holders and verifiers.
• Transparency: Transparent rules and voting

Fig. 1 - VC/DID Token issue

Fig. 2 - VC/DID Token verification (one possible scheme)

Motivation

Identity is a lynchpin of a decentralized ecosystem. Several use cases are being held back from realization because of the absence of a dependable universal solution for demonstrating or proving identity.

• C2B and C2C use cases: A key difference between Web2 & Web3 is the vision for user possession of data that they generate. Web2 platforms monetized captive user-generated data on their e-commerce or social media platforms and prevented user migration by lock-in due to network effects. DIDs are the hub to which a user’s information can be associated to possess and store their data.
• B2B and B2C use cases: Supply chains and projects require the orchestration of activities across multiple autonomous organizations, each with its own systems and its own self-interest. Web3 or blockchain technologies with decentralized verification and zero-knowledge circuits which can enable a trusted source of truth across organizations have great potential to make these workflows more efficient. The Baseline protocol is a standard for multi-party synchronization of records and processes across enterprises while keeping sensitive data and records secure. However, verification of counterparties and their credentials is essential for enterprise adoption of Web3 technologies making VC a critical enabler.

In the case of credentialing for commercial and regulatory purposes, combining transparency with privacy, and decentralization with authority are key challenges. We look at the balance between these factors and propose DAO for authenticating participants in business processes.
The key entities involved in the Scheme are:

• Governance body
• Issuers
• Holder
• Verifier

All these entities will hold authenticated identities or VCs in the form of non-fungible identity tokens (NFIT). In the typical verification use case, an entity acting as a verifier will divulge its identity NFIT to the holder whose identity it is verifying.

Token Design
The NFIT token design will be specific to the VC represented by the DAO. It will implement W3C Decentralized Identifiers (DIDs) and W3C Verifiable Credentials (VCs). The NFIT will aspire to transitive trust, so that other enterprise use cases outside of Baseline may use it for credentialing in their projects.
The W3C defines a verifiable credential as “a tamper-evident credential that has authorship that can be cryptographically verified.” The properties of the VC are as follows:

• Tokenized identity: The VC is a non-fungible identity token (NFIT)
• Sovereignty: It is stored in the User’s wallet or in a decentralized storage system such as IPFS where access to verifiers is only possible with the holder’s consent. The token becomes the holder’s Self-Sovereign Digital Identity
• Portability: The VC can be shared outside the Baseline ecosystem
• Persistence: The Tokens are stored on the blockchain or in a decentralized file system.

DAO Rules
Every participant has: 1 non-fungible identity token (NFIT) and a fungible governance token. Thus, every identified participant has a stake in the governance of the identity
It must be noted that for other VC DAO, the governance tokens may only be held by governing and issuing authorities. For instance, for university diplomas, a plurality of governance tokens may be held by university authorities.
Upon the expiration of the term, a transaction is automatically triggered for an extension.
While decentralization is important for DID, a strongly federated structure is more apt for VCs which will be reflected in the DAO design for Baseline Credential management. DAO VC implementation will depend on the use case.
As required by the Baseline CORE Specification, the credential holder proves control over the VC used in a BPI to a verifier by explicitly granting access.

We are discussing tokens to be used for the implementation. Tokens that we can use 1) for the NFT identity token (ERC 725 Ethereum Identity Standard, or ERC-721/ERC-1155), and 2) for the governance (ERC-20 or ERC1155). We are open to suggestions from the community.

Reference Implementation

Business Processes (BP) integrated with identity requirements are key parts of the Baseline Protocol. Our reference implementation will be for a strongly federated identity and credential management for the Baseline Protocol. We will build a DAO that can authenticate participants in business processes. It will verify and grant identity VC tokens to participants in a Baseline Protocol Instance (BPI) such as firms. As a new BPI is created participants are identified by their NFIT VC to be added to it. In a project signed transactions are traceable to real-world entities by counterparties.
All of the entities that possess an NFIT will also possess a governance token to participate in the functioning of the Baseline DAO.

[GoldenBit0]

6/27/22 Core Devs Call:

• Sonal sharing with rest of core devs to read through
• Ananth rewriting more feasible scope

[GoldenBit0]

7/11/22 Core Devs:

• Ananth rewriting scope of work

[GoldenBit0]

7/25/22 Core Devs:

• Iceboxing for future
• Ananth: This should be parked for now. There should be a discussion on how baseline will handle VCs. Wants to open the discussion on how to go about including VCs. The time is not right, and this should be reopened once there is more input. However, VCs are extremely important