DAO and Self-sovereign Identity (Verifiable credentials)
In its emphasis on computerized rules and contracts, the Decentralized Autonomous Organization (DAO) represents an innovation in organizational architecture. A DAO is a self-governing organization that is managed by rules encoded in computer programs called "smart contracts." The transaction history and programmed rules of a DAO are stored on a blockchain, which theoretically boosts transparency and immutability of DAO. Dash governance, the DAO, and Digix.io are all real-world instances of this business model in action. A DAO LLC is a new form of Limited Liability Company (LLC) in which no one member is in charge of the organization and who has the majority of the voting power. A DAO is based on the decentralization principle, with digital assets serving as membership and having rights outlined by the operating agreement. Four guiding principles characterize DAO:
- The protection of one's personal information
- Transparency and Openness
- Democratic Participation
The capacity to own and manage one's private data is a fundamental element of self-sovereign identity, which is also founded in the notion of blockchain technology that DAO operates on. One approach to self-sovereign identity is a mathematical policy in which cryptography is utilized to secure a user's autonomy and sovereignty over their own identity. For this to happen, not only does a user's identity need to be interoperable across various sites with their agreement, but it also has to have absolute user control over that digital identity, which results in more user autonomy; Users must control their identity. Subject to well-understood and secure algorithms that assure the continuous validity of an identity and its claims, the user is the final authority on their identity.
Credentials are an integral part of our everyday lives; driver's licenses attest to our ability to operate a motor vehicle, university degrees attest to our level of education, and government-issued passports proves to our ability to travel between nations. This standard defines a system for expressing various types of credentials on the Web in a safe, privacy-preserving, and machine-verifiable manner. According to Sovrin, "self-sovereign identity (SSI) is a word that refers to the digital movement that respects an individual's right to own and govern their identity independent of administrative authority." SSI enables individuals to engage freely and with the same capacity for trust in the digital realm as they do in the offline one."
The life-cycle of a verified credential
Implementing DAO with Verifiable credentials
There is a strong relationship between DAOs and verifiable credentials because a well-run DAO should function as a transparent platform that allows users to retain control over their personal data and identities. The DAO governance structure and security will leverage the secure user autonomy and sovereignty provided by VCs, while establishing a DAO-VCs environment. When it was created in June 2016 with $150 million in crowd financing and smart contract implementation using Ethereum technology, The DAO was instantly hacked emptied of US$50 million in bitcoin. This was due in part to DAO transaprancy nature, and cyber crminals exploit that. DAO-VCs partnership are the way to solve that, while still maintaining the desirable transparency that DAOs provides. Therefore, a cross-platform solution necessitates establishing a trustworthy and transparent identity management system capable of serving the DAO network's numerous stakeholders. Naturally, this criterion opens the DAO up to a verifiable credential-based solution that fosters confidence between stakeholders and aspires to create an interoperable system with transparent accounting for each member. As a result, the emerging verifiable credential solution must provide data privacy and trust for all businesses participating in the DAO blockchain network. Additionally, the importance of data protection and trust across such systems must be considered to minimize fraud due to the aggregated nature of sensitive user data, such as ride history and personal information.
How DAO Benefits from Verifiable credentials
The benefits of verifiable credentials provide to DAO are:
- Verifiable Credentials are strictly confidential.
- They are tamper-proof due to the use of encryption.
- It is transportable-Verifiable Credentials are yours to keep in your wallet and distribute as you like.
Verifiable Credentials and Self-Sovereign Identity rely on two levels of privacy protection: Zero-Knowledge Proof and Selective Privacy, which enable members of a DAO to demonstrate that their data meet particular criteria without disclosing the actual facts.
DAO and Verifiable Credential: the future of web 3.0
The emerging value of the internet, Web 3.0, will necessitate adopting a new organizational structure in which a community of users administers decentralized apps. The idea behind Decentralized Autonomous Organizations (DAOs) is to allow businesses and organizations to function without the requirement for a hierarchical management structure completely. Additionally, the evolution of DAO into a Web 3.0 is required to ensure that members of a community can readily trust one another. One billion people worldwide are unable to claim ownership of their own identities, according to recent estimates. This is one of the most significant disadvantages of physical identification documents. It isn't commonly available in every nation, unfortunately. As a result, one-seventh of the world's population cannot vote, create a bank account, or, in certain situations, obtain employment. In a decentralized autonomous organization (DAO), a blockchain-based internet makes it difficult to copy or fabricate digital assets (data, money, or property). Because the blockchain is an immutable and traceable ledger, it is ideal for financial transactions. Web 3.0, which is just over the horizon, will revolutionize how we interact with one another and with the globe. Because we are spending an increasing amount of our time online, we must build a reliable and trustworthy method of verifying our identities. Blockchain has provided us with the technology necessary to authenticate identities on-chain and do it in a way that respects the privacy of those who utilize the platform.
Benefits of Self-sovereign Identity in a DAO environment
For a DAO to take off, two concerns will be addressed in this new digital identity paradigm, which will be made possible by Self Sovereign Identity: reputation and risk. Risk will be controlled directly as a result of the ability for individuals all over the globe to exchange anonymized information for health, credit, and other services, with the ability to govern how information is shared and apply an intelligence layer to the information. Self-Sovereign identity may also enable the development of decentralized reputation models, which would aid in the establishment of trust in the Peer-to-Peer market and thereby making the DAO environment leapfrog from its present functionality into a more robust ecosystem. With the great benefits and transparency DAO offers in managing an organization, verifiable credentials will build on these features and help them function while allowing them to provide their transparency and user autonomy without sacrificing security and user verification.
Common use Cases of Verifiable Credentials within a DAO
In a DAO environment, each verifiable credential (VC) possesses some interesting characteristics:
- Each DAO through VC is distinct from the others, with a distinct identity and existence.
- Each DAO with the help of VC is privately held. It is controlled by whoever has the private keys associated with the address to which the VC was issued.
VCs provide indicators that decentralized autonomous organizations can use to track the DAO ecosystem. Such indicators as the number of members, proposals, and voters. There are several interesting use cases for Verifiable Credentials in DAO, and we are only scratching the surface. With the assistance of VCs, we can rapidly evaluate the governance structure of any DAO to determine which governance techniques are beneficial and ineffective. As a result, DAO has the potential to grow into a meta-governance' paradigm (a decentralized autonomous organization that can not only vote on its own but also accept delegates, representing Other decentralized autonomous organizations vote).
DAO-VC Tier levels and credentials of membership
It is common practice amoungst DAOs to have membership tiers based off a quantity of shares owned or a similar metric. These tiers not only provide meaning to ownership but also reward the community for participating in the long term. It is imperative for a healthy trust network within the DAO that members are able to identify themselves and prevent the risk of fraud from individuals with malintent. This is where Verifiable Credentials shine. The solve a variety of DAO specific issues like membership verification, proof of currency staking, fraud protection, and much more!
One of the most important parts of this collaboration is that this technique safeguards the Holder's privacy while simultaneously providing an absolute level of confidence to a Verifier (DAO) that (the necessary component of) a certified document is authentic.
DAOs have risen to become a more prominent means of group organization in recent years. What could be more resilient and permanent than a DAO? Nothing! The Self-Sovereignty Identity integration into the DAO increases the value of the overall organization by providing an extra layer of functionality and robustness.
Case study of DAO-VC in operation
Many development projects are underway that use this, but one of the most pronounced uses has been in DeFi platforms. Digital identities can be created and linked across different DeFi-based dApps, apps, and APIs that are available in the ecosystem using this partnership. A good example is a token called 'PhoenixDAO'. They used a functional protocol called Phoenix Authentication- a Blockchain-based two-factor authentication tool that verifies DeFi app logins and approves transactions using your digital identity to protect your financial information. Additionally, the platform is equipped with Phoenix Payments, a smart contract-based solution that allows transactions to be completed without the involvement of a third-party escrow provider.
A digital identity-based suite of protocols and products designed to power the new digital economy covering DeFi, NFT to decentralized governance through authentication, payments, and linked identity is made possible by DAO-VC integration.
In a centralized network, each user's identifying credentials are used for numerous services and shared with third parties without their consent. Governments, banks, and social media platforms are most susceptible to the present identity management system, compromising billions of user identities. Self-sovereignty enables us to validate the authenticity of all our digital assets' authenticity in a DAO environment, including our rightful ownership and power to vote in decision-making with the DAO-VC environment. The system uses a distributed ledger to manage user identity data and related Know-Your-Customer documents. All network transactions are kept in blocks, which are linked together to form a blockchain. Smart contracts will connect stakeholders to the blockchain network. Without the user's specific authorization, no third-party vendor can access the user's information.