The Reality of “Web 3.0”
In an era where data is the new gold, the centralization and ownership of personal information by Big Tech have become growing concerns. It’s against this backdrop that blockchain technology emerges as a promising solution. Utilizing its inherently decentralized structure and robust cryptographic principles, blockchain provides a secure foundation for identity management, enabling the creation and verification of digital identities without the need for central authorities. This sets the stage for an innovative shift towards Self-Sovereign Identity (SSI), where individuals can truly claim ownership of their data.
However, this transformative era is not without its opportunists. Some entities have sought to exploit the shift towards decentralization, masking their intentions behind buzzwords and promises of tokenization. Rather than creating truly decentralized systems, they have instead built elaborate facades designed to generate profit, often at the expense of unsuspecting participants.
Rigorous scrutiny is essential to prevent exploitation and preserve the integrity of these burgeoning systems. Through this lens, we will explore the ever-evolving world of blockchain-based digital identities, and shed light on what we believe to be the true embodiment of self-sovereign identity.
A Deeper Look into Blockchain and Tokenization
Web3 is a term that was coined (pun intended) in order to encapsulate a new way of building on the internet. It was supposed to define a decentralized, transparent, permission-less way of doing things. Unfortunately, many bad practices were picked up along the way of building this “new internet”, and the full potential of these ideas were never realized. One of the main hindrances to fulfilling the vision was tokenization.
Many blockchain-based platforms use tokenization to kickstart their ecosystems. In summary, large volumes of tokens are issued to a broad spectrum of stakeholders at the project’s inception, meanwhile, regular users or potential investors are typically left waiting until a later stage - often a public sale or exchange listing - before they have the opportunity to acquire these tokens.
While certain Web3 projects have devised more equitable methods of token distribution, the necessity of having a token itself can serve as a double-edged sword for some companies. This is because their strategic decision-making is invariably influenced by the constant concern for the token price.
Either way, these tokens primarily serve as mechanisms for price manipulation and personal enrichment for the founders, undeniably casting a shadow over the credibility of these platforms. One such platform that has come under scrutiny is “Cheqd.”
Cheqd claims to be a public permission-less network built with Self-Sovereign Identity and blockchain technologies. However, it appears that Cheqd is leveraging tokenization not just to artificially stimulate their ecosystem, but also to control and create a narrative surrounding their operations.
Here is a breakdown of their token issuance:
Many people invested with Cheqd suggest that tokens were strategically offered to influencers who might otherwise potentially critique the Cheqd platform. Cheqd has also been accused of announcing artificial partnerships with companies simply based on whether or not that company had been airdropped some of their tokens. In other words, they’ve stretched the definition of the word “partnership” and are using it in a very misleading way.
Such maneuvers have generated concern and prompted further inquiries into the authenticity of Cheqd’s operations and the legitimacy of their platform. Fortunately, many users are aware of these insincere tactics. Enough so, that the SEC has stepped in to investigate many of these Web3 companies.
Regulatory Concerns and Unveiling Frauds
A notorious instance of deceptive practices within the web3 domain is epitomized by the saga of a crypto currency exchange called SushiSwap. Emerging in 2020, SushiSwap claimed to be a completely decentralized crypto exchange touted as a revolutionary, user-friendly platform for cryptocurrency trading.
The saga took a dramatic turn when the founder of SushiSwap, Chef Nomi, was implicated in insider trading allegations. He had reportedly sold a large quantity of SUSHI tokens right after the platform’s launch. Like many other web3 projects, the SUSHI tokens were accessible to Chef Nomi before being released to the public, thus giving him an unfair advantage over other investors.
These actions didn’t go unnoticed, leading to the SEC accusing Chef Nomi of violating the anti-fraud provisions of the federal securities laws. Additionally, the SEC alleged that he had made false and misleading statements about SushiSwap in an attempt to induce investors to purchase SUSHI tokens.
The consequences of these accusations were far-reaching. Chef Nomi chose to step down from his leadership role in SushiSwap following the SEC’s investigation announcement. In an effort to rectify his actions, he returned the SUSHI tokens he had previously sold. However, the damage was done and the reputation of SushiSwap was tarnished. The value of SUSHI tokens plummeted.
Here he is apologizing for his actions on Twitter:
Unfortunately, this seems to be the fate for most companies that were born out of Web3 ideals, including Cheqd. There are those who learned from the flaws of Web3 and have developed a new vision for the internet, one that prioritizes user control, privacy and security - this is Web5.
WebTrust and Web5: A Different Path Forward
Web5, a concept proposed by Jack Dorsey, the former CEO of Twitter, aims to build a decentralized, user-centric internet founded on the Bitcoin blockchain. This innovative approach incorporates self-owned decentralized identifiers (DIDs) and verifiable credentials (VCs) that restore data control to users.
Web5 apps are developed on decentralized web nodes (DWNs), self-hosted servers that retain user data and operate web applications. Unbounded by any central authority, these DWNs can be individually or organizationally operated, ensuring a higher degree of user data control and privacy.
Here is a chart from TBD’s website:
In the midst of all these cautionary tales, it’s clear that there’s a critical need for genuine, trustworthy builders of this “new internet.” WebTrust is proud to be a company that’s truly embracing the core ideals of Web5. Our mission is to build a safer, more secure digital world, powered by decentralized identity and self-sovereign identity standards.
Unlike Web3 companies that distort the promise of decentralization for personal gain, Webtrust is grounded in the principles of transparency, fair play, and true decentralization. Our focus is not on short-term profit but on delivering a platform that empowers individuals to claim and manage their digital identities in a secure, user-friendly environment. Importantly, unlike some Web3 projects, our model does not involve or require any form of tokenization.
We believe in the transformative potential of blockchain and self-sovereign identity. But we also know that this potential can only be fully realized when we prioritize user trust and the fair, ethical treatment of all participants. WebTrust is committed to doing exactly that.