Bringing Ecosystems Collectively: How W3C DIDs and VCs may help with Ethereum’s Three Transitions

12 September 2024

Ethereum Open Group Initiatives L2 Requirements Working Group

Vitalik Buterin recognized three essential transitions for Ethereum: scaling via L2 rollups to scale back prices, enhancing pockets safety by way of sensible contract wallets for higher safety and consumer expertise, and advancing privateness via privacy-preserving mechanisms. This text explores how integrating W3C Decentralized Identifiers (DIDs) and Verifiable Credentials (VCs) can tackle a few of these challenges by enhancing the administration of identities, keys, and addresses, leveraging present decentralized identification options to help Ethereum’s transitions effectively to maneuver to a extra L2-based world.

As Vitalik Buterin identified in a sequence of 2023 articles, notably his Three Transitions article,  Ethereum is transitioning from a younger experimental know-how right into a mature tech stack that would convey an open, world, and permissionless expertise to common customers. Nevertheless, he believes that there are three main technical transitions that the stack must endure, roughly concurrently:

• L2 Scaling Transition: This entails transferring the ecosystem to rollups to handle the excessive transaction prices on Ethereum, which have reached $3.75 and even $82.48 throughout a bull run
• Pockets Safety Transition: The shift to sensible contract wallets (account abstraction) is critical for enhanced consumer consolation and safety in storing funds and non-financial belongings, transferring away from centralized exchanges and single non-custodial wallets.
• Privateness Transition: Guaranteeing privacy-preserving funds transfers and growing different privacy-preserving mechanisms similar to social restoration and identification programs is crucial to stop customers from resorting to centralized options that supply just some or nearly no privateness.

Vitalik emphasizes that these transitions are essential and difficult as a result of intense coordination required to implement them. Specifically, he mentioned the implications of those transitions on the connection between customers and addresses, fee programs, and key administration processes. The connection between customers and their addresses, and key rotation/restoration are a significant concern each technically and from a usability perspective – UX determines success or failure regardless of how good the underlying know-how is.

On this article, we’ll delve into these latter points and talk about how options from one other ecosystem, specifically the one centered on decentralized identification, additionally sometimes called self-sovereign identification, can considerably support with the transitions with out having to reinvent too many wheels.

The issue assertion within the context of Ethereum’s technical transitions may be summarized as follows in accordance with Vitalik:

• Complicated Funds: The transitions make easy actions like paying somebody extra advanced, requiring extra data than simply an tackle as a result of the consumer wants to find out which funds to make use of, the place to ship it to, and particular fee directions typically involving identification data.
• Good Contract Wallets: Good Contract wallets add technical points that should be addressed, similar to guaranteeing wallets monitor ETH despatched by sensible contract code together with monitoring throughout networks.
• Privateness Challenges: Privateness-preserving transactions, if applied, introduce new challenges, similar to needing a “spending public key” and encrypted data for the recipient to seek out the fee and the way to choose it up.
• Identification Modifications: The idea of an “tackle” will change, doubtlessly requiring a mix of a number of addresses, encryption keys, and different knowledge to work together with a consumer.

These factors, due to this fact, elevate the query of how we handle identification, addresses, and their keys collectively, and in a approach that doesn’t confuse the consumer, and compromise the safety of their belongings.

Given the above drawback assertion, the idea of an “tackle” within the Ethereum ecosystem, is evolving, with the standard concept of an tackle as a single cryptographic identifier turning into out of date. As a substitute, “directions for the way to work together with me” will contain a mix of addresses on a number of Layer 2 (L2) platforms, stealth meta-addresses, encryption keys, and different knowledge. In his article, Vitalik factors out that one potential method could be utilizing the Ethereum Title Service (ENS) data to include all identification data. Sending somebody an ENS title like “alice.eth” would enable them to entry all the mandatory particulars for interplay, together with fee and privacy-preserving strategies. Nevertheless, this methodology has drawbacks, similar to tying an excessive amount of to at least one’s title and the lack to have trustless counterfactual names, that are important for sending tokens to new customers and not using a prior blockchain interplay. As well as, the ENS system is a rent-seeking system. Subsequently, extra broadly, it isn’t equitable and doesn’t assure continued possession of 1’s identification; that’s not a tenable state of affairs. Another answer entails keystore contracts that maintain all identification data. These contracts may be counterfactual-friendly and should not tied to a selected title, permitting for extra flexibility and privateness.

This brings us to the subject of keys controlling “addresses”. Particularly, key rotation and key restoration in a multi-address Ethereum Ecosystem. Key rotation is simply turning into an necessary characteristic with sensible contract wallets and account abstraction the place the controlling tackle of a wise contract pockets may change as a result of a secret is rotated or recovered which necessitates a brand new controlling tackle. Regardless of key rotation or key restoration, the standard methodology could be to run onchain-procedures on every tackle individually. That is impractical because of gasoline prices, counterfactual addresses, and privateness issues. As talked about earlier than, Vitalik proposes the utilization of keystore contracts that exist in a single location and level to verification logic at completely different addresses. This could enable the creation of a proof of the present spending key for transactions. This requires a restoration structure that separates verification logic and asset holdings, simplifying the restoration course of by requiring solely a cross-network proof for restoration.

On this context, Decentralized Identifiers can leverage keystore contracts to empower a modular verification logic for contract accounts that verifies zk proofs via a selected validation module and embeds a system to standardize onchain executions.

Including privateness measures, similar to encrypted pointers and zk proofs, will increase complexity. Nevertheless, it affords potential synergies with keystore contracts for persistent addresses for the reason that persistent tackle could possibly be “cloaked” in a zk proof.

What does this all imply for sensible contract wallets? Historically, wallets have been designed to safe belongings by defending the personal key related to on-chain belongings. If the important thing was to be modified, the previous one could possibly be safely disclosed with none danger. Nevertheless, in a zero-knowledge world wallets want to guard knowledge moreover belongings. The instance of Zupass, a ZK-SNARK-based identification system, illustrates that customers can maintain knowledge domestically and solely reveal it when crucial. Nevertheless, shedding the info’s encryption key means shedding entry to all encrypted knowledge. Subsequently, the administration of encryption keys can also be turning into more and more necessary. Vitalik means that a number of gadgets or secret sharing amongst (key) “guardians” could possibly be used to mitigate the chance of shedding encryption keys. Nevertheless, this method shouldn’t be appropriate for asset restoration as a result of potential danger of collusion amongst “guardians”. Lastly, the idea of an tackle as a consumer’s on-chain identifier must change, and, due to this fact, wallets should handle each asset restoration and encryption key restoration to keep away from overwhelming customers with advanced restoration processes aka poor UX. For instance, Signal In With Ethereum depends on the onchain tackle and the consumer’s personal key controlling that key to generate the authentication message. Nevertheless, there isn’t any notion of a one-to-many relationship on this method, and no notion of a wise contract pockets as the first delegate of the consumer. The verifying celebration, additionally referred to as the relying celebration, due to this fact, can’t assess the scope of the authorization(s) required for the consumer when logging wherein is essential relying on the performance the verifying celebration makes out there to the consumer tackle.

The Three Transitions are extra than simply technical enhancements; they characterize radical shifts in how customers interact with Ethereum-based stacks, particularly within the areas of identification, key administration, and addresses, thereby, evolving the Ethereum ecosystem from its present state right into a extra user-friendly and accessible platform that prioritizes scalability, safety, and usefulness. Subsequently, one would naturally ask the next query: Are there instruments and frameworks already out there that could possibly be utilized by the neighborhood, particularly concerning identification, key administration, and privateness to ease the transitions? The reply to that may be a particular sure. Specifically, the ecosystem that has advanced across the idea of decentralized identification and its requirements, frameworks, and quite a few reference implementations has produced tooling that’s readily usable throughout the Ethereum stack.

What’s the Decentralized Identification Ecosystem?

The decentralized identification ecosystem is targeted on giving people management over their digital identities with out counting on centralized authorities. It leverages blockchain know-how and cryptographic ideas to make sure privateness, safety, and user-centric identification administration. On the core of this ecosystem are two key ideas: Decentralized Identifiers (DIDs) and Verifiable Credentials (VCs).

Decentralized Identifiers (DIDs):

DIDs are a brand new sort of identifier that allows verifiable, self-sovereign digital identities. They’re distinctive, globally resolvable identifiers related to a topic, similar to a person, group, or system. DIDs are decentralized by design, that means they don’t depend on a central registry or authority for his or her creation or administration. As a substitute, they’re created and managed by the customers or entities performing on their behalf. DIDs usually make the most of public-key cryptography to make sure safe interactions and permit the topic to show possession and management of their identification and carry out particular approved actions similar to assertions, authentication, authorization, and encryption.

Verifiable Credentials (VCs):

Verifiable Credentials are digital credentials that include claims a few topic’s identification, attributes, or {qualifications}, issued by trusted entities often known as issuers. VCs are tamper-evident and cryptographically signed to make sure their integrity and authenticity. Importantly, VCs are transportable and may be offered by the topic to verifiers, similar to service suppliers or relying events, with out the necessity for these verifiers to contact the issuer instantly. This allows seamless and privacy-preserving identification verification throughout completely different domains and contexts.

A number of key gamers and organizations are contributing to the event and adoption of decentralized identification applied sciences:

• Decentralized Identification Basis (DIF): DIF is a consortium of organizations collaborating to develop requirements and protocols for decentralized identification programs. It promotes interoperability and innovation within the area.
• World Huge Internet Consortium (W3C): W3C hosts the Credentials Group Group, which incubates work on verifiable credentials and associated applied sciences, and the Decentralized Identifier and Verifiable Credentials Working Teams, that are growing updates to the respective specs
• Hyperledger Indy: Hyperledger Indy is an open-source venture beneath the Linux Basis. It’s centered on offering instruments and libraries for constructing decentralized identification programs.
• Sovrin Basis: Sovrin Basis operates the Sovrin Community, a public permissioned blockchain designed for decentralized identification administration.
• Microsoft, IBM, and different tech corporations: A number of main tech corporations are actively concerned in growing decentralized identification options, contributing to requirements growth, and constructing reference implementations.

Requirements play a vital function in guaranteeing interoperability and compatibility throughout the decentralized identification ecosystem. Some key requirements and reference implementations embrace:

• Decentralized Identifier (DID) Specification: Defines the syntax and semantics of DIDs, together with strategies for his or her creation, decision, and administration.
• Verifiable Credentials Knowledge Mannequin: Specifies the construction and format of verifiable credentials, together with JSON-LD contexts for representing claims.
• DIDComm Messaging Protocol: Allows safe, personal communication between DIDs utilizing end-to-end encryption and cryptographic authentication.
• SSI (Self-Sovereign Identification) Protocols: Numerous protocols and frameworks, similar to DID Auth, Presentation Change, and VC API, facilitate safe interactions and transactions throughout the self-sovereign identification paradigm.
• Hyperledger Aries: A framework that gives a set of interoperable parts for constructing decentralized identification options, together with brokers, wallets, and protocols.
• Privado ID former Polygon ID: A set of instruments constructed for builders to create safe and trusted relationships between customers and functions within the Web3.  It focuses on decentralized identification, giving customers management over their knowledge. The toolkit relies on the open-sourced iden3 protocol.
• QuarkID: An open-source DID answer at the moment deployed on ZKsync Period with digital credentials being issued by the Metropolis of Buenos Aires.

Beneath, we element how a decentralized identification framework may be efficiently utilized to the cross-network challenges for identification, tackle, and key administration beforehand mentioned.

Utilizing Decentralized Identifiers (DIDs)

Drawback: Managing identification for a consumer throughout varied Ethereum networks is advanced.

DID Answer for Identities:

• DIDs present globally distinctive identifiers which can be resolvable (to their DID Doc) and cryptographically verifiable throughout any blockchain community.
• Every DID is related to a DID Doc which incorporates details about the connection of a DID with a set of cryptographic keys, the capabilities these keys can carry out similar to verification, authentication, authorization, assertion, and encryption, in addition to service endpoints similar to API endpoints to addresses managed by the keys listed within the DID Doc.
• The connection of DID to their DID Paperwork or respective cryptographic representations may be saved on any blockchain community, guaranteeing tamper-proof and chronic identification data.

DID Paperwork for Deal with Administration:

Drawback: Customers have completely different addresses on the Ethereum mainnet, testnets, and Layer 2 options, together with counterfactual addresses.

DID Doc answer:

• A DID doc has a verificationMethod knowledge property permitting a DID proprietor or controller to specify symmetric and uneven cryptographic keys for any desired curve similar to secp256k1 utilized by Ethereum stacks.
• The verificationMethod for a key additionally permits the consumer to specify an ID for the verification methodology. That is usually the DID plus a fraction as per the DID specification. This fragment permits two essential issues. First, it means that you can specify a community identifier, for instance, “1” if the secret’s an Ethereum key, and different numbers if that key shouldn’t be on an Ethereum community. As well as, the fragment may be prolonged to point if the important thing belongs to a counterfactual tackle or a wise contract pockets. For instance, “did:ion:1234xxxxddd4444-#1-counter” would point out that the general public key recognized belongs to a counterfactual Ethereum tackle. As well as, if required for sure causes to individually determine an tackle on Polygon PoS vs Arbitrum One the “1” could possibly be changed by the chainId of the goal community, e.g. 137 for Polygon PoS.
• Lastly, a wise contract pockets may be given its personal DID and managed by the DIDs of the sensible contract pockets house owners the place every proprietor identifies a number of controlling keys for the pockets as specified of their DID doc. This final level permits for 2 main enhancements for sensible contract wallets – key rotation aka key restoration, and an arbitrary variety of controlling keys with out revealing these controlling keys

DID Paperwork for Key Administration together with Social Restoration:

DID Answer for Identities:

Drawback: Key restoration and key rotation for Ethereum addresses, notably sensible contract wallets, are advanced and should not user-friendly.

DID Doc answer:

• When a public key related to a DID should be rotated for safety or restoration functions, a consumer can merely replace a DID Doc and substitute the previous public key with a brand new public key within the verificationMethod utilizing one other controlling key. This is usually a key the consumer instantly controls, or if management has been delegated, by one other consumer controlling a DID listed as controller.
• Subsequently, this can be achieved for a Good Contract pockets. Every controller can independently replace the important thing within the verificationMethod related to their DID. That is sufficient as a result of the consumer can produce a cryptographic dedication that the replace was completed accurately that may be submitted to and verified by the sensible contract pockets.    

Privateness (Zero-Information) Side of DIDs and DID Paperwork

• DID Paperwork may be represented as zero-knowledge proofs by first merkelizing their JSON-LD doc, after which verifying Merkle Proofs of relationships of DID-to-key and DID-to-functional-capability (as represented via a number of cryptographic keys).
• Utilizing zk-SNARKs, specifically, allows environment friendly verification of cryptographic key claims on Ethereum networks.
• For instance, the zero-knowledge circuit for a legitimate key rotation replace of a DID doc would do two issues: a) confirm that the updating secret is within the DID doc and is a controlling key by verifying a Merkle proof of inclusion within the DID doc and b) confirm the digital signature of the controlling key over the foundation hash of the previous DID doc. The general public inputs to the proof could be the Merkle Root of the brand new merkelized DID Doc and the foundation hash of the previous DID doc, and the personal inputs could be the Merkle proof and the digital signature. The sensible contract would solely should confirm the proof, test that the previous root hash was registered, after which replace the previous with the brand new root hash.
• This has the benefit that no data is leaked about which addresses management the sensible contract pockets. Each sensible contract pockets transaction could possibly be absolutely nameless if all transactions submitted to the sensible contract have a recursive zero-knowledge proof that verifies {that a}) the general public key belonging to the tackle submitting the transaction is a controlling key of the DID that may be a sensible contract proprietor and b) {that a} zero-knowledge proof that the transaction was signed by the right quorum of signatures of the sensible contract pockets house owners was correctly verified by a verifier within the circuit itself. 

Utilizing Verifiable Credentials (VCs)

Drawback: The entity performing a key operation similar to a key rotation or a digital signature for a monetary transaction should show that it’s a authorized entity that meets all relevant compliance guidelines for a jurisdiction that has compliance oversight.

VC Answer for Compliant Key Operations:

• W3C VCs enable assertions to be made in regards to the topic of the credential similar to “Alice is a authorized enterprise in Brazil”, or, “This enterprise is a authorized entity within the US and a registered Dealer-Vendor”, or, “The authorized US entity A is a legally registered Dealer-Vendor and is legally approved to behave on behalf of the authorized US entity B”. 
• Given the standardized construction and public context reference information that specify the VC normal and particular VC varieties, every VC may be readily became a zk proof given a standardized, and publicly out there zk circuit. Revealing solely the authorized identification of the VC issuer as the foundation of belief, similar to a KYC supplier.
• Such zk proofs, specifically, ZK-SNARKs may be submitted with any transaction and verified in a wise contract similar to a wise contract pockets or a DeFi protocol.
• This permits for compliant transactions on Ethereum stacks with out revealing any delicate identification or different related compliance knowledge.

Helpful Implementations for Ethereum Networks

There are dozens of various implementations of the W3C DID specification. Whereas many DID strategies should not as scalable as crucial, or not simply anchored on a blockchain, a number of DID strategies match the invoice for the Ethereum ecosystem – permissionless, blockchain-anchored, scalable, and low cost. All of those DID strategies are primarily based on the Sidetree Protocol.  The Sidetree Protocol is a “Layer 2” DID protocol that may be applied on high of any occasion anchoring system, together with Ethereum, and is compliant with W3C tips. The Sidetree protocol doesn’t require centralized authorities, distinctive protocol tokens, reliable intermediaries, or secondary consensus mechanisms. Particularly, the Sidetree protocol defines a core set of DID PKI state change operations, structured as delta-based Battle-Free Replicated Knowledge Sorts (i.e. Create, Replace, Get well, or Deactivate), that mutate a Decentralized Identifier’s DID Doc state.

Subsequently, by leveraging an Ethereum-based implementation of Sidetree, the Ethereum ecosystem can be certain that every consumer has a self-sovereign identification, that’s each personal and interoperable throughout completely different L2s and functions.

We imagine that the combination of W3C DIDs and VCs into Ethereum’s infrastructure is essential for navigating the upcoming transitions. They supply the mandatory instruments for managing identities, keys, and tackle safety, and privateness, and are aligned with the decentralized nature of blockchain know-how.

Sadly, the Ethereum ecosystem and the decentralized identification (DID) ecosystem haven’t intersected a lot, although each share a deal with decentralization. The Ethereum ecosystem has primarily focused on advancing and scaling its blockchain know-how, whereas the DID ecosystem has prioritized growing requirements and protocols for governing digital identities. Consequently, alternatives for collaboration between these two ecosystems have been restricted.

We see the Three Transitions as a possibility to alter this and begin a better collaboration between the Decentralized Identification and Ethereum ecosystems.

Acknowledgments

Particular thanks go to Eugenio Reggianini ([email protected]) for proofreading the manuscript and including necessary content material.