Coinbase Acquires Distributed Systems Inc., Plans to Pursue Decentralised Identification

Coinbase, the most well-known cryptocurrency exchange and wallet service, has acquired San Francisco-based startup Distributed Systems Inc. The company specialises in decentralised identity solutions, which will allow Coinbase to work towards developing new, more secure ways of verifying users’ identities online.

In a blog post published on 15 August, Coinbase project manager B Byrne said that Distributed Systems will enable Coinbase to introduce new ways to verify and validate identity:

“Blockchain technology that powers cryptocurrencies offers a new way to let us all be ‘verified’ everywhere we go on the internet, feeling safer about our interactions with others and opening the door to the experiences that require trust,” the blog post read.

Decentralised identity to give users control over their private information

Byrne further described having a type of identity verification where users would be able to retain control over the information they provide, stating that it will be possible to “prove that [they] own an identity […] without making a copy of that identity.”

Byrne cited an example of a Social Security Number, saying that any time a user is asked to provide their SSN in order to prove their identity, they have to give a copy of it, which has the same power as the original (as it’s a number). So in an event of a data breach, the SSN copies can be exposed to other parties, putting the identity of users at risk. A decentralised identity solution would enable a user to prove they have a SSN without requiring them to reveal it.

However, Byrne was quick to state that Coinbase needs to deliberate about where and how the technology will be applied, considering privacy, anonymity and other sensitive data concerns.

This is not the first time Coinbase has acquired companies to expand its services. The exchange also acquired Keystone Capital Corp. in June, Digital Wealth LLC, and Venovate Marketplace, Inc. in order to help it become a fully regulated broker with the U.S. Securities and Exchange Commission.

What this means for the cryptocurrency community

The powers of blockchain technology offer new ways to verify users on exchanges and brokerages – and online more generally – allowing the participant to feel safer about their interactions with the platforms. It also opens doors to experiences that need trust.

Developments in decentralised identity verification will give users more confidence to Coinbase users that their information is secure and their privacy is protected as much as possible. Although Coinbase is still looking on how best to apply this technology and where it’s best suited, one thing is certain – decentralised identity will transform their relationship with users.


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James is a cryptocurrency enthusiast, an advocate for the development and exposure of blockchain technology, and believes in the use of digital assets for the good of the society. He has been writing about crypto since he first learnt about cryptocurrencies in 2010. Initially, he was attracted by the disruptive economic and social implications of virtual currencies and blockchain technology, and over the years he has dedicated himself to learn everything he can about the industry.

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