Web 3 101

Verifying Identity in Decentralized Ecosystems with Sergey Nazarov from Chainlink

Aug 06, 2021

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MATTHEW GOULD:  Hi, everyone.  I’m Matthew Gould from Unstoppable Domains.  And today I’m joined by Sergey, cofounder of Chainlink, who we are collaborating with on our new Twitter verification smart contract announcement.  So Sergey, thanks for joining us.

SERGEY NAZAROV:  Great to be here.  Thank you for having me, Matthew.

MATTHEW GOULD:  It’s a pleasure.  For all the listeners of Unstoppable who may not know who you are or about Chainlink, can you give us just a quick overview of what Chainlink is?

SERGEY NAZAROV:  Sure.  Chainlink uses decentralized computation to create definitive truth.  So blockchains create definitive proof about transactions and contract states, and they memorialized that definitive proof in a blockchain kind of data structure.  What Chainlink does is it verifies things about the real world, like price data, weather data, in this case verification of social media data. 

And it puts that definitive proof into smart contracts, like the ones that you’ve built.  And that enables proof that somebody is somebody, or that a weather event happened, or that a price changed somewhere.  And by providing this very high level of proof about the real world, we can now expand what blockchains and smart contracts are able to be written about, which is part of what we’re doing here, which is very exciting.

MATTHEW GOULD:  We actually had a lot of fun implementing the Twitter verification with Chainlink.  And for those who don’t know, as of today you can now ling a Twitter handle back to your Unstoppable blockchain domain name, using the Chainlink network.  And at a high level, what we’re doing is allowing a user to verify their profile on a social network back to a blockchain domain, using the Chainlink network as the validation, so that users can trust that that information submitted is accurate.

And so this is one of those non-financial use cases that you just mentioned, like weather data or randomness, and we really think this just extends the set of things that people can do with blockchains and real-world data, connecting the two together.  So just as a follow on to that, you mentioned a few other use cases that you’d seen there.  But this is actually like a lead-in to decentralized ID. 

So how is decentralized ID good?  How is this going to help people?

SERGEY NAZAROV:  I think improvements in decentralized ID systems are going to result in a number of important things for how blockchains are used and what they have access to.  One of the most immediate ones I think will be AML and KYC, and the ability for people from the traditional and institutional world to prove who they are within blockchain ecosystems. 

And that will allow them to interact with the blockchain decentralized financial products, insurance products, games, all the things that are being made within the blockchain that might require a person’s ID in order to meet certain regulatory demands.  And what the exciting thing there is, is that there’s a very large universe of kind of use cases that want to be connected into front ends that can prove who somebody is and the ability to prove that is actually very, very powerful. 

The other thing that I think is exciting is that once you can prove who somebody is, you can start incentivizing them in certain ways.  So I think there’s some interesting ideas around loyalty programs and any number of other things where like we know exactly who you are and we know from your phone’s GPS that you were at a Starbuck’s, and maybe you get some kind of Starbuck’s token, loyalty token or something. 

And so I think there’s actually two dynamics.  One dynamic is people using blockchain products more.  And the second dynamic is the incentives of blockchains being able to flow to direct behavior of people offline.  And that offline direction of their behavior is actually something blockchains and tokens, and this ecosystem is historically very good at, and something that I think people will actually want to see.

MATTHEW GOULD: Yes, well I feel like we’re just taking baby steps.  We’re at the very beginning of this thing.  And for us, at Unstoppable Domains, you can immediately see the huge improvement in UX, just typing a crypto address and then being able to validate a person’s Twitter ID.  And as we’re looking forward into next year, adding more and more social networks, it also assists with search for maybe finding other people in your network that you may need to send to. 

So I think it’s very powerful, even just now.  And then what you’re talking about later, once you have a lot more data connected back to these online identifiers, you can layer incentive models on top of that, and then connect into people’s social networks to get more insight on what may be helpful for that person.

So that brings me to our next one.  How do you see Chainlink enable security for commerce on the internet, on this new version of the internet?

SERGEY NAZAROV:  The way that I see it is that a lot of the internet right now is based on centralized entities that have a lot of control.  And the relationship that a user has with the value in that system is based on a brand.  So it’s based on an entity, and its logo basically saying I will act correctly towards you, the user. 

And I think a lot of those assumptions are going to start breaking down more and more, over time, and in certain categories start breaking down quite rapidly.  So some of that stuff you see with social media.  Some of that stuff you see with the solvency of financial products.  And some of that stuff you see with interfaces that allow people to interact with financial products. 

But everywhere that people are basically relying on a brand to act correctly towards their interest as a user, you will see more and more divergence between the monopoly rent-seeking brand and the user’s interests.  What I feel that blockchains and smart contracts generally do is they can realign those interests very closely by building a system that’s provably fair to users.  And that’s something that users are going to be demanding more and more of. 

The way that Chainlink fits into that is it enables those systems to be built around more useful things.  So basically, it enables people to build those systems around things like crop insurance, where we provide weather data.  And now people that could have never had crop insurance have crop insurance through a blockchain because their local system can’t enable crop insurance, but a blockchain smart contract can enable crop insurance.  And the smart contract needs to know weather data.  It needs definitive truth.  It needs proof about weather events.

And once that definitive truth and proof is delivered, at that point you have new categories of contracts opening up.  It’s similar with decentralized identity.  Once you have enough data that’s appended to a decentralized identity to prove its accuracy, it passes a certain threshold of usefulness.  And people can suddenly start giving out universal basic income, or providing incentives, or allowing the person to interact with certain financial products on chain under very favorable terms because they know that is a unique, distinct person. 

So I think what’s going to happen is the dynamics that users want to have with applications are much more aligned when that application is built using smart contracts and blockchains.  And I think decentralized identity and oracles are both going to drive the usefulness of those applications and eventually, actually going to be adopted by bigger web2 companies to reimagine their own applications for their existing userbase.  And that’s how I think a lot of this will evolve.

MATTHEW GOULD:  Yeah.  I like how you phrase that, talking about the brand value.  And I think that what this does, being able to pin this back to your domain name or identifier on chain is it makes the brand value more portable.  So I can see the Twitter network on another social platform.  Like when I’m on Reddit, I can actually see the person’s Twitter ID.  Or in our case, inside of a crypto wallet, I can see their Twitter handle, to feel better about the payment.  And you can see this extending to other crypto applications.

And then the other note you had at the end there about web2 companies doing this, it sounds radical.  But I actually don’t think it is.  In the future, you could have social networks, like Twitter and Reddit participating in these Oracle networks directly, so that they can allow their users to have validated data about themselves on chain, which then makes it more valuable for them all over the internet, as they’re interacting with different things. 

So I think we’re just at the beginning of this, and I like working on it.  I like working with people like yourself, who have been working on this thing for half a decade.  And I feel like we’ve got at least another decade or two on this, so I’m excited to see where this is going.

Where do you think we’re going over the next 10 years?  How do you think crypto will become more adopted by traditional internet users in the next 10 years, and how is Chainlink going to help us get those people on?

SERGEY NAZAROV:  I think there’s a slow case and there’s a fast case.  The slow case is our crypto community, the blockchain community is so large now and there’s so much value in private keys within the blockchain community that you see people launching startups and becoming highly successful, securing hundreds of millions, sometimes billions of dollars in value, in the span of a year or two.

So now our own ecosystem has grown to the size where people in our ecosystem can become highly successful, make sustainable, well financed companies that make better and better product offerings, whether those are financial products, insurance, various decentralized identity schemes, various incentives for people to do things offline.

And I think there’s a slow case, where our community slowly continues to grow and reaches a certain tipping point in a slower pattern.  I think there is a fast case, where when centralized entities abuse their brand, and abuse the control that they have over certain types of data, certain types of networks of people, or certain promises about solvency to their users, that once those promises become abused, people—or don’t become abused, once the solvency of some entity goes into question because the market fails in a certain way, you basically, I think will see a very fast adoption of blockchain-based systems and smart contract guarantees within certain verticals. 

And I think that just depends on how quickly either the global financial system has a failure, or people want to imagine how social media networks work, or people want to reimagine how ownership works because there is some kind of centralized abuse there that isn’t apparent when everything is going well, but becomes hyper-apparent and people become hypersensitive to it when something does go wrong.

And the difference is that over the past 10 years, blockchains haven’t been fully baked in a way that you could solve that problem as a Web2 company or as a government, or as whoever.  But now, because they are becoming baked enough, and they have become well made enough to solve those problems, I think that if a category of insurance becomes insolvent because of the global financial system, people will just start looking towards smart contract based insurance more because it gives them the guarantees they couldn’t get in a brand-based, I promise it will be okay system. 

They’ll get math-based guarantees from smart contracts.  Likewise, for all of these other systems.  So I think you have a slow case, where people adopt based on the value we create in our ecosystem, and a fast case.  And in all of those scenarios, both Oracles and decentralized identity systems fit in very prominently because oracles provide data about what’s going on and decentralized identity systems allow people to participate in a lot of these systems.

MATTHEW GOULD:  Yeah, and I’m a big believer in the fast case.  I do think abuse is going to be one of the drivers.  But I will also point out maybe a more optimistic view of the fast case, too, which is there are actually some good Web2 companies who are interested in coming over to the dark side and using these technologies, and giving more value to the end users.

And then you get this gain theoretic, like if there’s Twitter and then there is Facebook, and one of them moves towards a more decentralized input first, I’m hoping that the competition will help drive it so that we get to that fast.  Fast takes it, and then people will start using even more of this technology.  And I can’t wait.  I’m a very impatient person.  So I’m always a hopeful believer in the fast case.

SERGEY NAZAROV:  Me too.  For me, every year is this year.  You ask me any year, is this the year smart contracts are going to take off?  Since 2014, I’ve been like yeah, of course.  This is the year. 

MATTHEW GOULD:  Yes, you can’t have any other mentality.  Well Sergey, thanks a lot for the time today.  I don’t want to hold us up too much more than this.  For those out there, if you want to learn more about how to verify your Twitter account to your domain name using Chainlink, check out our website.  There is also a media post.  There’s various tutorials out there, so you guys can get that set up.

We are on the cutting edge here for the use cases, and it’s great to see this type of stuff roll out.  And it’s also super fun to play around with.  So Sergey, I guess on the out, if people are looking to learn more about Chainlink, just let us know where they should go, and thanks again.

SERGEY NAZAROV:  Yes, of course.  Thank you for having me.  Chain.link is a good place to go.  And our Twitter, at twitter.com/chainlink has a lot of updates about new releases, new improvements to the system, new use cases, new data that’s on Chainlink for people to build around, a lot of exciting stuff getting built into Chainlink at the moment.

MATTHEW GOULD:  All right.  Thank you so much.

SERGEY NAZAROV:  Great.  Thank you.