Coinbase to Pursue Decentralized Form of Identification Following Acquisition
Cryptocurrency exchange and wallet service Coinbase has acquired San Francisco-based startup Distributed Systems Inc., which works on decentralized identity solutions, according to an August 15 announcement.
In the blog post, B Byrne, project manager for Identity at Coinbase, said Distributed Systems will help the exchange work on new ways to validate and verify identity within its plans to develop an open financial system. The blog post says:
“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.”
In the blog post, Byrne describes a type of identity wherein users retain control over their private information, without having to give a copy away. Citing the example of a Social Security Number, Byrne says that every time one is asked to provide it, the recipient now has a version of that information, which “has exactly the same power as the original.”
With the new acquisition, Byrne says Coinbase will work toward a decentralized identity that will “let you prove that you own an identity, or that you have a relationship with the Social Security Administration, without making a copy of that identity.”
Byrne further stated that Coinbase needs to be “deliberate about how and where we apply this technology,” considering anonymity, privacy, and other sensitive data issues.
According to TechCrunch, Distributed Systems was incorporated in 2015 with a focus on developing an identity standard for dApps called the Clear Protocol. Last year, the startup reportedly raised a $1.7 million seed round led by venture capital fund Floodgate.
The company was considering raising a $4 million to $8 million round this summer, but the team began negotiations about investment with Coinbase, which resulted in the acquisition.
Coinbase has previously acquired companies in order to expand its services. In June, the exchange acquired securities dealer Keystone Capital Corp. in addition to Venovate Marketplace, Inc., and Digital Wealth LLC in order to become a fully regulated broker dealer with the U.S. Securities and Exchange Commission. The acquisition could help Coinbase extend its offerings and subsequently expand into non-crypto financial products.