Richard Wang : A Look into Digital Identity

2021/11/28 Innoverview Read

Richard Wang, the General Partner of DraperDragon Fund was invited to deliver a speech on the virtual conference organized by NUCB Business school on Nov.18th (JST). 

Here is the full script of his presentation:

It's my pleasure to present here and to share my thinking and some ideas about the digital ID. First of all, I would like to introduce myself, my name is Richard Wang, and I was also an entrepreneur back to almost 10 years ago. In 2011, I started to work for Draper Dragon, which is a typical and traditional venture capital firm with the headquarter in Silicon Valley, Bay Area. Since then, I have spent my last 11 years into the venture capital business. We are a typical USD fund, and we also have offices in China, and we have our RMB fund as well. 

We actually focus on three different areas, which are TMT, healthcare since 2006, and blockchain since 2014, respectively. Our footprint is quite broad, as for the TMT field, we have invested in quit a lot biotech companies, semiconductor companies and technology companies. In the healthcare field, we do have a lot of medical devices companies as well as some companies specialized in developing therapy methods for some specific diseases. It has been 7 years since we’ve invested in the blockchain area, including the crypto and digital assets. Talking more about the blockchain, we own over 60 portfolios today, including Coinbase, which is the largest regulated exchange in the world. And also, Ledger, which is the number one cold wallet company worldwide. We also invested in Telegram in 2018 before, I believe some of you may know about Telegram, which was a very popular decentralized and encrypted messenger platform. But unfortunately, because of some regulations of the US SEC (Securities and Exchange Commission), the investors of Telegram were forced to exit. Anyhow, we do have a lot of experience in the blockchain area. 

Today, we are still interested in Layer 1 and Layer 2. While on top of that, there is something called Layer 0, it is all about protocol-related projects, which serve as the infrastructure for the blockchain. Currently, we are also interested in NFT, DeFi, GamFi, Metaverse concept projects, to name a few. Speak of NFT, we have approximately 8 portfolios so far, including some very good Marketplace companies in the USA. In brief, all those companies and their products are supposed to be supported by Web 3.0.

People talk a lot about the metaverse as well as Web 3.0. I would say that the metaverse is quite likely to be a new and innovative lifestyle for human beings in the near future. For example, in 3 to 5 years you are supposed to see numerous metaverse concept projects, then in 1 to 2 decades, these metaverse concept projects are expected to be more mature and much better. Overall, all those things need to be built based on the infrastructure of Web 3.0.

There are three key factors throughout Web 3.0. The first one is Artificial Intelligence, which we have already witnessed in our daily life through all kinds of applications embedded machines and chips, you may get a glimpse of the beauty of the AI Algorithm. In the future, the tiny algorithm needs to be embedded into the protocol. For example, in blockchain, we talk about smart-contract which is ‘smart’ and is even expected to be more intelligent later on. Therefore, Artificial Intelligence will be one of the very key factors for Web 3.0.

The second factor is edge computing. Nowadays, a lot of information has been stored in the cloud, which represents social and mobile, and is a critical part for Web 2.0. While in web 3.0 we have edge computing instead of the clouding in Web 2.0. So why the edge computing is going to be more and more important? Because in the future, everything is at the edge side, at the terminal side, at the personal side, even at each single device side is going to related with the digital ID, and is going to be more and more important. Therefore, you will require more and more computing and distributed storage as well. Clearly, the edge computing is becoming more and more crucial, and that would be a very basic feature and factor for Web 3.0 too.

The third one, I would say it might be the most important one, the so-called distributed data network. Why distributed data network? In web 3.0, every single data either generated or created by different notes, objects, people or different entities come from distributed network. That's the fundamental elements of Web 3.0.- AI, the edge computing and distributed data on the network.

Then people think about what is the other fundamental factor in Web 3.0 that serve as infrastructure. That is digital ID. When a person was born, he got a name, or saying, ID, even if it’s a very stupid name. ID is very basic in the digital world, all it is about is one thing which we call as ‘certificate’. This certification is bound with something such as data or a human being. Digital ID is certificate, but actually it's not just ID itself, it is data certificate in web 3.0. If you think about people's ID, the ID means somebody, but in digital world, the ID means data certificate. This data is going to show who you are, where you are from, and also where you're going to.

The data is so important, those data generated or created from you is the interaction between you and other people so as well other things. Those data which is going to prove who you are is all about you. So, what is the ID? Again, it is the certificate which presents a best way to prove ‘who you are’ for the reason that it is unique, specific, validated and valuable. The data comes from you without anybody else knows could be nothing but something valuable. But we need to select what kind of data we are going to contribute, keep and merge. Those data, again, is not only part of you, but the basic and fundamental things for the digital ID.

You may hear about people talking about the so-called metadata, which is every single data originally create or generate from you through the interactions with other things and other people. It is quite important because the metadata is about you, to be more specific, your ID. Think about it, nowadays, it is the police who proves who you are. But in the future world, in Web 3.0, in the metaverse world, it should not be the police to prove who you are but the metadata authorized by all the different distributed entities, by all different people and different organizations. A single data may only prove part of who you are. However, if you merge them, they can prove 99% of you, and that is enough. 

Then what is the data we're talking about? Again, it refers to the distributed data from all the interactions between you and other people as well as other things (or nodes). Actually, it is not only in the case that human’s interactions with people and things can generate data. Taking a wide imagination, not just a human beings got IDs but also an object (or machine) is supposed to own an ID. Take the self-driving car as an example. The self-driving car as a machine can also have ID because each car is different. There would be no human being as so-called owners for self-driving cars in the future, however, the car can be his own individual entity. Suppose a car is going to be produced by a car factory with a commitment to repay the loan which provides the capital for the production in 3 years. After the production was completes, the self-driving car is going to easily make its own living by picking up whatever the passenger it wants. Then, the car got the money, the crypto, the token or some kind of digital assets, therefore it can go to the charge station for power. In this way the car is supposed to get some return and pay back the loan to the car factory. That's exactly how a self-driving car exists without a human being as an owner. Each car is different with each other, such as they are able to travel in different ways with different passengers. So each car is unique thus it needs its own ID, in the way of the digital ID (again, it is all about data). Therefore, digital ID is available for both human and machines in the metaverse world base on web3.0 in the future.

Let's go back to the data generated or created by people, in the future digital economic system, these data can be merged and used either in a synthesized way, or be separated and just partially used to fulfill some specific tasks. In that case, you might be able to create not only some new business models, but also new business paradigms, because not every task is going to ask for all your information. Therefore, the ID carried certain assets and value, which includes not only money that in financial way but also data itself, which is the real infrastructure. 

Again, think of the self-driving cars, it can contribute a lot of valuable data about the traffic, even just patrol when driving by itself without any passengers. This self-driving car owns digital ID and it carries assets. Please take this as an example and try to open your mind, you're going to think about a lot more interesting ideas to hook up with the digital ID things. Anyway, ID is so basic, fundamental and critical, numerous different business paradigms can be created through merging or separating the ID data. 

In the case of a metaverse scenario, the importance of the digital ID can be imagined according to what I have just mentioned above. Taking the human being as another example. I'm currently 50 years old, I can create an artificially virtual Richard, or saying, a virtually digital ID, based on all the data collected over my past 50 years, which simulates 99.9% similarity of the real physical Richard. This virtual avatar can work 24/7 or he can work with me in parallel in different scenarios (or different digital world). But think about one more thing, one year later, this virtual ID has a lot more interactions with other things and therefore create large amount of data, however, the interactions did not actually happen to the physically real Richard. Therefore, those metadata created or generated by the avatar is going to affect the real physical Richard. In this case, then the 51-year-old Richard would be represented by the data merged from both the physically real Richard and the virtual Richard.

When referring to the digital data, we can think about many different ideas, which can create a lot of different business paradigms. Just as the example I have mentioned that I can use all the data to simulate 99% of the real Richard. While if you only use 1% of the data, you can create a partial you, that you could name as ‘second life’. Is it alright for ‘the second life’ to ask for a digital ID as well? Of course! Although this digital ID is not going to be 100% the same as the original ID, it doesn't matter, because the digital ID is not the only thing that stands for all. You can have sub accounts under a digital ID, through which you got partial IDs which represent part of the whole ID. Overall, it is the data that actually matters. From this perspective, you can create a lot more interesting things.

You may think the things I'm talking about are still quite far away, they might be something unachievable because of current regulations or conservative business models. However, things change quickly, and you need to believe  people’s capability how to be innovation and creation. I believe you're going to see the things I'm talking about very soon, saying, in 5 to 10 years. Nowadays, there are already a lot of protocols to address the digital ID issue, all the way from crypto wallet to SocialFi, GameFi applications as well as metaverse concept applications, for example you may found an ID in a gaming project. However, the idea is still not powerful, not diversified, and not versatile yet. Nevertheless, using the concept of digital ID you can create a lot more different business models.

Today, there have been a lot of crypto wallets using the digital ID, maybe you’ve heard about the public chains like Algorand, Solana and Dfinity, which all have some sort of digital IDs to carry the assets on the chains. Even Microsoft has the ID protocols to support applications. Also some US companies have defined digital ID protocols to help them manage their subsidiaries and reach those people who are unbanked or not even get a real ID, in case of being in some very poor countries. So the digital ID things have actually been used in some cases nowadays, at the meantime, using metadata to create or issue digital ID together with different business model is becoming more and more practical and crucial. Hopefully in the next 3 to 5 years you are going to see some more applications in this way. 

To summarize, digital ID is the infrastructure for all applications. It's a big topic, and there are a lot more that can be evolution. Please think about it and try to explore more, think about the data itself in the digital world, it would be very fascinating.