[Paper Review] A Plural Decentralized Identity Frontier: Abstraction v. Composability Tradeoffs in Web3

Shrey Jain, Leon Erichsen+1 more|arXiv (Cornell University)|Aug 24, 2022

Blockchain Technology Applications and Security4 citations

TL;DR

This paper examines the tradeoffs between abstraction and composability in Web3 decentralized identity systems, arguing that current standards like DID v1.0 are under-specified, enabling diverse implementations such as blockchain-based certificates (e.g., soulbound tokens) and decentralized identifiers. It contends that differences between paradigms like DIDs/VCs and SBTs are largely superficial, with both facing similar challenges—particularly non-consensual verification—while SBTs can be seen as an evolution of VCs focused on smart contract composability, privacy, and censorship resistance.

ABSTRACT

In this article, we explore the tension between abstraction and composability in web3 today, specifically within identity solutions, and argue that the current standard DID v1.0 is sufficiently under specified, allowing for many methods and instantiations, including blockchain based certificates. We view experiments today in web3 identity as additive and complementary, and argue that often cited differences are of degree and more in form, less in substance. By way of illustration, we compare decentralized naming services and blockchain based identity certificates such as soulbound tokens (SBTs) to decentralized identifiers (DIDs) and verifiable credentials (VCs). Both paradigms, to the extent they can be meaningfully differentiated, share similar potential as well as challenges. Specifically, we refer to fears about non consensual verification (scarlet letters) and show DID method iterations are not immune by issuing an innocuous public scarlet letter to a DIDs associated public address for anyone to see. Moreover, we argue that because SBTs are unspecified, one could characterize SBTs as an iteration, or extension, of VCs that additionally aspire to achieve composability with web3 smart contracts for correct execution of code, privacy, coercion resistance, and censorship resistance. We offer research paths for how VCs can also achieve these properties. We do not comment on cost, scalability, transferability, or common knowledge as they have been previously reviewed.

Motivation & Objective

• To analyze the tension between abstraction and composability in decentralized identity solutions within Web3.
• To argue that current standards like DID v1.0 are under-specified, enabling multiple complementary implementations.
• To demonstrate that apparent differences between identity paradigms (e.g., DIDs/VCs vs. SBTs) are often of degree rather than substance.
• To investigate the risks of non-consensual verification (e.g., 'scarlet letters') across different identity models.
• To explore how verifiable credentials can achieve similar properties to SBTs—such as composability with smart contracts, privacy, and coercion resistance—without requiring new primitives.

Proposed method

• Compares decentralized naming services, blockchain-based identity certificates (e.g., soulbound tokens), DIDs, and verifiable credentials as competing identity paradigms.
• Analyzes the implications of public, non-consensual verification by demonstrating that even DIDs can be issued with visible public identifiers that function as 'scarlet letters'.
• Reframes soulbound tokens (SBTs) as an extension of verifiable credentials (VCs) that prioritize composability with smart contracts.
• Proposes that VCs can be enhanced to support smart contract integration, privacy-preserving operations, and resistance to coercion and censorship.
• Uses conceptual and illustrative examples (e.g., public scarlet letters) to highlight shared vulnerabilities across identity models.
• Relies on conceptual modeling and comparative analysis rather than formal cryptographic proofs or implementation benchmarks.

Experimental results

Research questions

• RQ1 To what extent do differences between decentralized identity models like DIDs/VCs and SBTs represent fundamental architectural distinctions or merely variations in degree?
• RQ2 How do non-consensual verification mechanisms—such as public 'scarlet letters'—affect privacy and autonomy across different identity systems?
• RQ3 Can verifiable credentials be extended to achieve the same composability, privacy, and censorship resistance properties as soulbound tokens?
• RQ4 In what ways are current standards like DID v1.0 under-specified, and how does this enable plural, complementary implementations in Web3 identity?
• RQ5 What are the implications of public visibility of identity metadata (e.g., public addresses) for trust and coercion resistance in decentralized systems?

Key findings

• The current DID v1.0 specification is sufficiently under-specified to allow for a plural frontier of decentralized identity implementations, including blockchain-based certificates.
• Non-consensual verification, such as the public display of a 'scarlet letter' via a DID's public address, is not unique to SBTs but is also possible in standard DID systems.
• Soulbound tokens (SBTs) can be interpreted as an extension of verifiable credentials (VCs) that specifically targets composability with Web3 smart contracts.
• The core challenges—privacy, coercion resistance, censorship resistance—are shared across identity models, suggesting that improvements in one paradigm can be adapted to others.
• Verifiable credentials can be enhanced to support smart contract integration and privacy-preserving operations, offering a path to achieve SBT-like properties without requiring new primitives.
• The distinction between DIDs/VCs and SBTs is more about form and implementation focus than fundamental architectural divergence.