CRYPTO MOVERS AND PRICES
Crypto was relatively unchanged this morning with volatility and volumes continuing to decline. Ripple (XRP) is the best performer in the Top 10, recovering to levels prior to the SEC lawsuit.
Crypto Story of the Day
2 weeks ago, Microsoft launched version 1 of the ION Decentralized Identifier (DID), a decentralized digital ID system using the BTC blockchain. ION represents the most high-profile use of the BTC network for a non-financial purpose amidst a rally that has centered on the asset’s financial utilities.
ION, which Microsoft began working on in 2019, utilizes a “blockchain-agnostic Sidetree protocol on top of Bitcoin” in order to support a digital ID system. The Sidetree protocol, conceptually akin to the Lightning Network, allows “tens of thousands” of ION off-chain operations to be communicated to the BTC blockchain.
ION is open source, and its code is available for viewing on GitHub. The system is non-censorable— digital IDs can’t be removed from the system by third parties— and is temporary— digital IDs can be removed from the system at will by their owners.
Microsoft doesn’t own ION, but rather serves as a sponsor. ION doesn’t introduce new tokens, either: “[BTC] is the only unit of value relevant in the operation of the on-chain aspects of the ION network.” When ION communicates operations to the BTC blockchain, transactions are “encoded with a hash” that the system then uses “to fetch, store, and replicate the hash-associated DID operation batches [i.e. newly added IDs, updates ID info, etc.] via [InterPlanetary File System],” a peer-to-peer system for data sharing.
In other words, data from ION is communicated and stored in the BTC blockchain via transactions that, unlike most activity on the network, don’t serve to transfer value, but instead ION information. Unlike traditional IDs, ION IDs are controlled by the entity itself, which can be a firm or physical individual, similarly to how one maintains ownership of their BTC. Digital IDs are described by Microsoft as being essential to a “vibrant, interoperable decentralized identity and application ecosystem.”
The launch of ION, though admittedly early-stage and without broad uptake, represents a notable moment for BTC. Some of the coin’s proponents have argued that BTC, beyond its financial use, is the backbone of broad decentralized applications which other networks, like Ethereum, are striving to create.
However, the majority of attention to date has been on BTC’s store of value, with special focus on its blockchain centering on the enforcement of this characteristic. A shift of attention towards the use of the network itself also highlights a new avenue for demand for the coin: paying for the processing of transactions associated with applications such as ION.
Furthermore, BTC’s detractors have questioned the sustainability of mining if users are incentivized to hold their coin for extended periods to realize price appreciation, thus limiting revenue from transaction processing for miners.
Non-financial use of the network creates a new opportunity for miner revenue. Broadly, the potential opportunities for BTC’s non-financial use are largely unexplored and undiscussed as a potential selling point for the asset at this time.