Digital ID's Fatal Flaw: Ethereum Creator Warns of Problems Privacy Tech Can't Fix

Ethereum co-founder Vitalik Buterin argued that digital ID systems have an irreconcilable problem that even zero-knowledge proofs (ZKPs) cannot solve: the idea of linking every aspect of a person's life to a single identity.

The Limits of Zero-Knowledge Proofs in Digital Identity

Zero-knowledge proofs (ZKPs) are cryptographic methods that allow someone to prove a piece of information is true without revealing the underlying data. For instance, a person can prove that they are over 18 years old without giving out the exact year or any other private information. Such tools can be used to protect privacy in digital ID systems.

Vitalik Buterin viewed ZKP as beneficial in this regard, but said that they only address the how of sharing information, not the why. The issue is that most digital ID systems currently still use the “one size fits all” philosophy that ties everything about a person - finances, health, social interactions, and politics - to a single identity.

A single digital ID can compromise civil liberties in three ways, none of which can be solved by cryptography. First, it brings together the data about all facets of a person’s life into one easily accessed file. Second, it gives authoritarian entities an unprecedented ability to monitor citizens. Third, it excludes people who fail biometric checks or lack official documents. 

World’s Biometric ID Model as a Case Study

Buterin pointed to World (formerly Worldcoin), a cryptocurrency project that scans users’ irises for tokens as rewards, as an example of these risks. Operating in 35 countries, the project had faced regulatory pushback, including a ban in Spain, a suspension in Hong Kong, and criminal investigations in Kenya.

Critics of the project, including privacy advocates, argued that its business model took advantage of those living in poverty and presented a uniquely challenging risk to privacy since the information it collected about people were permanent and cannot be deleted like a password.

The Alternative: Pluralistic Identity

The alternative to a centralized digital ID system is what Buterin calls pluralistic identity, which uses multiple, overlapping verification methods for different contexts. Circles is a great example of such a system. This is a universal basic income project that uses trust networks in which community members vouch for one another rather than relying on a central authority. Other solutions include hybrid systems that combine some form of government-backed ID with trust-based systems in which ordinary citizens can participate.

Pluralistic identity systems aim to meet different levels of verification requirements needed in different use cases, while still giving people control over their digital identities. 

Unfortunately, this method is not foolproof. For instance, a community-based identity system requires a certain level of trust within a group before any of its members can verify another person’s claimed identity. 

Different identity systems must also be able to work together. The EU's preference for centralized, government-controlled digital IDs may further limit the adoption of alternative approaches. Meanwhile, growing regulatory scrutiny of biometric systems continues to fuel debate over more privacy-focused solutions.