Overview:
• In this session, Wright focused on private identity and whether it is possible to keep
identity private on the blockchain;
• Wright suggests using Zero-Knowledge Proof techniques like tokenisation and SPV proofs
to address the issue
• Zero-Knowledge Proofs allow an exchange to cryptographically prove solvency without
disclosing any private information;
• Wright noted the challenge of isolating individual pieces of information within a
digital certificate;
• Blockchain records on scalable Bitcoin and set standards can make it easier to keep
certain attributes of digital identity private.

Dr Craig S. Wright, Chief Scientist at nChain, held the first edition of his Bitcoin Masterclass series at an exclusive venue in London in January. The two-day immersive course forms part of a monthly series aimed at helping attendees understand the fundamentals of Bitcoin and the technology behind it.

The Bitcoin Masterclass series will give you a comprehensive overview of Bitcoin’s history, theory and design. Wright discussed the future of Bitcoin and the unbounded scalability of nChain’s blockchain solutions with potential use cases across several industries.

In the second session on the second day, Wright focused on private Identity and whether keeping your identity private on the blockchain is possible even though transactions are completely transparent. He also discussed what is needed to prove your identity to transact.

The double-edged sword of identity

The answer to whether one can have multiple identities is yes and no, said Wright. While a single identity is necessary at the foundation of everything, one can still have multiple identities that can be linked or unlinked, he said.

He noted that a person can have a corporate identity as well as a private one, and young individuals can create a lot of potentially damaging content on platforms like TikTok.

However, in certain situations, one may need to prove their identity, such as when verifying asset ownership. The challenge then becomes linking data while maintaining privacy for certain attributes.

Wright gave the example of using his driver’s licence to prove his age to a stranger but revealing his full name and home address in the process. Digital IDs can potentially solve these problems, but they currently function as digital copies of physical records, revealing all information.

Zero-knowledge proofs

To address this, Wright suggests using Zero-Knowledge Proof techniques like tokenisation and SPV (Simple Payment Verification) proofs.

A Zero-Knowledge Proof lets one party (a prover) who claims to know a secret, convince another party (a verifier) that the claim is valid, whilst not revealing the secret. Because of the hiding nature of ZKP, it can be used in many cases where privacy is desirable. More importantly, it can also be used as a building block to construct more sophisticated protocols.

Many users today prefer to store their cryptocurrency asserts with centralised exchanges for ease of use similar to online banking, to avoid the difficulty and risk of managing cryptographic keys themselves. Unfortunately, storing assets with an exchange exposes users to the risk of the exchange losing them due to external or internal theft.

Zero-Knowledge Proofs allow an exchange to cryptographically prove solvency, meaning its assets cover its liabilities. The proof does not disclose any private information, including its customers, the addresses it controls, and total liabilities.

Using your digital identity

Wright noted that a digital certificate works similarly to software authentication, using a hash to verify the validity of all data present. However, the challenge lies in isolating individual pieces of information within the certificate.

Wright then spent the remainder of the session discussing with the audience and members of the panel how this can be done and the ability to alter some attributes like home address, relationship status, or gender.

Today’s digital identity processes tend to record as much information as possible, benefiting marketers and data miners. The excuse for not keeping certain attributes private is often that it’s too much effort to create a system that can do so. However, with blockchain records on scalable Bitcoin and set standards, it becomes easier to accomplish.