Coinbase Acquires Digital Identity Startup Distributed Systems

Coinbase has acquired Distributed Systems, a San Francisco-based digital identity startup, the company announced Wednesday.

Distributed Systems has already been working on "decentralized identity solutions," Coinbase Identity project manager B Byrne wrote in a blog post. The startup's five-person team will join a unit within Coinbase that is dedicated to developing digital identity solutions.

Blockchain can help individuals maintain complete control over their digital identities, ensuring that their personal information remains safe, Byrne said. He went on to write that this could apply to Social Security Numbers for Americans by adding protections for users, as an example.

Byrne argued:

"Every time you want to prove who you are with your SSN, you need to give away a copy of it. That copy has exactly the same power as the original, so when there's a data breach with copies of your data it puts your identity at risk. A decentralized identity will let you prove that you own an identity, or that you have a relationship with the Social Security Administration, without making a copy of that identity."

"If you stretch your imagination a little further, you can imagine this applying to your photos, social media posts and maybe one day your passport too," he added.

That being said, Coinbase appears to be in no hurry to implement digital identity tools. Byrne wrote that the exchange will be "deliberate about how and where we apply this technology."

The exchange will need to consider issues around anonymity, privacy and the immutability of a blockchain as part of its exploration of the technology, he said.

Coinbase image via Shutterstock

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