Anonymous Digital Identities

I’m just reciting this to myself so I don’t forget the logic behind it, figured I might as well stick it on my blog.

When conducting direct trade, the market does not require either party to identify themselves to the other.

When borrowing on the other hand, at least one of the parties must identify themselves in order to prove their worthiness before property will be handed over to the debtor.

In a networked world, an anonymous digital identity would be sufficient to conduct trade.  For direct person to person exchange, a smart device could be used to transfer a digital payment as the purchased goods are handed over.  For an online trade, an address is necessary for a delivery to take place, but a name is not required.

This digital identity would build up a transaction history, along with seller and buyer ratings.  As a person sells goods online, their anonymous digital identity would be credited for the sales they conduct, while the same would be true of purchases they make, or paychecks that they receive.

At this point, should a person desire to take out  a loan, they could then use the same anonymous digital identity’s transaction history to prove their credit worthiness by simply proving to the lender that they are in fact the actual owner of that digital identity.  This could be done through either a third party verification or by proving they have control over the account’s password/security checks.

Thus, a person could chose to remain entirely anonymous by not engaging in trade that requires disclosure of account ownership, or they could disclose ownership of an identity to specific parties under a non-disclosure agreement in order to prove credit worthiness.

How this identity is crafted, maintained, and implemented throughout society would be rather different than the identification we use today.  For starters, it would only be possible to have such an identity if the currency a person is transacting with is also anonymous and digital.  Obviously something like Bitcoins would fit the bill here.

Just thinking out loud to myself here, perhaps some kind of an Open ID user account that is tied to several Bitcoin wallets.  A commercial service could identify a specific user’s transaction history with them through implementation of an Open ID type system, even though they are getting paid in an anonymous currency.  The ID system could then store additional information about transactions, besides simple Bitcoin transfers between anonymous wallets.  The ID could be credited with ratings, promotions, etc..

What makes the ID special is that it would maintain this history across platforms and vendors.  The ID would act as a measure of a person’s reputation for various things.

Consider a merger of these services:

Such an ID service could represent what you know (college degrees, courses taken, various verifiable accomplishments), who you’ve done business with and your reputation, along with your banking history.  The beauty of such a system is that a person could maintain multiple entirely separate identities if they wanted to.  They could “switch characters” as easily as one does in a video game.


  • Peter Surda

    That would not be anonymous, that would still be pseudonymous. Data mining can reveal your identity even if there is no explicit connection.

    • That depends on how it is structured, how it is implemented, and how a person chooses to use it.

  • Throughthewire

    I love this concept. 

  • There’s also the issue of identity theft. There would have to be something like the code on the back of credit cards, and strict controls over the mishandling of security measures.

  • I’m mixed on the concept of anonymity. There are definitely times when it’s useful but, on the whole, I think it allows people to do harmful things undetected. I’m not convinced that a stateless society could work without the ability to tell what others are doing and bring individual sanction/shunning against them.

    The concept of digital identities is intriguing because it solves some of the problems with cheap reputations. If someone spends a long time earning “trust points” associated with an identity, they’re less likely to throw it away. The key is that it has to be difficult to start over such that an individual can’t simply keep putting on new masks.

    I don’t know if it’s sufficient for what I envision as necessary for a reputation-based anarchic society. If I find out that person or business X is doing Y which I disapprove of, I’d like to be able to shun them and that would require knowing which identities map to them.

    No one has a right to how others perceive their information or what they do with discovered information, but no one should be forced to reveal anything and I believe that introducing things onto another’s property to obtain information is trespass (though capturing photons leaving their property isn’t).

    • It’s simple to “not trust” those with a limited transaction history.  And what “harmful” things do you think people will be doing anonymously?

      Murder?  Rape?  Clearly those things require a physical presence which leaves associated physical evidence.  We don’t catch murderers based on IDs, we catch them based on physical associations, relationships, video evidence, etc.. etc.. etc..  A murderer doesn’t need to have a drivers licence in order to be captured for murder.

      The “harmful” things that people would like to do anonymously are, generally speaking, not harmful to anyone but themselves.  You might wag a finger at child porn, but I say there is a distinct difference between the production of child porn and the sale of child porn.  The production is the real crime, which takes a real physical person, leaving real physical evidence.  I would almost say that the distribution is a victimless crime, but I still think it can be claimed that the victim is harmed psychologically by its dissemination.  However, I don’t see stopping the distribution of child porn as being so important as to throw out all the other benefits that arise from this type of system.
      It is impossible to construct a system that rights every wrong or prevents every crime.  The focus should not be on preventing crime, but rather on protecting liberty.

    • Throughthewire

      I always find it odd that people feel safer trusting governments (States) than they do themselves. 

  • Triox

    What you describe already exists in the Bitcoin economy.Check out and their Web of Trust system. Even a whole anonymous stock market can be built this way, as evidenced by the success of GLBSE. Also, there’s a whole protocol being proposed called Ripple that is meant to (AFAIU) seamlessly solve complex WoT independencies (say you don’t trust some debt issuer but you do trust your friend who trusts his friend who trusts the issuer – how much should you charge?)

    • Triox

      I guess I meant to say interdependencies.

    • That’s great.  I’ll have to look into it. I know about the OTC market, but I never bothered to learn about the trust system used.  I think what I have in mind is slightly broader in scope.