When privacy is a privilege: Ontology’s Jun Li on blockchain-based digital ID

“Everyone’s car generates a lot of data every day,” points out Jun Li, founder of the open-source digital identity blockchain Ontology.

The automotive sector is one in which his company’s ID solution has a clear use case, as each driver’s data can be stored and used to calculate insurance premiums according to actual driving behavior.

“Some insurance companies will put telemetry devices on the cars to collect your driving information. Every year, your insurance pricing will be based on your behavior data.”

For Li, this is a positive development because good drivers will receive well-earned discounts on their insurance payments. But what if someone does not want an insurance company to access their driving records?

“They can decide what kind of data they want to share with whom,” Li explains, adding that “This meets the legal requirements for privacy and data protection.” So, privacy remains under the driver’s control… but at what price?

“If you want to protect your privacy, you can use this way: ‘I don’t want to share data, I am willing to pay a higher price,’ so it’s everyone’s choice.” Li proclaims, explaining that without a provable, established reputation, no discounts can be offered.

It seems as if privacy is becoming a premium good. Developments like these are scary to many, but Li anticipates most people being happy to part with all types of data if they can get benefits in return. “A user will realize that data becomes a real asset. All data has value — even direct monetary value.”

In one sense, there is nothing quite new to this, as insurance companies have long based premiums on information such as age and gender, which are seen to predict driving behavior. At least this solution would base the premiums on actual behavior.

Li’s larger vision is of a globally compatible digital ID that can connect an individual with all the data they generate and allow them to pass it on to whomever they choose. This is comparable to privacy settings on social media sites, minus the need to trust the social media company itself. In the new age, industries like decentralized finance, or DeFi, could operate with credit scores, and ID can be associated with educational achievements and even vaccination records. “You can use blockchain to link to different data sources related to identity,” he says.

Li is not working to end anonymity per se, rather to help align interests so that everyday reality can better integrate into a decentralized world where individuals have more control over their data.

“I don’t want to define us as a revolution. We want to change the link to the traditional world to make things better and better. Not just ‘okay, break everything and rebuild everything’.”

Traditionalizing DeFi

The Wild West is a common characterization of the cryptocurrency environment — a new territory where everyone is a newcomer without a previous reputation and people are thus considered untrustworthy by default. Here, the only currency is cold hard (crypto) cash. In the old world, reputation and trust are perhaps the greatest of currencies. The question is how these two worlds will interact going forward: Will they separate entirely or merge?

Li is betting on a merger of worlds, believing that real-world identities still hold value. While centralized finance and DeFi players like Celcius and Aave offer various solutions for borrowing, these remain reliant on the borrower putting up adequate security.

As the solutions offered by the DeFi industry mature and vie to attract more of the global masses, a shift toward services that are more familiar to the average person is perhaps inevitable. This could mean the end of repetitive Know Your Customer procedures.

Jun sees Ethereum as the dominant chain going forward but believes there’s a need for at least a couple of others, including a blockchain for digital ID, which is Ontology.

Opportunities await

When Li began his studies at the University of Shanghai in the mid-2000s, he chose computer science because “The internet was just coming out” in China and the degree offered the hard skills that made it easy to find a job in the country’s growing technology sector. He initially worked as a programmer with various Chinese firms but soon moved up to manage IT strategy on behalf of major enterprises, such as Infosys in 2010. He expanded his horizons by studying in Manchester, London and Hong Kong, adding master’s degrees in both science and business administration by 2014.

With a fresh MBA in hand, he took on a post with China’s first futures exchange, the China Financial Futures Exchange, where he laid financial frameworks for the rising Chinese economy, including “exchange products, sentiment products, design and architecture.”

Six years ago, while leading an innovation team charged with researching new technologies like big data and artificial intelligence, he realized there was more to blockchain than meets the eye. Blockchain, he found, is “incomparable to other IT-technologies.”

“I realized that blockchain is not only a kind of financial technology. It is a kind of mechanism that allows people to cooperate based on a no-trust mechanism,” he explains.

“I thought ‘okay this is a very interesting technology, I should put then all my time to it’, so I quit my job.”

He promptly co-founded OnChain, a provider of open-source blockchain solutions for the Chinese market, in 2016.

The system architect determined that the virtual world being built by the global blockchain industry lacked interconnectivity due to its largely pseudonymous nature. “We need to build a bridge from the traditional world into the world of decentralized identity,” he concluded, explaining that a digital ID could link blockchain accounts to real people. Two years later, he founded Ontology to bring this vision to life.

The great balancing act

Data is often called the new oil. All manner of companies harvest various types of user data for profit without allowing the users themselves any method of benefiting directly from the data they give up. Much of this information collection takes place without the knowledge of the end-user, and the mere use of a product often implies the acceptance of a terms of service that makes it clear that the data in question never belonged to the user at all.

For a person who values privacy and anonymity, the modern reality of surveillance capitalism is a force to be reckoned with. Participation is effectively mandatory, lest one become a true hermit. Even if one is not opposed to sharing their personal information with companies, there is a constant risk that identity thieves will access the companies’ databases, as pointed out by Erik Voorhees, whose cryptocurrency exchange platform, ShapeShift, now allows users to trade without KYC.

“Online, your Bitcoin address is kind of an identity, people maybe don’t know who are you in the real world, but the account is kind of identity.” This is a kind of pseudonymity.

Li’s desire for greater transparency brings up ideas of integrity — a person should be who they say they are, and do as they say. With an ever-present self-sovereign digital ID, a sort of factuality or reality could be imposed on the online world. The project’s name offers a major clue — ontology is a branch of philosophy concerned with the ideas of existence, being, becoming and reality.

For Li, knowing who you are dealing with online is important, and he sees a future where centralized social media platforms give way to an environment in which users control their information directly and use the security of blockchain technology to control what they share and with whom they share it.

“Most identity is managed by centralized organizations or even governments, so it’s difficult for people to control all the verification processes. I think a decentralized identity is quite necessary in the digital world.”

Li believes that blockchain solutions such as Ontology provide balance between the two undesirable extremes of corporations controlling all the data and strictly anonymous interactions. “I believe this kind of balances conflicts between internet services and between privacy and data protection,” he says, referring to the present need for people to trust multinational companies with their private information and communications.

He envisions that digital identity solutions have a future in industries such as social media where users today must entrust their information with a centralized platform like Facebook and Twitter. Instead, social media could be a decentralized web of individuals who choose to connect certain information to their persona and make posts through open-source blockchain protocols. It would be easy to verify identity, and there would be less risk of information being used in unanticipated ways. “Maybe in the future we needn’t any Facebook or Twitter,” he says.

“I believe real information with a real identity will become a mainstream social network.”

Australia’s eSafety commissioner, Julie Inman Grant, recently suggested that a blockchain-based digital ID system could serve to prevent trolling and online abuse by users who hide behind the anonymity offered by various platforms. Such a system would still allow users to interact on the internet without revealing their real identity but would make it easier for law enforcement to detect abuse.

Digital IDs are not without precedent: A 2009 law in South Korea required real-name registration on websites, before being struck down as unconstitutional in 2012, and the 2017 Chinese Cybersecurity Law mandates that all users of Chinese websites provide their phone numbers in order to create an online environment that is “safe and real” according to state-run media. They have not, however, caught on in the Western world, with Germany forbidding unnecessary real-name requirements since 1997.

Li, who is based in Shanghai, places a high value on real people and reputation. While he does not have any problem with anonymous profiles, he figures that such users are less likely to provide information that is trustworthy or reliable. That is certainly the case for more traditional professionals, who seek to leverage their reputations by showing off their work.

“I believe people still want to tell everyone: ‘this is who I am, this is my opinion, these are my posts and articles’. But that is a personal choice.”