The Growing Importance of Digital IDs in a Globally Distributed Marketplace Spencer Follow Feb 14 · 5 min read

Trust is at an all-time low. The 2020 Edelman Trust Barometer revealed a continued global trust crisis in which government, business, nonprofits, and media remain mired in distrust. Across all respondents globally, fewer than 20% of global respondents expressed trust in the system.

There’s an inherent paradox here: in low-trust environments, institutions become increasingly important to hold society together. Yet the lack of trust further frays the fabric and threatens institutional stability. It’s a cycle, where distrust breeds more distrust.

Since less trusted institutions have weaker authority, it makes businesses increasingly distrustful of the government. Companies that do business across borders must then navigate different levels of institutional trust in each country where they do business. That leaves a trust gap, where businesses must make their own conclusions about potential business partners.

So what is a business supposed to do in this environment?

It’s not really an option to stop doing business across borders. But it is an option to innovate on the ways that enterprises do business with each other. To bridge this trust gap without having to rely on unstable institutions, companies require new tools, such as decentralized digital IDs. Here’s why this concept matters in today’s globally distributed digital ecosystems.

The trust gap and “trustless” ecosystems

One of the basic roles of institutions is to provide the structure and stability that builds trust. The level of trust is thus directly correlated to the confidence that individual participants have in that authority. For instance, every dollar is backed by the “full faith and credit of the U.S. government.” If people, businesses and other governments lose faith in the credit of the U.S. government, trust is lost.

Systems with low-trust lead to corruption and chaos, while high-trust environments encourage participants to stay within the system for safety and efficiency. We see this time and again, when governments collapse and citizens panic, causing bank runs and rapid inflation. When that happens, business grinds to a halt and governments cease supporting businesses with core services, pushing them to find other avenues, such as black markets.

With trustless ecosystems, like many blockchain-based decentralized technologies, there’s no central authority. Without that centralization, transactions can be completed with full faith and confidence, regardless of how any single party feels about that authority. It relies only on the level of trust each participant has in the system itself. It’s completely independent.

For businesses, trustless ecosystems don’t quite cut it. They need something that combines the trust-based benefits of decentralization with a set of standards to verify the identity of other market participants. identify other businesses verification. Trust is one of the essential components of a digital ecosystem. To build trust, you need to be able to identify who you’re doing business with and trust that they are who they say they are.

Trust, integrity and the value of digital IDs

One of the most common functions of the government is to regulate business through licensing. Since licensed businesses have met a certain threshold of shared requirements, they can thus be trusted. It’s a government seal of approval.

So what happens when people (and businesses) don’t trust the government? They trust the licenses less! If consumers believe that the government is incompetent and unethical, then the business verification process is meaningless.

That’s doubly true in more authoritarian environments in which the government uses licensing to pick favorites or restrict freedoms, as Kleros CEO Frederico Ast shared in a recent BLOCKTV interview:

[In Argentina] a couple of years ago, if you wanted to register your company to make business, and you were opposing the government, you had a high risk that the government would reject your request. That was a way that the governments sought to control the opposition.

When businesses lose trust in government, especially when it comes to licensing and other business-related tasks, it becomes incredibly difficult to do business. This distrust leads to workarounds, where corruption and graft reign supreme.

Trust is built on two dimensions: competence and ethics. Institutions must deliver on promises made (competence) and do the right thing for society as a whole (ethics). Unfortunately, in the 2020 Trust Barometer, no institution was seen as both fully competent and ethical. Governments are actually the worst performers, being seen as neither competent nor ethical, while businesses were seen as slightly unethical and slightly competent.

The blue triangle is those who trust institutions while the gray is those who distrust. [Edelman]

Something interesting happens once people trust their institutions: it restores balance and enables partnerships between different institutions, such as business-to-business relationships. Once trust is restored, relationships move more fluidly and effectively.

How businesses build trust also matters. In business, ethics actually influence company trust more than competence: ethical attributes making up 76% of company trust. Of that, 49% comes down to integrity. So it’s not just how well you execute your business but it’s how you go about doing your business. Integrity is incredibly influential!

Ethical attributes drive 76 percent of the trust capital of global companies, while competence is only 24 percent. The top ethical driver is integrity, which makes up 49% of company trust.

Integrity is where decentralization proves especially valuable. Digital IDs (like ORG.ID) is a trusted, transparent and consistent process for verifying a company’s identity, as well as any claims it makes around its business partners, products and business practices.

To ensure the integrity of a digital ID, the technology must provide:

CONTROL . Users maintain complete control of their data. No one except the owner of the data can modify or delete that data.

. Users maintain complete control of their data. No one except the owner of the data can modify or delete that data. TRANSPARENCY. Connections must happen directly without relying on third parties. This keeps the platform clean and transparent.

Connections must happen directly without relying on third parties. This keeps the platform clean and transparent. FLEXIBILITY. Open source and not dependent on any proprietary standards, software or algorithms.

With no central authority influencing trust dynamics, a decentralized digital ID becomes a badge of integrity. This badge is a signal of trust in today’s globally distributed marketplace where business-to-business transactions are not necessarily completed face-to-face or with known business entities.

Finally, since participants directly vote on the system’s mechanics via a shared Decentralized Autonomous Organization, the system will always evolve to reflect the current needs of the majority of users. With an ever-evolving system that reflects the wishes of its community, decentralized digital IDs will quickly become the de facto currency of trust in business-to-business digital ecosystems.

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