Metaverse Identity on the Blockchain is a good long weekend read from Philip Rosedale, and while he's talking about avatar identities, I think the solution he's proposing could also become scalable to all kinds of online identities which get us beyond the real name-based IDs of Facebook, which are intrinsically full of flaws and subject to varieties of abuse. As I've said before, while Bitcoin is useless as a virtual currency, the blockchain code it uses to transparently track and register transactions is definitely valuable. Philip's idea is to use it in tracking and validating identities without tracing the blockchain-based identity with the actual person it's associated with:
So, for example, let’s say you want to prove that you are really the person who owns a certain email address — this is a very common part of identity systems today, and a perfect example of what we need to make really secure. Here is how that would work: First, you go to a website of a trusted third party that validates information for storage in the blockchain. Let’s say for this discussion that this is Google, but it could as easily be Verisign, or of course High Fidelity. You can pick whatever company you want, provided that they are well enough trusted that the people you will ultimately want to prove your identity to are likely to believe them. Google puts up a web page where you can give them the email you want to prove that you own. They then send a code to that email, which you reply to, in the same way that might happen when you create a new online account today. But instead of putting that transaction in a database somewhere (which would potentially compromise you later on), Google writes an entry into the blockchain which says “Google, Inc. certifies that the owner of the following public key is also the owner of this email address” Google doesn’t need to know anything else, and they don’t associate your email address with any other account information.
Works for me. I'd say the key challenge is making this a consumer-friendly, mass market product that's easy to use that people will actually want to use. (You know, like every great idea Philip comes up with.)