Microsoft Is Building Decentralized Identity Solutions on Bitcoin's Blockchain

Microsoft is currently working on an open-source project which involves developing decentralized infrastructure on the Bitcoin (BTC) blockchain.

Microsoft’s latest project, called Ion, will focus on developing protocols which allow different networks to communicate with each other.

Facilitating Communication Between Separate Networks

For instance, if you use your LinkedIn credentials to log into an Uber Conference meeting, then a communications protocol at the software layer would send your profile data (from LinkedIn) to servers used by Uber Conference’s program. The profile data received would then be used to verify users’ credentials.

Microsoft’s Ion platform is being developed to handle a similar verification process, however it will process the data between separate networks by using decentralized identifiers. Ion network users will be able verify, or prove, that they own their data - as they will also own the keys associated with their data.

In statements shared with Coindesk, Christopher Allen, an early crypto adopter and co-founder of the World Wide Web Consortium (W3C) Working Group for Decentralized Identity (DID) Solutions, said:

A lot of enterprise infrastructures use Microsoft products. So if they integrate this into any of their infrastructure products, they’ll have access to DID.

Microsoft Working On Key Signing And Validation Solution

Yorke Rhodes, a Program Manager at Microsoft’s blockchain-focused engineering team, confirmed that the tech giant had been working on a key signing and validation solution for the past year. Rhodes also mentioned that Microsoft’s software is compatible with public chains including Bitcoin and Ethereum.

According to Rhodes, Microsoft’s Ion platform has greater throughput than the blockchain network on which it is being developed. He also noted:

There are systems that we have at Microsoft that give you permissions in an enterprise context, a product called Active Directory, that we think [may] be able to recognize these DIDs as well.

As a founding member of the Decentralized Identity Foundation, Microsoft has been building various infrastructure-related products and services such as its Azure platform.

According to sources familiar with the matter, the Ion network will be moved from Bitcoin’s testnet to its mainnet at some point during this year.

Facebook's Management Not Interested In Decentralized Identity Solutions?

One of the main benefits of using DID, or a decentralized identity and data management system, would be that giant social networks such as Facebook or Twitter would not have complete control over users’ profile images and other personal information. The centralized network owners would be able to terminate accounts, but they would not be able to prevent users from keeping their personal data.

Interestingly, Rouven Heck, the Head of the DID project at ConsenSys and W3C member, revealed that Facebook’s management appears to be avoiding discussions related to decentralized identity solutions.

Rhodes said:

Facebook is the complete antithesis of consumer privacy. Their business model is based on the fact they can monetize data about you.

Meanwhile, Rhodes thinks open-source projects like Ion are inline with Microsoft’s current business strategy and that the tech giant also believes in the “philosophy of consumer ownership and consumer centricity.”

CME Looks to Double Bitcoin Futures Limit, but Is This Wise?

The Chicago Mercantile Exchange (CME) has a new request for its regulator, as it looks to double open position limits on bitcoin futures contracts in the face of significant interest.

Nasdaq reports that the CME has already petitioned its regulatory body, the Commodity Futures Trading Commission (CTFC), asking for an increase from 1000 contracts per spot month to 2000 per investor. Each contract represents five BTC, so essentially, at its peak,  a single investor's total position may edge towards a monumental 10,000 BTC.

This is in direct response to the contract's recent growth which is currently depicting record levels of activity, citing $370 million being traded per day. A spokesperson for the CME noted that the idea to increase limits was proposed on the continued maturity of the market:

Based on the significant growth and acceptance of our financially-settled CME Bitcoin futures markets, as well as our analysis of the underlying bitcoin market.

However, as Nasdaq writes the increase in the upper limit of positions is somewhat superfluous. As of July, the number of open interest contracts reached an all-time high of just 6100; given this, it seems the CME may be future-proofing.

Open to Manipulation?

However, concerns remain about the limit increase, as without them, the potential for manipulation rises; often to the detriment to the underlying asset. Although, as per the CTFC website, the threat of manipulation from bitcoin futures contracts is "low":

In general, position limits are not needed for markets where the threat of market manipulation is non-existent or very low.

Instead, Nasdaq posited that this might point to a lessening on the CTFC's strict rule of bitcoin; as well as a maturing of the market in general.

Nevertheless, some believe the CME's bitcoin futures contracts do pose a significant threat to the price of BTC; with some suggesting that blatant manipulation continues unchecked within the market.

As reported, there seems to be a correlation between the expiry dates of CME bitcoin futures contracts and a lull in the price point of BTC. In several instances, a significant drop in bitcoin's price has coincided with a closure from the CME. The most recent example of this occurred on Labor Day, September 2, when bitcoin rose an extraordinary 8% shortly after the CME shut.

Crypto analyst, Alex Kruger, highlighted this, noting the large gaps which formed on the CME chart, from the price discrepancy before and after closing.

This has become a pretty accepted practice within the market. Kruger has even gone to the lengths of compiling statistics each time this phenomenon transpired:

On these occasions, bitcoin cited an average 4.6% price discrepancy following the close of the CME.

Whether this is a coincidence or the market is indeed being actively manipulated is as yet unclear. Either way, with the increase of these limits it might be only a matter of time until we know for sure.

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