Thread by @cyrilXBT

IOTA Identity is Coming to Layer 1 and I’m going to break it all down for you in this thread.

Let us dive in 👇

#IOTA #SHIMMER #SMR

We will be covering the following areas in this thread:

-Explore IOTA Identity on Shimmer
-More effective and powerful DID techniques
-Technical overview

-Identities controlling other identities
-Authenticating senders and receivers of funds
-DIDs issuing NFTs
-DIDs issuing native tokens
-Extending DID functionality with smart contracts

Explore #IOTA Identity on #Shimmer

The IOTA network's upcoming Stardust version will significantly boost the protocol's capabilities and bring new techniques for creating solutions for the ledger.

They have changed our minds on how IOTA Identity should operate on IOTA and how we can work with the enhanced capabilities as a result of this improvement.

You can explore these fresh features thanks to the Stardust upgrade to Shimmer, IOTA's testing network.

In addition to converting IOTA into a layer of infrastructure for smart contract chains, Stardust also turns it into a multi-asset ledger and adds mechanisms to make any data permanently accessible on all IOTA nodes.

More effective and powerful DID techniques

Data messages on the Tangle are used in the present DID implementation on Chrysalis to broadcast DID documents, which are indexed by all nodes but are removed after a certain amount of time.

This means that the so-called "permanode," a node that stores all data messages passing through the Tangle, must be accessible to the DID resolvers.

Permanodes, however, need a lot of resources to operate, back up, and maybe repair.

They are able to provide a solution that is more dependable, efficient, and effective thanks to Stardust's additional features.

Since an unallocated output is not deleted by nodes and therefore does not require a permanode, a DID document maintained directly in the ledger state is free from the limitations of a permanode.

This enhances synchronization, accessibility, and availability.

The following trade-offs will be made in order to deliver two complementary DID techniques for Stardust on the IOTA mainnet:

1. The storage deposit-required UTXO-based DID technique is designed for high-assurance IDs and enables complete Layer 1 integration.

2. A DID approach resolves a large number of identities in the ecosystem that substitutes the present Chrysalis approach and does not call for a deposit for each identity. It also lacks direct Layer 1 connectivity.

The UTXO method's objective is to provide Layer 1 access to DID documents while following as closely as feasible to the DID standard.

In order to achieve this, they make use of the Alias Output, a further improvement made possible by the Stardust upgrade.

The state metadata property of the Alias Output can hold any type of data up to a predetermined size. This property contains the DID document.

The Alias ID is used as the method-specific identifier (or "ID") of the DID.

The Alias ID is a globally unique and unchangeable identifier that is derived from the content of the transactions used to create it.

These characteristics enable it to be both a DID and a Layer 1 meaningful identification for broad utilization.

The Alias Output resides in the center of the Layer 1 web, which is also where DIDs should go because it can interact with NFTs and native tokens and allows smart contract chains to be anchored to layer 1.

Looking ahead, they need to expand the Alias Output to support many controllers in order to be completely compliant with the DID requirement. Before Stardust launches on the IOTA mainnet, they anticipate this update to go live.

Identities controlling other identities

An identity can effectively govern another identity since an Alias Output has power over other Alias Outputs.

This enables everyone to represent scenarios like corporate subsidiaries or human custodianship and establish identity hierarchies.

The control must be distinguished between the governor and the state controller in this situation.

The state controller has the power to modify the DID document and can choose how to portray the identity as a result.

By designating a state controller, the governor regulates who is permitted to update a person's identity.

Authenticating senders and receivers of funds

IOTA currencies and native tokens can be received by identities, held by them, and sent to other identities.

This can reveal who sent the money and who received it, giving the sender and receiver, respectively, a better level of assurance.

Any DID can simply be transformed into an address because an Alias Output can store tokens.

Let's say Bob and Alice just exchanged DIDs, and now Alice wants to send him some money. Alice asked Bob to authenticate his DID to her during the DID exchange in order to show that the DID he shared is actually his.

In this approach, Alice may be certain that whoever controls Bob's identity will have access to the funds when she sends money to the address of his Alias Output. Although Bob himself is probably at this location, it could potentially be an alias or NFT address.

DIDs issuing NFTs

NFTs can now be created and transported on Layer 1 using a dedicated NFT Output thanks to the Stardust protocol enhancement. The identity of the NFT issuer can be established with the aid of DIDs.

Since the Unlock Condition of an NFT Output can be an Alias Output representing a DID, offering assurances about whom you get NFTs from or send NFTs to, NFTs can also be held by and transferred to DIDs in a manner similar to the transfer of funds.

NFTs have the ability to unlock (read: "own") identities. For items or organizations that are represented by and traded through their respective NFTs, this may initially seem weird and is not generally advised for people.

DIDs issuing native tokens

The minter of native tokens can give token holders stronger assurances and more trust if the minter is a DID.

Token holders can use this information to confirm the creator of a native token, determine whether a native token they have received came from the source they expected it to, or confirm someone else's claims about the assets they produced.

Technically, this is possible because a Foundry Output, which in turn is managed by a single Alias Output, is used to construct native tokens. The identity of the minter can be determined thanks to the Identity encoded in this Alias Output.

Extending DID functionality with smart contracts

The IOTA Smart Contract (ISC) chain state will be able to be anchored into Alias Outputs in the ledger thanks to the Stardust protocol enhancement. Chains of smart contracts can be identifiably connected using IOTA Identity.

Identity groups can be arranged hierarchically, enabling a single identity to produce and govern a variety of additional Alias Outputs. This implies that identity in an Alias Output can control an ISC chain's Alias Output.

Users can use this to determine a chain's governor and whether or not they wish to interact with and trust it. Additionally, it enables other parties to confirm and demonstrate who is in charge of the entire chain.

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