Coinbase Acquires Distributed Systems, Pledges to Explore Decentralized Identity Systems

Coinbase has announced the acquisition of Distributed Systems, a decentralized identity solutions provider. In a blog post announcing the acquisition, the San Francisco-based crypto exchange described it as strategic in Coinbase’s bid to bring cryptos into the mainstream. The five engineers working at Distributed Systems will join the Coinbase team and will work to integrate their services into the exchange’s operations as well as develop new identity solutions. This is the latest in a string of acquisitions by Coinbase as it continues to strengthen its position as the most popular exchange in the US and one of the most influential globally.

Decentralizing Identity

After decades of users having their identities controlled by multinational entities that use them for their own gain, it’s about time that people retook control and ownership, and blockchain technology is the way to achieve this. Announcing the acquisition in a blog post, Coinbase Identity’s project manager, B Byrne, explained the value that decentralized identity will have on Coinbase users and the world at large, making it possible to prove one’s identity without having to share a copy.

Blockchain technology that powers cryptocurrencies offers a new way to let us all be “verified” everywhere we go on the internet, feeling safer about our interactions with others and opening the door to the experiences that require trust.

The Distributed Systems team is composed of five engineers, three of whom will join Coinbase’s Toshi decentralized browser. The two co-founders, Nikhil Srinivasan and Alex Kern, will join the Coinbase Identity team, and as revealed to TechCrunch, the team will be working on a new ‘Login with Coinbase’ feature that aims to infiltrate the decentralized web in a similar way to what Facebook Connect did with the internet.

Login with Coinbase – although this hasn’t been settled on as the official name of the product – will give developers of decentralized applications an easier way to sign up users and connect to their crypto wallets, Srinivasan explained. Developers will be able to integrate the SDK into their applications and use Coinbase to verify identities instead of requiring their users to register afresh. This could take Coinbase beyond its crypto exchange business and into identity verification, essentially growing its brand in the same way Facebook did.

With the acquisition, Coinbase has made a head start, but it might not stand for very long. Facebook has been working on its own blockchain solutions in the past few months, and many industry experts expect that a decentralized identity platform for dApps will be among the products it will offer. A week ago, the head of the blockchain research arm of Facebook, David Marcus, resigned from Coinbase’s board, leading many to speculate that the social media giant’s blockchain efforts are progressing well and that Facebook could be on the verge of launching its first blockchain-based product.

Srinivasan also stated that initially, the startup had reached out to Coinbase Ventures about an investment, but after seeing the startup’s vision and progress, Coinbase quickly initiated the acquisition process. The startup was looking for a partner that had sufficient KYC and AML data to work with. Coinbase was one of four companies it had considered, with the other three being Facebook, Binance and Robinhood. Coinbase was able to convince the company that it was making big bets on the decentralized ecosystem, and this brought them on board.

Distributed Systems was founded in 2015, raising $1.7 million in 2017. This summer, it had intended to raise a further $4 million to extend its product reach. Both companies withheld financial details of the deal.


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