Identity in a Circular Future — Part 2/2

Data Science and Economics in the Circular Cloud including GAIA-X

[Note: this continues on the first installment in the series, subtitled “Decentralized identity as global accounting for a circular economy.”]

As we argued in our Meta-platform series, lowering trust transaction costs could open up new business models to lower-value transactions; as we argued in the first installment of this series, making lower-value transactions like recycling and refurbishment more widely profitable requires data sharing and back-to-birth traceability by the use of verifiable data. In this essay, we’ll go deeper into our vision for that data sharing system and its contents: data about the materials, origins, and end-of-life considerations for all manufactured things.

This data needs to be persistent for many categories of products and commodities where these “recycling forensics” costs keep waste reduction inhibitively expensive or risky. Persistence is also required for any enforcement of circular regulation to be effective.

This persistence requires a cloud we could call the “Circular cloud,” the stability of which could drastically alter the economic landscape and enable new forms of value and new business models. A circular cloud has to be easily accessible by any circular system actor that wants to learn about the history of a given circular object: this is its primary function and definition.

We believe that a connection between the meta-platform’s cooperative network effects and a broader circular economy should be explored as it will deliver new forms of value for society as a whole.

Persistent Identity (and data) for all things

To enable truly restorative and regenerative economic principles by design, circular systems need a digital representation like a “digital twin” for any given entity. The term comes originally from iterative design processes in military and aerospace engineering, where prototypes, data models, and other kinds of information have to be painstakingly versioned and tracked to allow more iteration, more testing, and more data modelling within a finite budget, particularly for precise and critical components. Perhaps in the years to come, end-of-life and circularity will be elevated to the status of a critical component.

Since the mid 2000’s, the concept of a “digital twin” has come to encompass many ways of linking, bundling, or making persistent diverse forms of data and metadata. In a decentralized context where that data might be generated and stored across many networks and contexts with little persistent access to one another, this digital twin can be thought of as a secure vessel for “receipts” and auditable data that can navigate various silos and contexts accruing data in a complex and granular access model. Spherity’s vision is for this kind of data-rich, persistent digital twin to be widespread and common practice, particularly for carbon-intensive manufactured things that are difficult to recycle, i.e. most mobility and computing hardware.

To enable circularity, this kind of persistent digital twin must be accessible over the course of the physical twin’s life by any (permissioned) actor along a supply chain to provide verifiable data provenance. This provenance needs to include legible and complete information about materials, origins, and lifecycle that enable safe, exhaustive, and efficient recycling or refurbishing. Furthermore, this information should be legible to all supply-chain actors as a verifiable and authoritative life-cycle credential. Some subset of this digital twin’s contents needs to be accessible to everyone (or at least to anyone with access to the physical twin), and it needs to outlive the utility of the artefact, and in many cases even the company that manufactured it. To be a truly “circular” artefact, its recyclers and refurbishers need access to a “verifiable story for everything”.

Depending on the item, use case, and industry, many different kinds of information might need to be included in this story, encompassing many transversal categories of information. It is entirely reasonable to expect that within our lifetimes, there will be markets where some kinds of machinery or goods will be illegal to sell without verifiable “carbon certificate” or other indices of the externality-accounting we mentioned in part one. Some highly regulated goods already need precise information about the lot, site, and date of manufacturing in case of recalls; the most secure way to execute these kinds of recalls is with this kind of verifiable stories. Some goods are regulated less by government agencies than by consumers themselves, who are hungry for verifiable and reliable information about fair-trade policies or labor conditions; these kinds of certificates could share the same infrastructure.

Regardless of which aspects of manufacturing and sourcing get tracked in these stories, the lynchpin holding them together such is a persistent identifier, whether public or private, that persists from the conception of the artefact. (Sidenote: if the manufacturing of a product is its “birth”, its “conception” is usually the decision or order to manufacture it). A true digital twin, autonomous enough to convey the whole “story” of that artefact, requires not just a persistent identifier for the product of which it is one instance, but also a separate persistent identifier for the specific artefact, even if it contains, in the worst case scenario, nothing more than a persistent product identifier and little more that is persistently meaningful. While traceability and accountability (both human concepts meaningful only relative to today’s human society) routinely put the 22nd century out of scope, circularity does not.

Accountability and Legal Identities

As we discussed at length in Part 1 of this article, circularity requires a new form of accounting for commodity decisions to factor in all of the lifelong costs of manufacturing (including the “out of sight, out of mind” costs, called “externalities” by classical economics). The unique identity of a manufactured product can (and perhaps should always) contain this kind of lifetime cost or impact; the digital twin of a specific manufactured thing might well include information about whether these costs have yet been paid, or are outstanding. Any number of tax or regulatory data points might be worth registering in the digital twin of a thing, especially if public coffers might be drained some day to recycle it when no accountable party can be identified.

But there is another scale at which costs can be accounted for: the corporate entity responsible for bringing manufactured things into the world, things which will someday have to be re-manufactured or de-manufactured. Aggregating all of a company’s paid or unpaid “end of life fees,” you might end up with something like a risk assessment or a report card for the corporate entity responsible for them. Accounting for sustainability on a per-corporation basis is very valuable business intelligence for regulators and for the ecosystem as a whole; the semi-public, semi-confidential digital twin of a legal entity identifier seems a natural way to organize this information, if it is to be verifiable and portable.

Just as the human rights record of a corporation can be an index to or driver of public opinion and thus market value, so too can circularity metrics be an important piece of information that consumers might demand to know of a company before buying their products. Companies leading the charge today would love to be recognized in objective, data-driven ways and highlight the difference between them and the rest of their industries. But circularity is hard to rate because no single entity can gather enough data, or data of high enough granularity and verifiability, to make objective claims.

Current experiments to improve data quality and reporting around recycling efforts often stumble on the data problems and the costs of addressing them in an ecosystem-wide way. Brands are willing to commit resources, but the scale of the problems makes proprietary systems, consortia of brands, and custom blockchains orders of magnitude too local to be effective. Instead, large-scale experiments are increasingly turning to alternate conceptions of accounting and funding. An analogous shift in thinking about the architecture and pricing model of clouds themselves might be needed to shift our thinking towards a more circular cloud where all these digital twins and persistent records would live.

What would a circular cloud look like?

Much of the future Spherity imagines for the decentralized meta-platform assumes a utility-like infrastructure pooled across compute and storage resources. To put it bluntly, some kind of cloud infrastructure is the direction in which essentially all computing is currently moving, and the data needs of circularity require this kind of universal accessibility and persistence. We have written previously about the ins and outs of this shift. There remain, however, questions about the nature of its ownership, governance, and centralization.

At time of press, for example, the biggest software companies on earth are competing for ownership and control of the lion’s share of earth’s compute resources in their steadily and rapidly growing clouds. The companies themselves are also growing into cloud-focused conglomerates at a historically significant rate. Like most software companies today, Spherity uses AWS for much of its infrastructure, drawn to the lambda/serverless architecture and the DevSecOps featureset. Indeed, the decentralized identity community as a whole has been heading towards a micro-service and cloud-agent-centric architecture for years, and is making significant progress on standardization that would accelerate this shift. There is no question that most Software-as-a-Service and enterprise computing will continue to migrate more and more to the cloud, and while on-premise computing might have its local comebacks in this or that niche, the net trend will continue cloudwards.

We believe that the GAIA-X design principles in combination with W3C standards such as DIDs and VCs will enable the main foundational features of a circular cloud:

• Identity & trust for enterprise entities and serlialized objects

• E2E federated catalog and look-up infrastructure

• Sovereign data exchange for back-to-birth traceability

• Compliance, Electronic Records & Electronic Signature (ERES), E2E Verifiability and Data Provenance

In ecological terms, this is self-evidently a net gain for resource and energy efficiency. The question is whether private ownership motivated by private profit is the best governance model for a resource needed by the planet to save it from human waste. Even by the 20th century criteria of a level playing field for efficiency-driving competition, current clouds run dangerously close to the so-called “Amazon Basics problem,” whereby a platform’s neutrality (and its safety from anti-trust regulation, in some jurisdictions) is compromised by its operators selling products the create an insurmountable disadvantage for competing platform participants. Substantial persistence could complicate this metric, since platform operators could receive an additional anti-competitive advantage if they get cheaper or faster access to circular cloud infrastructure.

Cloud computing for the circular commons

21st century criteria of universal addressability and persistence make even more pressing the need for a cloud that works more as a commons. There many technical features this might entail as well: persistent and highly portable storage, structured and portable semantics, self-verifying identifiers and data. But its most important features are universal access and open governance.

This kind of “computing for the commons” requires different governance structures to ensure that the costs of circularity do not get socialized for lack of profitability. One common starting point for this shift is to adopt business models more appropriate to utilities than to primarily profit-maximizing corporations. If clouds have outcompeted on-premise systems by adopting a “pay-as-you-go” model, identity and data persistence for the commons might require more of a “pay-once” or “pay it forward” model, where the end-of-life data needs are paid for at time of manufacturing.

There are promising experiments today in this kind of model for persistent and global cloud storage, in the form of the Interplanetary File System (IPFS) and Interplanetary Database (IPDB), two major utilities already essential to many experiments in Web3, decentralization, and peer-to-peer computing. In fact, persistence has been a key reorganizing (and decentralizing) principle for decades in the opensource and radical computing communities. Younger projects like Holochain combine this kind of “pay upfront” model with ambitious privacy and licensing ideas to make computing for the commons more sustainable and more decentralized than would have been imaginable a few years ago.

Clearly the concept of the “cloud” will evolve more than most concepts as the groundrules of life on earth change over the coming decades. However, it seems safe to assume that sooner or later a compromise will have to be struck between relying entirely on the goodwill of profit-driven megacorporations, the increasingly more nuanced calls from government to reform data governance along utility lines, and the needs of the decentralized commons. Exactly what form that compromise takes is anyone’s guess, but clearly pooling resources while minimizing profit extraction is the only way we can bring down material costs enough to achieve circularity without drastically deindustrializing our economy.

New markets that take root in a circular cloud

While a circular cloud full of persistent digital twins might seem far-fetched or utopian, there are many reasons to be optimistic on the basis of current experiments tending towards that kind of reorganization of our digital economy. As with so many chicken-and-egg problems in technology, however, the trick to progress is finding business cases along the way to incentivize the necessary parties to take each incremental step. What follows are some knock-on benefits and economic opportunities that we see deriving from this common infrastructure, which might motivate some stakeholders to contribute when it is their turn in the series of incremental upgrades that will build the circular cloud for all. Building blocks for future business cases, as it were.

In the broadest terms, we could say that a cloud full of cryptographically-secure, information rich digital twins would effectively be a trust fabric for orchestrating and streamlining all kinds of circular economic systems. It would significantly increase the confidentiality, integrity and availability of data, the three criteria which make up the so-called “triad” of high-quality data. It would allow audits, business intelligence, and accountability on the basis of that verifiable and universal-scope data.

But many further opportunities and values arise from such data:

• Everything with a Decentralized Identifier (unique or shared) would be connected to a persistent data store hosting verifiable life cycle data

• Any arbitrary actor could independently verify the life cycle assertions of a thing, literally “its complete story”

• Back-to-birth traceability of manufactured things could be used (and is needed) to minimize avoidable pollution and to design out waste from manufacturing processes while keeping materials in use as long as possible

• Expanded capabilities and greater autonomy of data-producing devices (commonly known as “IOT” devices), enabling them to be more trustworthy and more useful to other circular efforts

• Monetization and incentivization of existing problems could begin in the short term, addressing machine life cycle, supply chain provenance, or third party risk management through an automation of audit processes on demand

• Repair, predictive maintenance, and retooling/repurposing would become cheaper to guarantee, weakening the economic incentive for today’s “disposable” goods and built-in obsolescence

• “Disposable” goods and excess consumption would be easily disincentivized by a “consumption tax” baking end-of-life and lifetime costs into the market price of manufactured things

• Orchestrating circular systems would be easier and more standardized by the evolution of algorithms for monitoring, optimizing, and transitioning to a restorative and regenerative economy; they could pull all the data they need from universally-addressable digital twins of machinery and materials

Most importantly, though, digital twins aren’t science fiction: we’re already building them today. In fact, our solution is not a greenfield, “sign here and commit to our proprietary blockchain” solution: we work hard to be blockchain agnostic and accelerate open standards, and do plenty of brown-field work as well. In our next article, we’ll lay out one such example of retrofitting existing product information and serialization systems to securely bind these identifiers to digital twins containing public and private information of various kinds. These digital twins are ready for the circular cloud of tomorrow, and make solid business sense today.