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Cryptocurrency exchange Coinbase has acquired a startup called Distributed Systems, according to a press release published by the former in Medium.

Distributed Systems of San Francisco, which has a workforce of five people, works in the area of blockchain-based identity security. It describes itself: “Our mission is to place users in control over their data and privacy.”

Data on 20 million people

Coinbase has also assigned a team, which it calls ‘Identity’, to research this area. According to TechCrunch, the two founders of Distributed Systems will be working with that team to develop a password protection service similar to ‘Login’ of Facebook. Coinbase has access to the data of 20 million people, and Distributed Systems CEO Nikhil Srinivasan told TechCrunch that he is interested in using that data to build new applications.

Facebook Login is an API, or application programming interface, which other companies can integrate into their websites and applications. As the name implies, it is what customers use to access their accounts. Spotify, Airbnb, and Tinder all use it.

Data security is doubtless a sensitive subject at the Facebook office. Last year it was discovered that the firm had illegally sold information on tens of millions of people to a covert marketing company, and an April 2018 study on Facebook Login from Princeton University found that third party tracking scripts were able to take advantage of the use of a shared password portal to harvest identity data (name, email address, age, birthday, etc.).

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Even looking at its description on the Facebook developers page is a little chilling: “With Facebook Login, people can … still get the benefits of logging in with Facebook even if they feel uncomfortable granting access to certain information. Your app can later re-request this information once you’ve explained how the person’s experience will be enhanced.”

Blockchain technology is seen by some as a way for users to take back control of their information. It could be used to design a kind of stamp that people can use to verify themselves, as opposed to them giving companeis their details.

B. Byrne, product manager of Coinbase’s Identity team, said: “Decentralized identity will let you prove that you own an identity, or that you have a relationship with the Social Security Administration, without making a copy of that identity. If you stretch your imagination a little further, you can imagine this applying to your photos, social media posts, and maybe one day your passport too.”

Interestingly, the executive in charge of Facebook’s blockchain research team resigned from his position on Coinbase’s board of directors last week, apparently to avoid conflict of interest.

Toshi browser is now Coinbase Wallet

Distributed Systems raised $1.7 million in funding last year, and had been courting Facebook, Robinhood and Binance before making its decision. It chose Coinbase because, as Srinivasan put it, they “were able to convince us they were making big bets, weaving identity across their products.”

The other three employees of Distributed Systems will be working on Coinbase Wallet, which until yesterday was called ‘Toshi’.

Toshi was an API toolkit launched by Coinbase in September 2014, according to CoinDesk, although Siddharth Coelho-Prabhu, Product Lead at Coinbase, wrote yesterday that that it was “developed by the Coinbase team a little over a year ago.” Its purpose in 2014 was to enable developers to retrieve Bitcoin blockchain information. In April 2017 Coinbase announced the release of an Ethereum-based mobile internet browser by the same name.

According to the Coinbase blog, the new Coinbase Wallet can be used to store and manage Ethereum-based crypto-tokens and will soon add support for Bitcoin, Litecoin and Bitcoin Cash. Users can send payments without fees, access decentralised exchanges, and search for/access other decentralised applications. It is secured with biometric technology.

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