What is Litentry? (LIT)

When taking out a loan, opening a bank account, or being hired for a job, applicants have to prove who they are. This almost always includes using government-issued identifying documents and alphanumerical figures like a social security number (in the United States) or a national insurance number (in the United Kingdom). Identification is important for preventing fraud, understanding financial risks, and matching the correct people to services. Online, users are commonly identified by usernames or social media handles.

Whether they are obtained through governments or social media companies, these forms of identity are ultimately controlled by centralized parties and the use themselves are not the actual owners of their “identities.”

This has spurred an effort to use blockchain technology (and oftentimes, cryptocurrencies) to create decentralized identities (DIDs). DIDs are intended to provide a way to create and manage online identities for interacting with web3 applications, trustlessly enabling “know your customer” (KYC) procedures, universal logins, and more.

Though DIDs attempt to fully decentralize provable identity without third parties, some blockchain-based projects act as intermediaries that facilitate a “nearly” or “mostly” decentralized experience. They protect users’ privacy and control over their own data, while still ensuring provable identities. Litentry is one such identity provider. Its developers describe the platform as an identity aggregator, which pulls identifying data from multiple sources and integrates it within web2 and web3 applications. By creating trustworthy user-specific identities, Litentry can help its clients prove they are human, confirm their credit for financial purposes (traditional or DeFi), and manage credentials across blockchains.

Litentry was built as a Polkadot parachain and uses a native token called LIT for transaction fees and to provide a security and funding mechanism for the project.

How was Litentry developed?

Litentry was founded by Hanweng Cheng, a software engineer based in Berlin, Germany. His experience in blockchain dates to 2015 and includes work with Polkadot developer Parity Technologies. In 2019, while still at Parity, he began working on a new identity aggregation project that was built out with collaborators, which eventually became Litentry. Development initially began on Ethereum, but the team switched to Polkadot because of both cost and speed considerations—and Cheng’s history with Parity.

In 2020, the project received a grant from the Web3 Foundation to fund its development. Throughout 2020, it also raised over $20 million through various seed funding rounds and token sales. This culminated in the February 2021 listing of the LIT tokens on the Binance Launchpool, which allowed users to farm for LIT by staking BNB, BUSD, and DOT.

With this financial support, Litentry won Polkadot’s 15th slot auction in April 2022 and launched its parachain in June. Its Kusama-based canary network, Litmus, won its parachain auction earlier in the year. Soon after its parachain launch, Litentry announced its first major product: My Crypto Profile (MCP), which was highlighted by comprehensive decentralized identity features. MCP was a pilot project that was launched alongside the “play-to-build” web3 game PhalaWorld. Ultimately, this led to the launch of Litentry’s IdentityHub.

How does Litentry work?

Litentry’s identity oracle takes data input, processes it, and then provides an output to be used in decentralized applications (dapps) and other services.

The data input is collected and aggregated from multiple data providers. It is then organized into usable forms and processed using both on-chain and off-chain computation. Smart contracts process the on-chain work done by Litentry, using the Ethereum Virtual Machine (EVM) or other computational models like WebAssembly (WASM), whereas the off-chain work is mediated by the Trusted Execution Environment (TEE). Litentry describes the TEE as a black box in which user data is shielded from view from the system, while the system is still able to use and process the data; although the model differs significantly from zero-knowledge technology, the result is similar. Ultimately, data processing results in “verifiable credentials” that can be provided to dapps and other services.

Users interact with the front-end of Litentry, which is called the IdentityHub (IDHub). This is the app through which users create and manage their identities across blockchains.

Parachains

Litentry is a blockchain built as a parachain on the Polkadot network. Its primary operations occur on the parachain (layer 1), but like other parachains its verified data and transactions are ultimately communicated back to Polkadot’s relay chain (layer 0). Collators of the Litentry parachain produce proofs for relay chain validators.

Litmus is Litentry’s sister canary network on the Kusama blockchain. It is a parachain just like Litentry, and its goal is to pilot changes that may eventually find their way to the main network on Polkadot.

How is the LIT token used?

LIT is the native token of the Litentry and Litmus parachains in the Polkadot and Kusama ecosystems, respectively. It is used primarily to pay the network’s transaction fees and incentivize collators to maintain the parachains and ensure transactions are recorded to the relay chain. LIT is also the primary funding mechanism for the project, supporting the parachains through Polkadot’s parachain slot leasing mechanism.

Token distribution

There is a maximum supply of 100 million LIT tokens. Many of these tokens were allocated either to project funding or to the team and developers. Of all LIT tokens, 25% are dedicated to the ecosystem for purposes like staking rewards and other operational functions. The Foundation owns 17% of all tokens, which were intended for use in supporting exchange listings, facilitating market makers, and funding community events. 20% of LIT tokens were allocated to the Polkadot crowdloan, and 15% were given to the development team. Another 20% were used in token sales, and the final 4.5% were allocated to the Binance launchpool effort and partnerships.

Conclusion

• Litentry is a Polkadot-based identity aggregator and oracle that allows users to create verifiable credentials for use in decentralized applications and other services.

• The architecture of Litentry’s oracle involves data input, processing, and usable output. Data processing takes place in the black box of the platforms Trusted Execution Environment, which relies on open source code and prioritizes user data privacy.

• LIT is the native token of the Litentry parachain and its sister canary network, Litmus. It is used to pay network fees, secure the chain, and support development of the project.