Use Case: How ADIs Leverage Social Connections To Enhance Economic Relationships

Written by TJ

On November 4, 2022

There is a concept in social psychology known as ‘six degrees of separation’ which states that all people are six or fewer social connections away from each other. 

This means that given any random sample of people from anywhere in the world, you can draw a linkage between their social relationships to find a mutual connection no more than 6 relationships away. 

This idea has many profound implications, including the idea that our world is much smaller and interconnected than we perceive it to be. With the advent of the internet and social networks, these links have become even more apparent as well as our capacity to form new relationships and collaborate on projects at a greater scale than in any other time in history 

In the same way that the internet has made the concept of six degrees of separation more relevant, we believe that the emergence of blockchains and decentralized digital identifiers will enable people to leverage social connections in new and exciting ways that are currently not possible with the current system. 

Digital Identifiers refer to a system for assigning unique digital identities to assets, individuals, or entities on the blockchain. On Accumulate, there are Accumulate Digital Identifiers (ADIs), which are human-readable addresses chosen to represent one’s presence on the blockchain. 

ADIs enable more flexibility and deployment of complex operations by issuing a hierarchy of keys with different permissions or levels of security. 

This allows entities operating on the blockchain to more easily build standardized yet scalable protocols for other entities to interact with and exchange sensitive information with them based on their access permissions for specific data sets.   

Using ADI’s, Accumulate can serve as the de-facto communication and audit layer between blockchains, enabling the seamless transfer of tokens or other kinds of digital assets between ADI’s across different chains regardless of their consensus mechanism. 

What this means is that every individual or entity who holds an ADI could potentially run a query that pulls all of their primary, secondary, and tertiary social connections on-chain and across chains. This would enable them to gain instant access to the full scope of their social networks and construct economic relationships based on where each connection falls within the spectrum of the 6 degrees of separation. 

For example, we could envision a lending protocol that structures loan terms that are not solely based on collateral or credit score, but instead based on where the borrowers sit along their spectrum of the 6 degrees of separation. 

If the borrower has a primary relationship with an existing borrower (i.e both borrowers have a pre-existing business relationship) then the interest payments and/or collateral requirements would be lower compared to if the borrower had a pre-existing business relationship with another entity that has a primary relationship with the first borrower, or if the borrower had a  pre-existing relationship with an entity that was 2 or more connections away from the first borrower.   

From a bank’s perspective, it is less risky to lend to a business that earns a significant portion of their revenues from an existing client whom they already trust (e.g a landlord that receives rent from a grocery store that has received a loan from the bank). 

This is in contrast to a business that has no prior or a weak relationship with the client and therefore is not part of the economic chain that the bank is already supporting.

On Accumulate, the ability to identify these types of relationships would become significantly easier overtime as more businesses adopt ADIs to present themselves on-chain. 

Managed transactions (a form of smart contracts on Accumulate) could be coded to operate based on on-chain analysis that identifies primary, secondary, or tertiary connections and adjusts the terms of the loan based on the strength of the connection. 

This same principle could be applied to solving complex logistics problems within supply chain networks, where the ability to identify and form relationships with secondary or tertiary connections could save companies millions of dollars in shipping and transportation costs. 

Ultimately, one of the most important factors for enhancing one’s capacity to leverage social connections is interoperability. Increased connectivity through the internet has accelerated our ability to identify primary, secondary and tertiary relationships and as a result, form new primary relationships that creates an entirely new set of secondary and tertiary connections, thereby exponentially expanding one’s social network. 

ADIs enable individuals and entities to experience this phenomenon through a transparent and permissionless blockchain network. 

By forming a unified communication, audit, and identity layer for the web3 ecosystem, we are expanding each member’s capacity to identify and form new social connections, while enhancing economic relationships through managed transactions that operate based on the degrees of separation between counterparties. 

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