Bitcoin, as a pioneering cryptocurrency, is not only a peer-to-peer electronic cash system but also a complex adaptive system (CAS) composed of three core formal systems: the individual sovereignty system represented by UTXO (Unspent Transaction Output), the P/NP reality-perceiving mechanism centered on Proof-of-Work (PoW), and the trust code consensus based on blockchain. These three components interact and support Bitcoin’s security, transparency, and decentralization.
In the evolution of the Bitcoin ecosystem, horizontal expansion—building broader global CAS designs on top of Bitcoin—is undoubtedly an important direction. However, beyond horizontal expansion, we can also imaginatively explore Bitcoin’s internal structure for vertical extension. Among these, the most notable is constructing a global digital identity system based on Bitcoin’s most successful product structure—UTXO.
Bitcoin’s UTXO structure supports trillions of dollars in market value, fully demonstrating its strong monetary properties. At the root of these properties lies the implicit state identity embedded within UTXOs. UTXO is the core data structure protected by Bitcoin’s consensus mechanism; the blockchain ensures transparency and trust in UTXO transactions; PoW ensures the security of UTXO confirmations; and the one-to-one mapping between each user’s private key and account system with UTXO ensures its usage security. These characteristics give UTXO a natural potential to serve as a secure and reliable global digital personal identity system.
The key to realizing this potential lies in the ingenious extension of Bitcoin’s existing transaction structure. By embedding additional information into UTXO transactions—using operations like op_return or Taproot scripts—we can append explicit or implicit identity data onto UTXOs. op_return allows a small amount of arbitrary data to be stored in Bitcoin transaction outputs, which can be used to record public identity info or identity-related claims. Taproot, as a more advanced script upgrade, not only enhances the privacy and scalability of Bitcoin transactions but also enables the storage and management of more complex identity data.
A digital identity system built on UTXO offers unparalleled advantages over other approaches:
First, it inherits Bitcoin-level security guarantees. With its massive computing power and decentralization, the Bitcoin network is considered one of the most secure blockchain networks. Any network capable of recognizing Bitcoin transactions can naturally recognize identity data built on UTXOs, thereby enjoying the same level of protection. This security is difficult for emerging identity systems to match in the short term.
Second, the system benefits from Bitcoin’s global availability. As a globally circulating cryptocurrency, Bitcoin’s infrastructure spans the globe. Any location where Bitcoin transactions can occur can, in theory, recognize and verify UTXO-based digital identities. This global accessibility lays a solid foundation for building a truly universal digital identity system.
With such a secure and globally accessible identity system, we can further develop innovative applications. For example, building a decentralized reputation system where users prove reliability with credentials bound to their Bitcoin identity, enabling trust-based transactions without endorsement from centralized institutions. Or constructing privacy-preserving digital inheritance systems, where inheritance information is tied to specific UTXOs and only becomes accessible under preset conditions.
Compared to other digital identity system proposals, vertically extending Bitcoin’s UTXO offers significant advantages. Starting from scratch to create a Bitcoin-like incentive system for identity usage and adoption would face enormous challenges. Unlike currency, identity lacks natural speculative value and thus struggles to establish an effective incentive mechanism to attract users. Meanwhile, identity systems built on centralized world state trees like Ethereum, though leveraging blockchain transparency and immutability, still place control in on-chain smart contracts. User sovereignty over identity is thereby limited—it merely shifts trust from centralized institutions to centralized code.
Only through direct vertical expansion of Bitcoin’s UTXO can users truly gain full control over their digital identities. The UTXO itself inherently contains the user’s implicit identity—that is, the private key holder of the UTXO. On this basis, privacy-enhancing identity extensions can be built using technologies like Taproot, or explicit identity data can be appended using op_return.
Integrating UTXO-based identities into the BitAgere ecosystem of GEB can provide users with convenient identity management and verification tools, and serve as a foundation for decentralized application scenarios (Agere systems).
In summary, Bitcoin’s potential goes far beyond being a digital currency. Its unique UTXO structure holds immense potential for constructing a global digital identity system. Through thoughtful technical extensions, we can project Bitcoin’s security and global accessibility into the identity domain, offering users a truly autonomous, secure, and ubiquitous identity solution. The vertical expansion of Bitcoin via UTXO opens new possibilities for building the infrastructure of the next-generation internet.
