The five-person Distributed Systems team has been working on an identity standard for decentralised app developers dubbed Clear Protocol. Founded in 2015, the business raised $1.7 million last year and has recently engaged in acquisition talks with multiple prospects, including Facebook and Robinhood before plumping for Coinbase.

The idea is to create a product built on KYC data collated by Coinbase on its 20 million customers that will act as an identity verification service, securing user identities on the blockchain for future look-up by authorised third parties. The individual retains ownership and control of their digital ID while traversing the wider Internet.

Coinbase Identity project manager B Byrne, explains: "Think about how this applies to something like a Social Security number. Every time you want to prove who you are with your SSN, you need to give away a copy of it. That copy has exactly the same power as the original, so when there’s a data breach with copies of your data it puts your identity at risk. A decentralised 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."

He says the idea raises new questions about anonymity, privacy, and how permanent the different pieces of our identity should be, but believes that "ultimately, decentralising online identities will transform our relationship with technology".

Terms of the acquisition were not disclosed.