At Blockstack’s 4th Annual Summit, held on October 23 in San Francisco, angel investor and entrepreneur Balaji Srinivasan defined pseudonymity and explained why we should consider a pseudonymous economy.

What is Pseudonymity?

First things first: what, exactly, is pseudonymity? Srinivasan started by comparing 3 forms of online identity today:

• Real name, used on platforms like Facebook
• Pseudonym, used on sites like Reddit and Twitter
• Anonym, used on sites like 4chan that are designed to be anonymous.

“Pseudonyms are interesting because they’re not your real name, but they are persistent…and you can build up reputation on them,” said Srinivasan. “For example, you can build up Twitter followers or Reddit reputation.”

The concept of “33 Bits” can help measure pseudonymity. The idea is that there are about seven billion people in the world, and two to the 33rd power is about eight billion. So with 33 independent bits of information, you can fully de-anonymize somebody. If you have 10 bits of uncertainty about somebody, they’re within a set of two to the 10th, or about a thousand people. And if you have 20 bits, it’s about two to the twentieth – or about a million people. So pseudonymity is in a continuum within that 33 Bit range.

Srinivasan pointed out that pseudonymity is now mainstream: even Mitt Romney has a pseudonymous Twitter account. Middle and high school kids school often have one Instagram account under their real names for their parents, another one under a pseudonym for their friends. So the ability to toggle between multiple social media accounts – which was originally developed so that people could switch between their personal and corporate accounts – has led to everyday people having main and pseudonymous “alt” accounts.

Why Should We Want a Pseudonymous Economy?

We have freedom of speech, but in today’s social media climate, there can be serious blowback if you make a misstep. “A Twitter mob can come and descend on you,” quipped Srinivasan.

Negative press could have serious consequences for your business; interested investors could pull their funding and partners could drop out. Even sharing an article with controversial political views can have unforeseen repercussions. But if it’s shared under a pseudonym, the stakes are different. “There’s no action. They’re practically immune. The pseudonym can be surrounded by all kinds of negative adjectives, but the person walks away unscathed.”

How Would a Pseudonymous Economy Work?

“If your bank account is your stored wealth, your real name is your stored reputation,” said Srinivasan. “And while you need a PIN to go and debit from your bank account, anybody can debit from your reputation by just swarming you on social media.” You are in control over your finances in a way aren’t with your reputation. One strategy to safeguard your reputation, he suggested, is to diversify it: earn under one name, speak under another, and use your real name only on official forms such as government visas or similar.

How Do We Build It?

If you diversify, can you migrate your social “wealth” – your reputation – to a new pseudonym account? Srinivasan says yes, and points to Twitter as a case study. “What I’m going to ask you to sort of imagine is a crypto version of Twitter where certain parts of the backend are decentralized. It’s the kind of thing you might be able to build with Blockstack, for example.”

You start with a Twitter account with your real name, so you have 0% pseudonymity and all of your distribution, reputation, and followers. Then you set up a second account with 100% pseudonymity, but zero followers. If you migrate your verified information from your primary account to the pseudonym, you can bootstrap the new account. “You can just make one click, set up a new account, move over some reputation… you can start speaking. So this radically increases the utility of a pseudonym.”

The flip side: If you migrate identifying information to your new account, you’re also giving up about 10 bits of anonymity. But you can see how many followers you’d gain through auto-follow distribution. To Srinivasan, that freedom to make those choices is invaluable: “What’s interesting is that we’ve started to actually quantify the degree to which we’re trading things off by using this quantification of pseudonymity.”

To watch Balaji Srinivasan’s full talk, visit the Blockstack Summit site.