OK, I see where you are going. Using crypto and web-of-trust as an identity system is really using it as a reputation system. I would point out, however, that t

OK, I see where you are going. Using crypto and web-of-trust as an identity system is really using it as a reputation system. I would point out, however, that the cryptographic identity is not a "hard and fast identity", at least not in a way that's useful. As you point out, I've met Bob, I trust Bob and Bob's an old friend. I know Bob's cryptographic identity, but I also know that identity could be compromised at any time. However, if I know Bob I'm much more likely to realize that. The reputation system tied to that identity could also be compromised, the difference is I'm much less likely to find out until it's too late and the potential harm to me is very high (lets say the government is operating a Silk Road honeypot). That brings us back around to the problem of identity. If I know and trust Bob then his utility is higher. Which is the point of the "web of trust", it (sort of) builds that utility system in. I personally know Bob and know he's pretty sharp. He knows Jim and has signed Jim's key, but I don't know Jim and I'm taking Bob's word for his identity. Jim knows someone as well and has signed their key, but now we're getting pretty far removed from Bob. Their utility (in this case their utility at confirming identities) is getting smaller for me. I'm less inclined to trust them. But Bob, Bob's an old friend. So I see where you're going, but I still think "identity" is the critical factor.