Project Liberty, is a federated trust & identity based scheme. It was created as a "Microsoft Passport Killer". A couple of years ago, MS was pushing Hailstorm and Passport as a mechanism to centrally control identity and schema based data. The fine folks over at Sun (and friends), came to the conclusion that they didn't want MS to control all of the user id's in the world - and for good reason. Thus, they came up with a specification to decentralize identity & trust. The program came to fruition just after the September 11th tragedy, and was given the very awkward name, "Project Liberty" - I guess they felt that they were 'liberating identity' or something like that...
Well, Project Liberty did what it was supposed to do. It created an alternative means to accomplish the same goal as Passport, without handing over the family jewels to MS. However, Project Liberty was created prior to the creation of the WS-* specifications. This means that for the most part, it has overlap with some of the newer specifications created, like WS-Trust, WS-Privacy and WS-Metadata.
I'm a huge fan of "concern-based protocols". Thus, I like having 'trust' as its own protocol - and 'privacy' as another protocol. I don't like mixing concerns in a single protocol; which I believe Project Liberty is guilty of. From a cursory view, it is appears as though WS-Federation covers the bulk of what is actually needed. I'm not an expert in this area - but so far, it looks 'good enough'.
The Project Liberty group recently published a paper comparing the approaches. Although the paper attempts to subtly convince the reader that their approach is better, for me, it has the opposite effect. They basically claim that they have successfully lumped a bunch of standalone concerns into one specification. In addition, they did it prior to the existence of the WS-* specifications, thus the implementations that are available won't be technically aligned with the needs of the next generation web service developer.
I'm not ready to say, "let's kill Project Liberty"... yet. But, I am mentally preparing for the funeral. In my opinion, Project Liberty did what it was supposed to do: force Microsoft down a standards based decentralized ID system. And this is exactly what happened... thus, I consider the project a raging success. But it served its purpose and now it may be time to move on.
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