context: https://github.com/edmundedgar/did-plc-p2p-guard-rails

Not sure I understand what this does. Can anyone explain?

It is a proposal for a decentralized identifier that wraps an existing did:web or did:plc ID together with an Ethereum address that controls it in order to give ATProto identities blockchain-backed ownership. (So to not have to depend on a centralised server as is now the case.) Beware it's a proposal, this all on testnet.