Unlocking the Potential of Digital Identity in Web3

Web3 is reshaping the way we use the internet. As blockchain grows and evolves, our digital identity also gets an upgrade. It becomes more secure, private, and more flexible than ever before. Let’s see how it works and why should you care.

What is digital identity?

Digital identity allows you to prove who you are online. It consists of certain characteristics or data attributes, such as:

• Username and password
• Online search activities
• Date of birth
• Social security number
• Medical history
• Purchasing history and behavior

So basically, your digital identity is the content and data you produce or share online — your emails, photos on Instagram, credit card numbers, your mother’s maiden name, etc. It’s your data, right? But the thing is, you actually don’t own any of it.

From the moment you add your data to the internet, it becomes a property of the platform you share it on. And it’s not just stored there. The platforms can sell this data as they want. Of course, you’re not getting your fair reward for sharing your data with service providers. You’re getting ads!

You share your personal information to be able to communicate online, share your content, do shopping, etc. And it seems like a good bet. Until your data get stolen. And social media platforms have been compromised quite a lot. For example, last year 533 million Facebook users’ personal data were leaked online.

The data set has been posted hacking forums for free, making it available to anyone with rudimentary data skills.

Where does this leave us?

1. Our digital identity does not belong to us. We can’t control how our data is used.
2. Companies that store our data cannot guarantee security. Data breaches happen all the time.
3. Our digital identity can be stolen and compromised.
4. Digital identity is not transferable, meaning we can't just move from one platform to another freely.

Blockchain technology can be a solution to all these problems and will help to level up our digital identities.

Digital identity in web3

Identity in web3 is based on the idea that each person online will have a unique identifier stored on a blockchain.

It would be owned by users, backed by on-chain data, and have the ability to be linked to any piece of software.

Let’s see how it works.

How does digital identity work on a blockchain?

The core of the idea of decentralized identity is self-sovereign identity (SSI).

Experts distinguish 3 pillars of self-sovereign identity: blockchain, Verifiable Credentials (VCs), and decentralized identifiers (DIDs).

Blockchain: A decentralized digital database distributed among computers network. All data stored on the blockchain is recorded in a way that makes it very difficult to change, hack, or cheat the system.

Verifiable Credentials (VCs): Digital cryptographically secured and verified credentials that implement SSI and protect users’ data. These can include versions of both paper and digital credentials that people can present to organizations that need them for verification.

Decentralized Identifiers (DIDs): Cryptographically verifiable identifiers created and fully owned by the user.

You can have a DID for your interests, professional purposes, or to access different crypto-related apps & services that need to verify your identity for trading and investment activities.

So, instead of having a company own your identity and then granting you access to other applications — in web3, you will own your identity and choose which applications to interact with.

This is accomplished by using a digital wallet such as Metamask (for Ethereum and ETH-compatible blockchains) or Phantom (used on the Solana blockchain).

Your wallet becomes your identity, which can then allow you to use various decentralized applications on the internet that need to interact with your currencies and property. This includes decentralized finance applications, as well as metaverse experiences that will draw upon interoperable avatars, items for self-expression, game items, etc.

You can create multiple wallets which means you can have multiple identities within the blockchain.

Whenever using a blockchain app, you are a user of the entire network and not just a user of a specific app. So it solves the problem of having to create a username and password every single time when you sign up for a website. You just have your private key which is like your password on the blockchain and then your address which is like your username.

Your key and address can represent you on every single application and there is no need to manage your passwords and usernames within apps.

Here are 5 characteristics of decentralised identity:

1. Control — users are in control of their identities.
2. Ownership — users have access to their own data without the interference of intermediaries.
3. Transparency — blockchain operates on transparent systems and algorithms. The decentralized identity systems use an encryption mechanism so that no external actor can tamper or change the data.
4. Portability — information and services about identity are transportable.

Blockchain solutions are offering a foundational identity layer that enables inherent information transferability. What it means is that users will be able to move across platforms without losing their profiles:

5. Interoperability — identities should be as widely usable as possible.

That means that user wallets will have wider functionality in the future.

For example, Mirror announced web3 subscriptions, allowing readers to subscribe to any Mirror publication with their wallets and receive notifications for new content.

At Tapx, when you connect your wallet, you can save your favourite blockchain brands in MyTapx to shape and organise your web3.

As Jay Drain Jr. mentioned in his article on the potential of digital identity, a crypto wallet is the most important piece of a user’s journey into web3. It’s one of the first things we all need to have when going down the crypto rabbit hole.

As blockchain technology grows and evolves, we’ll see how we can access all the services available with the wallet we have. It will be much more than just a log-in option.

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Now, you might be wondering, who are the web3 brands that are working on the next-gen digital identity?

Well, that’s a good question. Here are 3 blockchain companies that are focused on upgrading our online personalities in web3.

Polygon

Earlier this year, the Polygon team announced they are working on a new product — Polygon ID. It’s a decentralised identity powered by zero-knowledge proof.

The product portfolio includes wallet app, ID platform, and public service platform to integrate access across user wallets and applications.

Polygon ID leverages the Iden3 protocol and Circom ZK toolkit.

Dock

Another example of reshaping digital identity in web3 is Dock Certs. It’s an all-in-one suite of Verifiable Credential (VC) tools built for organizations to issue digital credentials and certificates.

Their newest product called Web3 ID is a blockchain-based authentication and authorization system that allows organizations to securely request private user data and the user has the option to give permission to reveal the information or confirm it without revealing the data at all.

SpruceID

Another piece of web3 infrastructure working on developing digital identity potential is Spruce ID. SpruceID is an ecosystem of open-source software tools designed to enable users to control their identity across the web.

SpruceID’s products DIDKit and Rebase also will supercharge wallet functionality by enabling use-cases like credential verification for DAO governance, NFT authenticity confirmation, and social profiles linked to public keys.

Key takeaways:

• With blockchain, your online identity becomes more secure and trustworthy because it’s not controlled by any single entity with centralized servers that can be hacked or compromised.
• Having control and ownership of your digital self will enable people to manage their entire life online. Instead of relying on big corporations to store and manage our data, we are in charge of how we use it.
• Identity in web3 is based on the idea that each person online will have a unique identifier stored on a blockchain. It would be owned by users, backed by on-chain data, and have the ability to be linked to any piece of software.
• Your wallet becomes your identity, which can then allow you to use various decentralized applications on the internet that need to interact with your currencies and property.
• As blockchain technology grows and evolves, we’ll see how we can access all the services available with the wallet we have. It’s much more than just a log-in option.
• Centralized web2 platforms like Meta are not going away anytime soon. They will still exist because they provide value to many users, but now there will be an alternative option available for people who want to own and control their data.