Web3 & decentralized identities have been around for a few years - early projects date back to 2015 - revolutionizing our online identity: an aspect of our digital lives we couldn’t control before now. In 2023, the spotlight shone brightly on DIDs with the launch of Sam Altman’s pet project, Worldcoin, sparking a renewed interest in DID projects. DIDs, with their focus on decentralization and self-sovereignty, are stored on the blockchain, providing users with a level of security and transparency that was previously unattainable. This singular advantage - amongst many - is gradually making DIDs a go-to solution to mitigating and preventing data breaches, identity theft, and privacy violations, which are concerns associated with traditional identity systems.
Traditional Challenges & The Promise of Decentralized Identity
Traditional identity management systems are centralized, posing significant challenges. A primary issue is the vulnerability to data breaches by cybercriminals; when systems are compromised, sensitive personal information is exposed. This exposure causes financial losses and loss of trust in the institutions by the millions entrusting this data. But it's not just data breaches that are a concern. Other vulnerabilities include the potential for identity theft, the misuse of personal data for targeted advertising, and the lack of control individuals have over their information. This dilemma depicts another drawback of traditional identity systems: individuals need more control over their data, whether it is about storage or how it is used and shared. Because of the oversight, companies often monetize the data they store without explicit consent from their owners. Users are not blind or oblivious, as they have raised ethical concerns while their mistrust grows. Furthermore, users must worry about getting their identity stolen by a hacker and being impersonated for fraudulent activities. Now add the trauma of impersonation with the long, difficult process of recovering from identity theft, plus the financial strain and we have a scarred individual.
One of the most notorious examples is the 2017 Equifax incident, where the personal information –Social Security numbers, birth dates, and addresses– of about 147 Americans, along with 15.2 million British citizens and about 19,000 Canadian citizens, were exposed, making it one of the largest identity theft crimes. Another infamous incident is the Facebook-Cambridge Analytica scandal, where millions of Facebook users' data was harvested and used for political advertising without their consent. So you see, it doesn't matter whether it's an individual or an institution; traditional identity management is inadequate.
Blockchain solutions offer much-needed relief to users at the mercy of centralized entities, empowering them to control and verify their identity without exposing sensitive information to third parties. This shift in power serves as a cornerstone of privacy and trust in the Web3 ecosystem, significantly reducing the vulnerability and unease that traditional systems often bring.
DIDs and Their Relation to Blockchain
DIDs serve as unique and tamper-proof identifiers, making them ideal for application in identity management. There are multiple categories related to DIDs, and here they are:
Decentralized identity solutions, a category that empowers users with control over their digital identities, are built on the fundamental components of decentralization.
Self-Sovereign Identity (SSI): SSIs are closely tied to DIDs, as their frameworks rely on DIDs. With an SSI, users can authenticate themselves and share their credentials selectively, ensuring their personal data is secure and under their control.
Verifiable Credentials: This category involves using DIDs to issue and verify digital statements about a subject. These verifiable credentials can be used to prove things about a person or an organization, such as age, qualifications, or membership in a group.
The relationship between DIDs and blockchain technology is fundamental. DIDs incorporate privacy-preserving features while enjoying the robustness and security of the network in which they are generated.
Notable DID Projects
The growth of DIDs has been rapid in recent years with multiple projects entering the ecosystem and the existing ones solidifying their presence by adapting and transitioning. So, as the world anticipates the holistic shift to Web3, which DID projects are taking charge and onboarding users with unique decentralized identity management? Let’s compare the builders pioneering DID technology.
Ethereum Name Service (ENS)
ENS provides human-readable names for blockchain addresses, i.e. replacing the hexadecimal address with a familiar name like “Bob.eth.” In February 2024, GoDaddy Inc. partnered with ENS to connect user’s names to their web domains. In April 2024, ENS also integrated .box domain names which is the first on-chain TLD (Top Level Domain) included in the ENS manager app alongside the .eth TLD. As of March 2024, Google has integrated ENS data into its search results, meaning you can search for .eth names and view on-chain information.
Pros
Multiple utility
User-friendly integration with Ethereum ecosystem
Cons:
Limited to Ethereum
Scalability issues
Worldcoin
Worldcoin has a unique approach to identity, using World ID, a verifiable digital identity credential for each user that contains their biometric data (scanned iris). The goal is to facilitate one account for one user across platforms. In the works is Worldchain - a Layer two which will prioritize human engagement over automated systems. There are also talks of upcoming collaborations with giants like OpenAI & Paypal.
Pros:
Inclusive to everyone
The inclusivity creates potential for wider adoption
Cons:
Difficult to implement especially in rural areas
Valid privacy concerns about biometric information
Civic
Civic enables identity verification to prevent AI deep fakes, unattributed content, cat fishing, sim swaps, sybil attacks, identity fraud, etc while reducing the complexity and cost. Civic applies to businesses due to the streamlined process. Civic can help projects detect and prevent sybil activity on their platform eg: airdrop farmers making micro-transactions with multiple wallets. According to the website, they have served 570+ projects, has issued 925k+ Civic passes and millions of bots blocked.
Pros:
Streamlined identity verification and management
Easy access and usage
Focused on security
Con:
Because of the focus on verification, there is limited need for the use case
PrivadoID (FKA PolygonID)
While Civic is identity verification-centric, PrivadoID focuses on digital identity privacy that leverages zero-knowledge proofs. Users can manage their credentials on their devices, with passwordless logins and confidential information sharing. In September 2024, PrivadoID and Disco.xyz merged to offer a more unified identity service.
Pros:
Privacy
Compabitible with Ethereum
Scalable because of Polygon network
Cons:
Might take longer to adopt and difficult to integrate as well
New
BrightID
BrightID is an innovative project that provides DIDs using a social graph to ascertain the uniqueness of the owner. BrightID enjoys network effects while fostering trust and collaboration among users in each community.
Pros:
Private; no need to reveal more than necessary
Community-oriented
Cons:
Heavy reliance on network effects
Early stages
SpaceID
SpaceID is dubbed the ‘universal domain for blockchain’ as you can register and manage your names across different blockchains.
Pros:
Cross-chain functionality & interoperability
User-friendly
Broad applicability
Cons:
Limited adoption in and outside crypto
Cross-chain functionality & interoperability are not widespread yet
Challenges of DID Projects
Interoperability
A significant challenge DID projects must overcome is interoperability. Identity solutions will one day be a dime a dozen, proliferated like the chains they're built on. It's one thing to have a plethora of DID businesses; it's another to make them work together. Without interoperability, users are limited to specific ecosystems. Therein lies the problem.
Regulations & Compliance
The regulatory landscape is complex. Navigating it is another critical hurdle DID projects face because while they offer numerous benefits, they must comply with existing data protection laws (e.g., FINRA, FedRamp, HIPAA, GDPR). So, it is paramount to balance everything.
Scalability
As with many blockchain-based solutions, scalability is a concern. This is linked to user adoption; to accommodate the needs of numerous users, DID systems must be able to handle large interactions while compromising neither performance nor user experience. This is a pressing need as more users are onboarded to DIDs.
Adoption
For DID solutions to succeed, widespread adoption must come first. This will be done by overcoming the inertia of established systems and convincing users to switch to DIDs, which is a challenging feat.
Technicalities
Are DIDs easy to build? Do existing projects release code and SDKs to facilitate building on and integrating their protocols? Complexity slows development and makes adoption cumbersome, especially for those less familiar with the technology. Builders should ensure their platforms work together.
The Future Trends of Decentralized Identity
The future is exciting and promising, and as the demand for better identity systems increases, we expect to see some trends:
More Integration and Interoperability: As more platforms adopt decentralized identity standards, integration with existing systems will improve, creating a seamless user experience. Efforts to standardize decentralized identities (DIDs) will enhance interoperability, allowing users to manage identities across different platforms.
Privacy and Security Enhancements: Innovations like zero-knowledge proofs will bolster the privacy and security of DIDs, strengthening trust and encouraging broader adoption.
Regulatory Developments: As regulators become more familiar with blockchain technology, clearer guidelines will emerge, supporting DID adoption while ensuring consumer protection and promoting innovation.
Wider Adoption and Technological Integration: Growing awareness and technological advancements will drive wider adoption of DIDs. Integrating emerging technologies like AI and IoT will create more robust identity management solutions.
In conclusion, DIDs are crucial for decentralized identity solutions, offering users greater control over personal data and reshaping digital identity management. By exploring these projects, we have gained insights into the transformative potential of blockchain in identity management. And as the technology matures, we expect significant advancements in decentralized identity management.
