When it comes to Web3 and its pillars of distinction from what we know as Web2 today, identity sits at the forefront of this emerging technology. The internet was created without a native identity layer for people. The digital identity issue was relegated by websites and applications relying on centralized authorities (Facebook, Google) to encompass the many policies, services, and technologies. This allows organizations to verify users and levels of access. Even though legislative breakthroughs such as GDPR in Europe and CCPA in the U.S., centralized identity (a process of authentication where usernames and passwords continue to be the dominant paradigm) have been a way of controlling the narrative and algorithmic base approach. This form relies on users not owning their online identity but instead interpreted as space users rent from centralized entities, giving users a trade-off mechanism “We give you access in exchange for your data.” Platforms gain many insights from likes, dislikes and preferences which is why Web3 looks to change this method with a renewed emphasis on creating robust identity applications as its success and key differentiator.

Decentralized Identity (DID)

To autonomously participate in these interconnected Web3 landscapes as your own unique person, Web3 enables users to distinctly characterize themselves through the ecosystem using Verifiable Credentials. Verifiable Credentials have become digital passports for Web3 or unique stamps that attest to specific information about an entity associated with their digital ID. In the physical world, identity is integral to a well-functioning society. Passports enable governments to identify their citizens, driver’s licenses allow citizens to claim rights to the road and university degrees attest to specific qualifications. Similarly, DIDs will enable high-value internet economic activity to become the ecosystem we prescribe value to, similar to how these external factors do in the real world.

The (DID) Ecosystem

Decentralized Identity (DID) gives individuals control by providing users with security, privacy and portability. In this self-sovereign form of identity online without third-party authenticators and centralized authorities, users are no longer locked into a single ecosystem with siloed approaches. Playing a pivotal role in this method is Self-sovereign Identity (SSI), a digital identity management concept in which an individual or company retains total control over their accounts and personal data. Individuals with SSIs can keep their data in their digital wallets and use it for verification, special access, and transactions. A digital wallet record, save users’ activities and affinities on-chain ( it would be public upon request and easily searchable via their individual crypto wallet) through encrypted identifiers, making it a part of their digital identity. The encrypted identifiers are machine-readable, self-sovereign, and use Blockchain as a trust anchor (smart contracts). These decentralized Identifiers can be traceable, tamper-evident (Blockchain), and globally unique on various protocols in Web3, providing an extra layer of protection and privacy to share information they want to reveal to specific parties.

Powered by Blockchain

Blockchain is a digitally distributed database shared among nodes (computers in the blockchain network), making it difficult or impossible to change, hack, or cheat the system. The nodes execute functions like sending and receiving information, allowing everyone in the network to have the exact source of truth about which credentials are valid and who authenticated the validity of the data inside the credentials. This establishes trust by maintaining a verifiable registry (or records) of DIDs, Proof of certificates issued, and public cryptographic keys.

Personal Digital Backpack

Information about those interactions is recorded passively when a person’s wallet interacts with apps or sites. For example, if your wallet were attached to a specific community, such as on Discord and you earned server badges, that will give the user incentives for different use cases. So dependent on the Web3 platform you are interacting with, the user can share specific credentials to the public as supporters of a community, showing particular interest or past experiences you took part in as a way to communicate, proof, or interact with others in Web3. A universally accepted standard for exchanging and verifying digital credentials.

The Digital Ecosystem by layer (Bottom to Top)

Layer 4: Blockchain — Apps Wallet Products

Layer3: Decentralized Identity Wallet — Credentials

Layer 2: Decentralized Identifier (DID) — Infrastructure

Layer 1: Verifiable Credential (VC) — Identifiers and Standards

Layer X: Holder (an individual in the scenario), Issuer (organization), Verifier (prove the legitimacy and trustworthiness of information)

The New Digital Identity Ecosystem

By curating an on-chain graph of a user’s prior achievements, investments and community support initiatives, this on-chain backpack becomes users’ form of identity, changing how individuals record experiences, accomplishments, professional achievements and fanships. This ability will transform how people self-identify in the future. Decentralized identity is the future of the web governed by the contributions one accumulates over time. An example of that can be contributing towards a shared community mission, helping to share the initiative with others and giving them higher status. These contributions will become significant to citizens, forming a portable identity system unique to the Web3 world. They’ll become the carrier signals of who the users are and their basis for reputation.

Contributions in Web3

• To identify and reward the users who have contributed value to a Web3 platform — a form of signaling on chain history that users can parlay into public reputation.
• To provide a form of compensation that enables contributors to liquefy some of the value they have created into an exchangeable currency.

This holistic approach removes the barriers and is archived only through the user’s interactions and hours spent. Time and interactions mean something Web3 can help users gain more access and unlock IRL and URL experiences. This idea has already been conceptualized with NFTs incentives and Metaverse fashion as another form users are using to define and express themselves outwardly in virtual universe.

Phygital

In a Web3 space, a decentralized identity system tracks each person’s movements, contributions, and achievements in the community, including URLs and IRLs. This three-dimensional form of identity becomes an interconnected reputation system beyond the internet, where users can utilize their accumulated reputation value across communities or platforms.

No longer will people identify solely through appearance, race, gender, or brand affiliation, but more importantly, they will look to what contributions and affiliations a person has made as the determining factor in multiple sectors. From the next community, users will participate in Web3 to their next job application. The opportunity to receive recognition and rewards comes from set actions and supporting others breaking the siloed approach.

(DID) Technology to Explore

• Rabbithole Application that encourages people to use Web3 projects by allowing them to earn points and crypto. Rabbithole uses Ceramic’s network to link multiple Web2 and Web3 accounts into a unified, cross-chain DID, and allowing the user’s reputation to span across other Web3 applications.

• ArcX A decentralized app that provides on-chain credit score and identity through the issuance of a “DeFi passport.”

• Violet aims to authenticate off-chain, personally identifiable information on-chain.

• Polywork and 0xStation allow users to record professional achievements on-chain

• Koodos helps map disparate affinities on-chain by enabling people to turn any content on the internet into a customizable NFT, creating a collection that meaningfully represents who they are online.

• Etherscan a navigator for transactions on the ethereum blockchain — that would allow users to view all of a wallet’s interactions within a specific type of activity, for example, activities associated with community service.

• Ceramic helps applications keep track of high volumes of mutable data and encode relevant information on-chain, allowing viewers to compare people’s contributions to distinct projects at a high level.

• Startupy incentivizes experts to contribute startup knowledge and gain an internet-wide reputation in specific domains.

• Friends with Benefits a a place where artists and creators are rethinking how they can connect with their fans and monetize online. FWB is new type of social community using tokens for access and rewards.