Hassan Maishera
Web3 is often called the next iteration of the internet, and among its many innovations are new ways to implement and manage issues around digital identities. The shift from a centralized model to one that’s decentralized has profound implications in terms of user’s privacy, security and their control over personal data.
Many believe that Web3 will ultimately have a positive impact on user privacy, enabling users to mask their identities and retain control over the information they generate online, to the extent that they can even benefit financially. Yet if Web3 is going to do this, it must find a way around the inherent transparency of the blockchain technology upon which it is built.
The transparency of blockchain is fundamental to the way it works. Because blockchains are open, public ledgers that anyone can view, this enables the nodes that host it to reach the consensus required to process transactions without any need for a trusted and centralized entity. This transparency is also what makes blockchain immutable, because if any node tried to change the details of an earlier transaction, all of the other nodes would immediately know about it and reject the change.
However, this transparency means that everyone’s financial dealings are out in the open, visible to anyone who cares to look. If a user’s identity can be linked to a wallet address, that would mean all of their sensitive financial information and their history of decentralized application interactions is exposed.
Power To The Users
Fortunately, there are some promising initiatives designed to address these concerns, and some of the most encouraging are focused on the idea of decentralized identifiers, often known as “DIDs”. By issuing blockchain users with a unique DID, it’s possible to identify individuals in a decentralized way without relying on a centralized authority or exposing any personal information about that user. Users can manage and control their DIDs themselves and selectively disclose any information they choose.
Innovations around identity are seen as one of the biggest opportunities for Web3. They represent the ability to democratize online experiences and give users control of their personal data. They can also make it possible for dApps and service providers to customize each user’s experience, and even give users the opportunity to sell their data if they wish. This will have significant implications for industries that require access to data, including AI and online advertising.
In order to deliver on this opportunity, the Web3 industry needs to devise effective and user-friendly ways for people to share and manage their data.
This is exactly what DIDs are intended to deliver. DIDs are defined as user-controlled self-sovereign identities that live on the blockchain, independent of any centralized authority. That means there’s no need for users to provide sensitive personal information to companies, which inevitably store that data on centralized servers, reducing the risk of data breaches. DIDs are owned entirely by the users who create them, so no one else can access the data within them without the express permission of the user
DIDs are based on the idea of verifiable credentials, which are digital statements made by an issuer about an individual. By storing these credentials on the blockchain, we can make sure they are tamper-proof and verifiable, without exposing any personal information. This system means users only ever have to share their personal information once, with a verifier, without exposing it to any other entity.
DIDs can be used for a wide range of Web3 purposes, such as proving one’s age to access a restricted service, verifying an identity to be able to vote online, pass KYC checks, prove the user’s expertise or education, and more besides.
Blazing A Trail
A number of Web3 projects are already working hard to make DIDs a reality, with some of the biggest names including Polygon ID and Fractal. Those projects are primarily focused on decentralized finance, enabling dApps to perform KYC checks on their users and boost their legitimacy in the eyes of traditional institutions. They’re having a big impact in terms of making DeFi more accessible for traditional finance, and have the potential to spark rapid growth in that industry.
For end users, some of the more consequential impacts of DIDs can be found in social media and blockchain gaming. A project called cheqd is making big waves in terms of social media communities in the crypto space, enabling users to mask their identities while proving their reputation across platforms. In this way, a highly respected moderator on Telegram can use their cheqd credentials to prove their status on another platform, such as Reddit or X. Other applications include gating Discord and Telegram rooms to only those users who have engaged with a certain account on X, for example.
In gaming, one of the most progressive projects is CARV Protocol, which is a modular data layer for blockchains that’s designed to facilitate the seamless exchange of information and value across the Web3 gaming and AI industries. CARV uses the new ERC7231 standard to issue users a personal DID as an NFT, enabling them to prove their identities and their gaming history without revealing it to anyone.
By creating a CARV ID, users can own, control, verify and monetize their Web3 data. CARV Play is a cross-platform credentialing system that has also grown to become one of the industry’s major gaming distribution platforms. It enables players to immerse themselves in various games while using a single identity encompassing all of their data. One of the best things about CARV IDs is that users have full control of who can see their data. This has paved the way for users to earn a “lifetime passive income” by sharing their personal information. For instance, they can share their data with advertisers, for example, or AI companies that need data to train their new AI models. For games developers, CARV also provides tools for them to reach out to CARV gamers and build better relationships with them.
A Paradigm Shift Is Taking Place
CARV’s model has emerged as a showcase for the potential improvements Web3 can bring to users. With its strong cryptographic security, its clever use of the ERC 7231 standard to enable private data sharing and its powerful incentivization model, it has proven to be very appealing to a Web3 audience that’s known to be extremely concerned about online privacy. That explains why it has already sold its promise of Lifetime Membership of Passive Income to more than 920,000 unique individuals.
Protocols such as CARV, and others like cheqd and Polygon ID, look set to redefine the way digital identities are verified and protected, introducing an era in which users have more control and privacy than ever before. As the Web3 industry shifts further towards this new paradigm, the onus falls squarely on developers and organizations to adapt to this evolution.
