Home NFT & Blockchain An Overview of Web3 Identity in 2023
An Overview of Web3 Identity in 2023

October 12, 2022

An Overview of Web3 Identity in 2023

October 12, 2022

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You have probably heard of “Web3” more than a few times within the last few years. Maybe someone was discussing it at work; you saw the term when scrolling Twitter or at dinner when a friend was impressed by Dogecoin taking SpaceX to the Moon. Regardless of what the source was, Web3 is definitely gaining popularity. 

However, it is vital to understand that Web3 is still in its infancy. Therefore, it’s rapidly evolving, and experts believe that the industry will continue to evolve for quite a several years. Even though the impact and ultimate form of Web3 won’t be able to evolve fully anytime soon, we do have a clear understanding of its working principles and foundation elements. 

Related: Explore what Web3 means and how it was developed.

The Web3 industry has experienced growth over the last few years. Non-fungible tokens (NFTs), decentralized finance (DeFi), and decentralized autonomous organizations (DAOs)., to name a few, received immense interest from both media and investors. In addition, experts strongly believe that these sectors will only grow, predicting the industry’s growth in revenue of USD 81.5 Billion by 2030, at a CAGR of 43.7% 

As a result, the meaning of Web3 identity also grows, as it works as a fundamental element for Web3 development and as a key driver for realizing the full potential of decentralization. This article will dive into digital identity in Web3, its uses, pros, cons, and the future.

Related: Explore how to develop a Web3 app in 2023

What is Web3 Identity?

In Web2 (the previous version of Web3), a person’s identity varies. One identity can be used to sign into Google, while another can be used to sign into Facebook and more options. Even if the same person uses the same email address for all services, they will still require the user to create separate accounts using separate login credentials.

With Web2, users give access to personal data in exchange for using its platform. This platform will then send your data and own it in a sense. In contrast, Web3 provides a completely different experience, allowing users to have a single identity that’s tied to their digital wallet.

Instead of setting up a separate account on every service, Web3 lets users connect their digital wallet to an application or platform. And the connection is exactly what allows users to decide what data to share. Therefore, users do not need to subject themselves to hundreds of emails clogging their inboxes simply because they signed in to a specific platform. Web3 also allows users to decide whether they want to give the business access to their email when connecting the digital wallet.

To put it simply, the goal of decentralized identity is to give people official proof of identity and also allow them to control their identities in a secure and user-friendly way. Verifiable proof of identity is also required by some services and platforms, like healthcare, banking, and education.

web3 identity

Issues With Digital Identity

User Experience

Since digitalization and Web3 identity puts users at the center of a company’s business operations and decisions, they have to get a seamless user experience. However, it seems to have become a great challenge for all digital applications. Developers should focus on the customer journey while also making sure they launch customer-centric solutions. Finding the perfect balance between user security, usability and convenience may become one of the most significant challenges for digital ID solution providers.

Scale and Coverage

Since digital identity can be a hassle and does not guarantee security, one of the main challenges of Web3 identity will be persuading users to adopt digital ID solutions. And this also adds another layer of complexity for development companies since they should make the process as smooth as possible, ensuring the protection of user data. Remember that users avoid unproven systems, which may prevent your product from further development.


Developers should monetize their software solutions which require users to go through digital identity by asking to pay additional fees for digital ID applications. Even though there is a growing number of cases where users are willing to pay, mainly in developed European countries, the volume is still small, and there is no guarantee it will grow in the future.

Self-Sovereign Identity in Web 3.0

Digital identity, mainly self-sovereign identity (also known as SSI), is key to enabling Web 3.0 since it is all about decentralization and data privacy. While Web 2.0 is characterized by careless data sharing and its uncontrollable use for commercial purposes, Web 3.0 changes that paradigm giving users control over their data.

Self-sovereign identity (SSI) is considered to be the most efficient way of digital identity for Web 3.0. SSI refers to the method of identity that centers on the control of user data. Enabling Web3, SSI eliminates the need to store personal data entirely on a central database and allows users greater control over what information they share while protecting their privacy. Being a fully user-centric and user-controlled approach to exchange digitally signed information, SSI is believed to be also the most secure way for digital identity in Web3.

As the name suggests, SSI technology allows users to self-manage their digital identities without the need for third-party providers to store and manage the information. The three main plates in the SSI system are:

  • Holder: The individual creates a decentralized identifier using a digital wallet app and receives Verifiable Credentials.
  • Issuer: Party with authority to issue Verifiable Credentials.
  • Verifier: Party checking the credential.  

To stay efficient and secure, SSI technology works following these key principles:

  • Existence: Users should be able to exist in the digital world without relying on a third party.
  • Control: Users should get the entire authority over their digital identities and the information they share.
  • Access: Users must always have seamless access to their personal information.
  • Portability: Users must have an opportunity to easily bring their identities and credentials anywhere and share their data from one platform to another.
  • Interoperability: Identities should be used as widely as possible by various systems. 
  • Consent: Users must give permission for an entity to use or access their data. 
  • Minimization: A digital identity solution must allow users to share the least possible amount of information that another party needs to minimize the risk of stealing sensitive personal data.
  • Protection: Users’ rights to privacy must always be protected, and safeguards should exist against tampering and monitoring information. In addition, data traffic must also be encrypted end-to-end.
digital identity

Benefits of Decentralized Identity

Your Identity is Hard to Verify

Using traditional login methods, users should remember the right credentials to access an account. That means anyone who knows your credentials can access your personal data pretending to be you. In contrast, decentralized identity verification requires physical access to the user’s device to make sure that the needed user enters an account, which is a much higher barrier for any hacker.

A Lower Risk of Mishandled Data

It isn’t a surprise that cybercrime is on the rise today. And recent data breaches of large companies like Facebook have called for a debate about the security of third-party data storage. When companies aren’t able to protect user data, they not only risk losing customers’ loyalty but also leave numerous users vulnerable to identity theft and cyber-attacks. That is why decentralized identity allows users to control their own data, making it harder for attackers to access it and, therefore, reducing the risk that user data will be compromised.

Transactions are Set in Stone

If previously attested information is altered, it gives many opportunities for hackers. By decentralizing transaction information thanks to blockchain signatures, altering verified information is almost impossible. Since all transactions happening on the blockchain are immutable, it ultimately prevents anomalies in the network and guarantees that verified data had not been tampered with.


Modern people seek extra convenience in everything they do. Since almost everything from ordering food to checking with a doctor happens through software, digital spheres should always be convenient and user-friendly. Using traditional methods, it takes a long time to access the service as you need to register online, set your password, and choose security questions that will further prove your identity. That is why decentralized identity eases the sign-up and sign-in process, allowing users to enjoy their favorite services with no hassle. They will need to create an identity once and then reuse that verified identity over and over again.

Use cases of SSI in Web 3.0

Since SSI is known for convenience and efficiency, its uses are growing with the development of new technologies and spheres. Let’s explore the most common ones below:

DeFi, CeDeFi in Web3

Identity verification in Web3 is essential in both DeFi and CeDeFi. As a result, SSI develops an excellent identity layer, working as a bridge between traditional data-heavy interactions and an anonymous DeFi approach. In addition, CeDeFI offers the financial infrastructure for SSI adoption. 

NFTs in Web3

In an NFT market, SSI is used to verify the blockchain identity of creators, owners, and buyers of tokens across their entire lifecycle. Regardless of the blockchain ledger NFTs are hosted on, SSI has been shown to solve the provenance issue. The key thing about SSI is that it also allows for the consumption of media/content directly from the creator without the need for a distribution channel, allowing for decentralized content consumption a reality. 

Related: Explore our smart contract development services.

Gaming in Web3

Even though it is one of the newest use cases of SSI, NFT and SSI working together brings a whole new gaming experience. While NFTs are great for bringing uniqueness and user satisfaction, SSI is an excellent choice for storing and updating characteristics. 

Metaverse in Web3

Finally, SSI seems to benefit Metaverse as well. Verified and interoperable information will be essential in the Metaverse. This is used on many levels starting from original identity verification when users create a profile and ending with countless transactions within the virtual world.

The Future of Decentralized Identity

With the increased use of NFTs, crypto, and the growing popularity of Metaverse and Web3, the future of internet identity will be decentralized. That is because it provides higher security, gives users control over their data, boosts efficiency, and provides simplicity in using services. This entirely new approach seems to dramatically change how users interact with services, how transactions are made, authenticated and how data is managed. 

decentralized identity

How Can We Help?

Interexy is a trusted app & web development company focusing on blockchain development services. As an expert in the blockchain and NFT ecosystem, we use the latest technologies and check market trends, offering our clients innovative, secure, and stable products. 

We have a well-thought-out hiring process, which allows us to collect the best talents from all across the world. Therefore, each client gets a dedicated team of blockchain experts who know every aspect of the industry and deliver top-notch quality solutions for business growth. 

Final Thoughts 

Decentralization, transparency, security, and efficiency are pervading characteristics of Web3. Therefore, users also want to reap the benefits of the new version of the internet. And digital identity allows users to get control over their data. If you have questions or want to share your project idea, our team will be happy to assist.


What is Web3 Identity?

Web3 identity allows users to connect their wallets to a specific network. After the first authentication, users are allowed to use the same identity for all services they use.

How does Decentralized Identity Work?

Decentralized identity, also known as self sovereign identity, is an open-standards-based identity framework that utilizes digital identifiers and verifiable credentials that are self-owned, safe, independent and allow for trusted data exchange.

What are the benefits of self-sovereign-identity (SSI)?

SSI allows users to control their own data, how it is used by services, and how it will be managed further. In addition, SSI boosts security and simplicity.

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