What do Web3, Decentralized Identity, and Reese Witherspoon Have in Common?

 There’s a lot of hype around Web3, decentralization, and our digital identities lately. Even actor and producer Reese Witherspoon is getting in on the action, tweeting that parallel digital identities like avatars, crypto wallets, and digital goods will soon “be the norm” for everyone.

When the aim is to optimize customer experience and trust, understanding these concepts is critical for forward-thinking organizations. Read on to understand how the digital identities of your customers are soon to be driven by the concepts of Web3 and decentralization. 

What is Web3?

Simply put, Web 3.0 (Web3), refers to the next evolution of the internet, and it arrives on the heels of Web 2.0 and, before that, Web 1.0. 

The evolution looks like this: 

• Web 1.0: internet users as consumers of content 
• Web 2.0: internet users now consume and produce content via platforms like YouTube and social media 
• Web 3.0: internet users take back control of their data via decentralization, blockchain, and token economics 

So, as Web3 begins to dominate, a customer’s digital identity will become central to the way they navigate through their lives online. And while there’s still debate around the true impact of Web3, decentralization is clearly here to stay. 

Centralized versus decentralized identity

Digital identity: the basics

A digital identity, like a human identity, is made up of various data attributes, such as date of birth, a social security number, or a username and password. But it can also describe a device or entity using digital identifiers like a URL or domain name.

Digital identities are how we gain access to private resources on the internet, as well as a way to combat cybercriminals. Over time, the concept of IAM—identity and access management—was developed to encompass the many policies, services, and technologies allowing organizations to verify every user’s identity and an appropriate level of access. As a process of authentications and access, some call this a form of centralized identity. 

Decentralized identity

Decentralized identity, by contrast, gives individuals control over which data they share with organizations, including the ability to revoke access to that information—whenever they want. This can be done by using digital wallets, which store identity and credential information from certified issuers (e.g., governments and employers).

Decentralized identity also makes it easier for people to access the services they need. It does this by giving users encrypted identifiers, which can be verified by multiple service providers. In the real world, obtaining identity documents can be hindered by factors like bureaucracy, displacement, access to education, or poverty. But by enabling an online, blockchain-based system, people easily can build their own digital identity, get essential services, and bridge the digital divide.

Issues with digital identity today

There are a number of ways the current, centralized, framework is failing customers and the organizations that cater to them. What’s wrong with today’s approach to digital identity? 

• Identities are siloed. Think about all of the accounts you’ve created online over the years. Now, think about all of the information you’ve shared when creating these accounts—preferences, location data, credit card numbers. When all of these accounts are managed by different providers, there are more opportunities for things to go wrong. 
• Identities are difficult to manage. Given the sheer number of accounts we’ve created across the internet, it’s almost impossible to keep track of which accounts have access to what data and for what timeframe.
• Identities are prone to data breaches. One study found the average user has 150 accounts that require a password, yet more than 2/3rds of Americans reuse the same password across different accounts. This creates a huge security risk. Once one password is exposed, it’s easier for hackers to gain access to other accounts.
• Identities lack foundational trust. Trust is missing from identity. Four in 10 Americans say their personal information has been compromised online. Trust is paramount to any interaction, on or offline. 
• Identities are limited to humans. We still think about identity as something that is tied to a human, but with Web3, our homes, cars, TVs, and other devices will also need secure and trusted identities. Connected IoT devices are projected to reach 75 billion by 2025.

How decentralized identity can help

Forward-thinking organizations need to future-proof their identity approach. The decentralized path laid out by Web3 can solve many of the problems of centralized identity by enabling

• Ownership and control of identity. This is the core of Web3 and decentralized identity. Each person should have complete control over who has access to their data. This means users are empowered to grant, modify, or revoke access at any time, as well as receive a unified view of all the data they share. 
• Best practices for securing identity and building trust. Numerous organizations are working to standardize and shape decentralized identity. Some of the key players here include the Decentralized Identity Foundation and the World Wide Web Consortium. 
• A way to identify people, places, and things. Digital identities for humans are not the only problem to solve. We also need a way to identify and verify any device that’s connected to the Internet. One way to do this is to utilize blockchain. Blockchain’s ability to automate and keep transactions accountable via a secure shared ledger and smart contracts has the potential to enable new and interesting use cases, like an autonomous vehicle that can authenticate its driver.

The next evolution of the internet may seem future-focused, but we can begin to solve some of the challenges today, especially with features such as social login and biometric authentication. 

Want to dig deeper? Learn more about how Okta’s Customer Identity products are helping organizations solve today’s identity challenges.