No More Catfishing. Digital Identities — It’s not a matter of if, but whom.
If you’re like me, you’ve had a friend who’s about to go on a first date with someone they met on Bumble. They’ll usually say something like, “I’ve already checked them out online. They were on the varsity soccer team in college, work at a startup, have a really cute labrador named Dusty, and bought a place a few miles from me 7 months ago. But, just in case you never see me again, here’s their contact info.”
A little online sleuthing can tell you a lot about people you’ve never even met. But how do you know that information is genuine? The popular MTV reality show “Catfish” demonstrated time and time again how easy it is to fake an online identity.
The solution to preventing online fakes? Yes, that’s right — the blockchain.
Blockchain-based decentralized identity platforms will play an essential role in enabling people to prove that they are the person they claim to be. (Unless, of course, you’re dating a rug puller who hacks NFTs in their spare time.)
Within a few years or quarters, my friend will also be able to check out a digital identity profile that lists which digital communities their dream date belongs to, the events they attended, the causes and artists they support, the PFP NFTs they own, as well as any tokenized merch they own. She might even be able to view health data showing their on-chain exercising activity, including when they started slacking off.
All of this data is captured on the blockchain today. People’s crypto wallets already reveal a ton about who they are and what they’ve done — provided that you know their wallet address. And that’s the problem digital identity platforms are trying to solve: How to display all of a person’s on-chain activity in an easily accessible way.
A truly unique consumer crypto product
Digital identity platforms are one of the most exciting consumer product areas in crypto for a few reasons.
- They directly leverage the core innovation of blockchain technology (a verifiable, immutable record of who did what).
- Owning the identity layer is one of the most strategic positions in the Internet — as shown by a decade’s worth of fighting between Apple, Facebook, and Google to become the single-sign-on king for web2. (Meta/Facebook had the early lead, but is now losing ground to Apple — which, as usual, entered the game late but is doing it better than anybody else.)
- Digital identities are a rare example of a consumer crypto category that leverages the blockchain to do something truly new.
Within the crypto community, much has been written about this new product potential. It’s not really a matter of if it will happen, but WHO will build it.
Many people assume wallet providers (like Metamask, Phantom, Coinbase Wallet) are the de facto leaders in this space. But I’m not convinced wallets will end up building our decentralized digital identities.
Why? Because just like bank accounts, people will maintain different wallets for different purposes. And because increasingly mainstream users onboarding into crypto do not want to self custody or consciously deal with managing a wallet at all.
The platforms that win will either be fun to play with, amazingly useful, or both. This becomes obvious when we look at how the dominant web2 identity providers emerged:
- Google Single Sign On: The broad utility and convenience of search and email made this a central hub.
- Facebook/Instagram: The ability to easily connect with friends online as well as the entertainment value of sharing filtered photos.
- AppleID Single Sign On: The ability to sign onto multiple devices using your Apple ID.
- LinkedIn: The unique utility of replacing offline resumes with digital links.
Whoever creates a worthwhile reason to aggregate and update user profiles — either by giving people a useful tool or by creating entertainment value — will rule the blockchain identity roost.
A crowded field: the game of identity thrones
There are a ton of startups vying to create the de facto digital identity platform for web3.
For digital identity profiles to flourish, users must be motivated to update and add content to them. The platforms that succeed will give people a good reason to use them, whether that comes from network effects (everyone else has one, I need one), real-world use cases (my profile can help me land a job or a date), or financial incentives (someone will pay to contact me if they find my profile compelling).
After that, more practical implications come into play — like which platform has the broadest distribution, who has the most complete view of on-chain activity, who’s capable of connecting advertising and marketing dollars to profiles, who has the most compelling real-world use cases, who’s got the biggest head start, and who has the most to lose by not capturing the web3 identity market (Apple, Google, LinkedIn, and Meta, I’m looking at you).
My top picks? Portfolio aggregators like Zerion or Zapper (in a multi-chain world) or CeFi Fintechs like Coinbase or LemonCash (in the interoperable cross-chain world).
Here’s my ranking of who’s most likely to build this future from top to bottom, with a lens to the human behavior drivers that are so important to building successful consumer products:
- CeFi Fintechs (Coinbase, LemonCash). These players already provide the primary onboarding experience for new users to buy cryptocurrencies, arguably blockchain’s first killer product. Coinbase has been working on digital identity since 2018 or earlier. Many CeFi fintechs enable both fiat onramp and self-custodying wallets. Emotional hook: The need to own, to accomplish, to accumulate wealth.
- Portfolio aggregators (Zapper, Zerion). They have a comprehensive view of your holdings across multiple wallets and already have really high engagement. Emotional hook: Dopamine hits when holdings go up or down, need for financial safety & security, ego boost of seeing all holdings together in one place.
- Domain name services (ENS, Unstoppable Domains). These are already public profiles people use to share their crypto affiliations. Emotional hook: The need to accomplish & build
- Identity, social and data protocols (Lit, Ceramic, Lens, Arweave, CyberConnect) These open source protocols are primarily middleware that integrate into consumer identity profiles, but if any of them decide to go application layer (Lens already experimenting with profiles) — they could be a huge contender. Emotional hook today: need for safety, security.
- Wallets (Metamask, Phantom). An existing digital identity layer required by many dAPPs to enable you to login; many offer privacy features (public and private keys) to protect their contents. Emotional hook: The need to own.
- Web2 social identity profiles (Google, Facebook/Instagram, LinkedIn). They have the most to lose if a new digital identity standard takes off around crypto. Emotional hook: The need to accomplish & build, need to influence, need for connection.
- Marketplaces (Magic Eden, OpenSea). They already have primary data knowledge of any commerce transactions involving NFT holdings. NFTs are arguably share much more about our identities than fungible tokens. Emotional hook: The need for self expression & creativity, need for thrill, need for connection.
- Attestation protocols (POAP, Project Galaxy). An independent source of information about non-financial crypto activity — such as attendance at events or membership in a community — that creates a new identity layer that doesn’t exist in web2. Emotional hook: The need to belong, for connection and influence, to accomplish and build.
- Web3 social networks (DeSo, Bitclout, Entre). Existing social profiles that have yet to generate immense entertainment value or gain great traction. Emotional hook: The need for self expression and creativity, to influence and relate.
- Token gating platforms (CollabLand, Mintgate). These already serve as authentication tools for token-based or NFT communities. Emotional hook: The need to belong, for connection and influence.
- Ticketing platforms (Afterparty, Tokenproof). Tokenproof is really a proof of ownership platform but has seen success with ticketing use cases. These platforms have another form of primary non-financial crypto data not captured by other platforms. Emotional hook: The need to belong, for connection and influence.
- Advertising-enabled platforms (Layer3, Brave). They have captive users who are already primed to opt into sharing data with external parties. Emotional hook: The need to have control over your own data and to secure it.
- Messaging players (Dialect, XMTP). The gatekeepers of how we contact other digital identities. Emotional hook: The need for connection and belonging.
Taking control of our identities
A reasonable question to ask would be, If the blockchain is an immutable record of all on-chain activity, why do users need to update or manage their identity profiles? Wouldn’t that just happen automatically? And the answer is, privacy. People won’t be forced to share everything they’ve done online; digital identity simply means that everything you’ve done online (and that you want to share) is verifiable.
So my Bumble-dating friend can indeed ensure that she’s not being catfished. And her dream date can be reassured that she is who she claims to be, while still leaving enough mystery to keep things interesting.