Bitcoin has taken the world by storm. It has introduced everyone to a whole new industry, which was worth almost 6 billion USD in 2021. The global blockchain industry is expected to grow exponentially, with a predicted valuation of over 69 billion USD by 2030. Blockchain is a key technology fueling the ongoing transition of the World Wide Web, from a centralized Web2 to more decentralized Web3. However, despite its promise to offer the world a more secure, private and transparent way to exchange data, the blockchain industry lacks a strong identity layer, allowing bad actors to hide behind an indestructible anonymity wall. Fortunately, this identity layer is in its last stage of development. Experts call it Self-sovereign Identity.<h2>The current state of the Web</h2><h3>Web2 and the rise of Web3</h3>In 2007, Steve Bratt, CEO of W3C, first coined the term<a href="https://www.w3.org/2007/Talks/0123-sb-W3CEmergingTech/Overviewp.pdf" alt="web3-emerging" title="Web 3.0 Emerging" target="_blank" rel="nofollow" class=""> Web 3.0</a> (now Web3) as the upcoming version of the World Wide Web that can facilitate the exchange of data and services between people from anywhere in the world. In 2014, Gavin Wood, co-founder of Ethereum, <a href="https://www.cnbc.com/2022/04/20/what-is-web3-gavin-wood-who-invented-the-word-gives-his-vision.html" alt="gavin-wood-first-coined-web3" title="Gavin Wood Coined The Term Web3" target="_blank" rel="nofollow" class="">updated the term</a> to associate the Web directly with decentralization, blockchain, and a token-based economy. Our current state of the Web is Web 2.0, or Web2, symbolized by the mainstream use of smartphones and portable devices to access the Internet. Web2’s maturity marks the inevitable trend of all industries’ transitioning from a traditional, local or national business model to a more connected, digital, and global one.&nbsp;&gt;&gt;&gt;Learn more: <a href="https://www.builder.news/news/defining-features-of-web-30-Wihpp" alt="defining-features-of-web3" title="Defining features of Web3" target="_blank" rel="" class="">Defining Features of Web3</a><h3>As Web2 obsoletes, demand for Web3 begins to multiply</h3>The hunger for economic growth posed by the transition, following the Great Recession, has downplayed the precaution of everyone surrounding the matter of sensitive data. Incidents of data leaks, data breaches, surveillance without consent, and failure to protect users’ data soon sparked great doubts about the security of the Web. Because of these incidents, everyone was aware that as long as users’ data are stored on centralized servers, it can never be truly secured. What follows was an overwhelming demand for solutions that can support the secure exchange of valuable customer data across industries.&nbsp;&gt;&gt;&gt;Learn more: <a href="https://www.builder.news/crypto-insights/web-3-vs-web-2-yyCL5" alt="web3-vs-web2" title="Web3 and Web2 Comparison" target="_blank" rel="" class="">Web3 vs Web2</a><h3>Bitcoin and the official emergence of Web3</h3>In 2008, Bitcoin was born as an answer to such demand in the Finance sector. It provided a secure and transparent way for everyone to exchange value without requiring a centralized clearing house. The rise of Bitcoin to a market cap of almost $330 billion between Late 2017 and early 2018 was undeniably the mark of the beginning of Web3.&nbsp;However, similar to the early days of the World Wide Web, the lack of accountability presented by <a href="https://www.builder.news/crypto-insights/web3-identity-problem-pn6ed" alt="web3-identity-problem" title="Web3's Identity Problem" target="_blank" rel="" class="">too much anonymity</a> stagnates Web3’s progress. To be fully complete, Web3 requires an identity layer that can scare black-hat hackers away (hopefully). This identity layer is often referred to as Decentralized Digital Identity or Self-sovereign Identity (SSI).<h2>Self-sovereign Identity</h2><img src="https://lh6.googleusercontent.com/X-q6cuHzMLUs1IkVlOkBJkXoqL0xu44z_pKLeMaj5lWXMoof9mbL6rsNueTyu6cQ6XbqYxnZD5zTxO9lWWbESV-FYx8y5xM6-80GbZ6l9Zzn9fsbquKAyD2m0fbUafXK8eQQENE5buJR3fjyZrqRbIfwSceW9A1ob-nv5t61asur4mN_C7Q5qEhREw" alt="self-sovereign-identity" title="self sovereign identity" width="600" height="339"><h3>The core idea of Self-sovereign identity&nbsp;</h3>The idea for this new system is fairly straightforward. To give all parties: users, issuers, service providers, and platforms, the choice to interact and represent themselves at different levels of anonymity without compromising the quality of the interaction or violating each others’ privacy. Developers achieve this by giving parties total control and ownership of the identity documents issued to them. At the same time, they utilize a seamless way to safely verify these identity documents without the need to tamper with the information. Self-Sovereign Identity is a crucial technological advancement since it will allow interacting parties to scale accountability with knowledge of each other’s identity.The three pillars of SSI include Distributed Ledger Technology (DLT or Blockchain), Decentralized Identifiers (DIDs), and Verifiable Credentials (VCs).&nbsp;<h3>Self-Sovereign Identity in detail</h3>Let’s dive a little deeper into these three pillars of Self-sovereign Identity.The first is Blockchain or DLT. DLT provides a public/private ledger for actors to record change without relying on any single node or centralized servers.The second is Verifiable Credentials, which are tamper-evident credentials that can be cryptographically verified. Verifiable credentials can be used to build verifiable presentations, which can also be cryptographically verified. The claims in a credential can be about different subjects. (Source:&nbsp;<a href="https://www.w3.org/TR/vc-data-model/#dfn-verifiable-credentials" alt="w3c-verifiable-credentials" title="Verifiable Credentials by W3C" target="_blank" rel="nofollow" class="">W3C</a>)The third is Decentralized Identifiers, which are a new type of identifier that enables verifiable, decentralized digital identity. A DID refer to any subject (e.g., a person, organization, thing, data model, abstract entity, etc.) as determined by the controller of the DID. In contrast to typical, federated identifiers, DIDs have been designed so that they may be decoupled from centralized registries, identity providers, and certificate authorities.Here is a simplified version of how the three pillars work together as a whole:For example, the issuer, a university, will create its own DIDs on a Blockchain. The university then issues to a student, the prover, a Bachelor's Degree, as a verifiable credential with the name of the person receiving the degree, date of issue, level of distinction, name of entity issued, etc. The student stores this certificate right in his smartphone's Credential Wallet. It is now his.&nbsp;When the student applies for a job that requires a bachelor's degree, he then has a choice to present the whole degree to the employer, the verifier, or only the bare minimum of what the employer requires (sometimes, only the hashed data is given). The employer then signs a verification signature if the issued degree or the pieces of data presented are legitimate, untampered, and qualified for use. This verification signature will be emitted to, recorded, and stored on the blockchain virtually forever. And, in theory, any change to it will be visible to the public.&nbsp;<img src="https://cdn.builder.news/news/11ed38d1c630c0b4a8e6023f659fee92.jpg" alt="example-workflow-of-a-Self-sovereign-identity-system" title="Example Workflow of an SSI System" width="600" height="300">Example Workflow of an SSI System (Source:<a href="https://tykn.tech/decentralized-identifiers-dids/"> </a>SSI Ambassador)<img src="https://lh4.googleusercontent.com/jTUexXf65kw1OzDaDrN-iALz-CvpuAognRTuc04ySwnTXzxCtKm-GUis-KKv9gvqMWKonjrE5JbeWd-pEBL9o2wdaOlACX1vJIAN_av2w6_LGMCk9-7mPuXq1ZdIoBylsMHY2HSErl8B23iPrnAD6rR7sDtXYuLUD1rUWw4G8vCjc2xIzQrzKChfhg" alt="self-sovereign-identity" title="Example Workflow of an SSI System" width="600" height="333">Example Workflow of an SSI System (Source:<a href="https://tykn.tech/decentralized-identifiers-dids/"> </a>Tykn)Keep in mind that everything on the Blockchain is transparent. Therefore, personally identifiable information should not be stored on the Blockchain.&nbsp;There are, of course, many other questions regarding the flexibility and speed of Self-sovereign Identity, especially in the case of modification or change to the verifiable credentials. However, the main point here is that developers are building the entire infrastructure with a privacy-first approach that will give users full control of their data.&nbsp;<h3>How will SSI look in Web3?</h3>SSI will serve as an important identity layer for individuals and institutions on Web3. It is hard to discuss how the Web will change when Artificial Intelligence matures and can present itself as a legal entity, however, until then, humans are still at the helm of the technology ship, and identities, along with accountabilities will still be centered around humans. It is worth noting that Self-sovereign identity is currently a set of standards, a set of guidelines set forth by joint efforts from different organizations and individuals including the&nbsp;World Wide Web Consortium, W3C on how to implement a privacy-first approach to building a user-centric identity data system. Therefore, we may see different products applying the standards in different ways, much like how Twitter, Facebook, TikTok, and Reddit, despite their different representations, are all touted as social media.&nbsp;Commercial SSI products have not reached mainstream status yet. Many organizations and corporations are working on it, but the solutions are currently geared toward businesses. With the advanced UI/UX of Web2, users can rest assured that SSI products, namely the Identity Wallet will be just as user-friendly as current mainstream products. These identity wallets will likely be integrated directly within your crypto wallet.&nbsp;IDramp, Tykn.tech, Everest, Evernym, uPort Project (now split into Veramo and Serto) and Infopulse are a few promising names to watch for.<img src="https://cdn.builder.news/news/11ed38d1c630c7a8a8e6023f659fee92.jpg" alt="self-sovereign-identity-app-by-infopulse" title="Example Design of an Identity Wallet" width="600" height="594">Example of an SSI Wallet Product Design. Source:&nbsp;Infopulse The upcoming release of <a href="https://www.builder.news/crypto-insights/soulbound-token-W0gKb" alt="soulbound-token" title="" target="_blank" rel="" class="">Soulbound Token</a>&nbsp;(SBT) may give Self-sovereign Identity systems a way to tie these identities to a public address, greatly increasing a public address's value. The public metadata stored inside it can be a ranking or scoring system much like a credit score, telling the public the number of successful verifications that this public address has acquired, increasing its authenticity and accountability.<h3>The skepticism of SSI</h3>The infrastructure for self-sovereign identity heavily depends on the development of blockchain technology. Leading Web3 developers are trying their best to solve the mystery of the Blockchain Trilemma, meaning one must sacrifice one out of the three aspects when building their blockchain: Decentralization, Scalability, and Security. If a system focuses on security and decentralization, it will be slow and can only process a small number of transactions or verifications per second. Self-sovereign Identity will also face this challenge.&nbsp;The hope for Web3 developers is that the Blockchain Trilemma, termed by the Ethereum team, is currently only an observation and not mathematically proven. An architecture that can be decentralized, fast, and secure is not at all impossible.&nbsp;<iframe width="550" height="400" src="data:text/html;charset=utf-8,%3Cblockquote%20class%3D%22twitter-tweet%22%3E%3Cp%20lang%3D%22en%22%20dir%3D%22ltr%22%3EUmm...%20the%20scalability%20trilemma%20was%20about%20scalable%20blockchains%2C%20not%20PoS%3B%20those%20are%20two%20separate%20topics.%20And%20the%20trilemma%20was%20never%20an%20impossibility%20result%2C%20it%20was%20claiming%20that%20getting%203%20of%203%20is%20*hard*.%3C/p%3E%26mdash%3B%20vitalik.eth%20%28@VitalikButerin%29%20%3Ca%20href%3D%22https%3A//twitter.com/VitalikButerin/status/1050117973543858176%3Fref_src%3Dtwsrc%255Etfw%22%3EOctober%2010%2C%202018%3C/a%3E%3C/blockquote%3E%0A%3Cscript%20async%20src%3D%22https%3A//platform.twitter.com/widgets.js%22%20charset%3D%22utf-8%22%3E%3C/script%3E%0A"></iframe><h2>The Verdict</h2>With the help of Self-sovereign Identity, service providers of Web3 can apply a privacy-first credential gate for users for increased accountability. This way, bad actors will have to think twice before interacting with a system using self-sovereign identity standards.&nbsp;Despite the crypto and token price crash in 1H22, developments in Web3 have shown no sign of slowing down. Gartner Hype Cycle for Blockchain and Web3, 2022, published in July 2022, observed key Web3 technologies, including Self-sovereign Identity (presented in the graph as Decentralized Identity) still moving towards the end of their Hype cycle.<img src="https://lh3.googleusercontent.com/m-93ry0OQgAnKFT_RJLew-Q0Fx1i6Rlskz3UhzTozKJPE9GgDF_xJutS1CbxE2CI6s8frLfnZDsz-PgCeb6Rr7WVGgQBhsrMJrGIttBRHSEZX_jpUgfJQBIko7N4U-zP33tpCQijwdIROt2XenBuZZUOArdVupGUdCOgqoUL58tOSRKDA12yn1mjYw" title="Gartner Hype Cycle for Blockchain and Web3 2022" width="600" height="339">Source: Gartner Hype Cycle for Blockchain and Web3 2022The prospect of a Self-sovereign Identity to supply the demand for a different way to manage users’ data is evident. Therefore, it is likely that we will see a lot more use cases of this technology soon.&nbsp;<div class="pr-block-special">Disclaimer This article is intended for and only to be used for reference purposes only. No such information provided constitutes advice or a recommendation that any investment or trading strategy is suitable for any specific name. </div>

A new and privacy-first global identity standard would be compulsory for the mass adoption of Web3. This standard is Self-sovereign Identity.

Self-sovereign Identity - Web3's Missing Identity Layer