1. Introduction

The evolution of the internet from a public information system (web1) to an interactive social web (web2) has given rise to innovative applications, use cases, and economies of scale. Yet, a trade-off exists in the form of standardized identity provider models that are centralized and fragmented. Digital identities in this scenario lack user control, transparency, and interconnectivity.

With the advent of web3, we are presented with a whole new way of managing digital identities. Transcending the barriers of traditional systems, web3’s robust identity layer is guided by the principles of privacy, trust, anonymity & user-centricity. At the heart of this transition lies the concept of identity portability — a feature of decentralized identity management that holds the key to a seamless and hassle-free user experience across dApps and blockchain ecosystems — thereby facilitating wider adoption.

In this latest blogpost, we investigate the concept of identity portability, its implications for blockchain ecosystems, and how it helps unlock the full potential of the web3 economy. We also explore what makes Fractal ID the go-to identity infrastructure builder for supporting this effort.

Let’s explore!

2. The Evolution of Identity in Blockchain Ecosystems

Before we jump into what makes an identity portable and examine its relevance, we must first understand why decentralized identity is an infrastructural necessity for blockchain ecosystems. It is no secret that when it comes to traditional identity management systems, users always run the risk of their privacy being violated, their data getting breached and digital identities being stolen and misused. Today, blockchain platforms prioritize trust minimization and data privacy, seeking strong assurances for all on-chain interactions. In simple terms, the goal is to ensure that specific functions of digital contracts will execute as agreed upon while protecting user anonymity.

In line with this paradigm shift, the relevance of identity for blockchains has shifted from KYC/AML compliance to becoming the foundation for securing ecosystems and streamlining user experience. Leading L1 and L2 ecosystems like Polygon which leverages Fractal ID technology, have already started integrating identity solutions at the blockchain level. This user-centric approach not only enhances security but also enables all on-chain dApps to simplify user interactions within the ecosystem.

But coolness aside, what’s the catch?

Quite simply, user verification for multiple dApps on-chain is cumbersome and complicated. Users have to go through repeated identity verification and KYC processes that pose a barrier to a seamless on-chain experience. The true value of decentralized identity can only be unlocked when this verification process from one dApp to another is made easier, quicker, and more user-friendly

This is where identity portability comes in.

3. Understanding Identity Portability: What Does It Mean and How Does It Work?

Imagine yourself to be a web3 project builder with a need to interact with a crypto launchpad while accessing fiat on-ramp service providers. In an ideal world, to interact with a second dApp built on the same blockchain you should not have to undergo a new KYC process. In this case, having completed a KYC process for the launchpad is enough for you to start using your fiat on-ramp service seamlessly.

This is what a portable identity enables.

Identity portability represents a fundamental shift in how users interact with dApps within a blockchain ecosystem. Put simply, identity portability refers to the capability of users to verify their identity once while onboarding to a dApp and then share that verified identity seamlessly across different dApps. This identity transfer is made possible because the user retains full ownership of their identity and can import it from one application to another — all in a manner of their choosing.

Unlike centralized web2 identity systems, which restrict user control, lead to data silos and obstruct collaboration, portable identity solutions address these limitations. While other efforts to create shared identity systems have kick-started, they still fall short of becoming truly global systems across use cases. In contrast, portable identity solutions offer a pathway to enhanced collaboration and support for new innovations within the blockchain ecosystem. As we move towards a more decentralized web, portable identity solutions are the key to ensuring a seamless authentication process for users — thereby enabling blockchain ecosystems to grow their user base across dApps.

How, you ask? Let’s dive in!

4. Empowering Blockchain Ecosystems: The Role of Portable Identity Solutions

4.1 Better UX

Traditionally, when users engage with different dApps on a blockchain, they often face the task of repeatedly verifying their identity, which can be time-consuming and frustrating. This process can create friction and deter potential users from exploring new dApps. However, with portable identity solutions, users can seamlessly move between different dApps within the same ecosystem without the need for redundant identity verification each time. This simplification makes the onboarding process easier and reduces the barrier to entry for new users. Ultimately, this enhances user engagement and encourages broader adoption of a blockchain ecosystem.

4.2 Selective Disclosure and Privacy

Not just ease of use, identity portability also empowers users with the ability to exercise selective disclosure. This means that users are granted full control over the data they share with different dApps on the chain. This heightened control ensures that users can decide which specific pieces of personal information are shared with each application, safeguarding their privacy while engaging in various interactions. Users can grant or revoke access to their portable identity between dApps as per their preference. As a result, the increased level of user autonomy improves trust in the ecosystem and ensures more sustainable growth for the network — as users feel reassured that sensitive information is not indiscriminately shared across all dApps.

4.3 New Use Cases

By eliminating repeated verification processes, identity portability also provides a fertile ground for innovation within blockchain ecosystems by empowering dApps to collaborate and create seamless solutions and use cases. Since dApps can securely and instantaneously access verified user identities, an accelerated onboarding process and ease of user onboarding unlocks new possibilities for creative, composable, and efficient cross-platform interactions. This ultimately enables ecosystems to establish themselves as thriving networks for blockchain-based innovations. We explore relevant examples further down in this blogpost to facilitate a more thorough understanding.

4.4 Commercial Viability

As an added benefit, implementing portable identity solutions at the blockchain level reduces the need for individual dApps to engage with different providers and conduct user identity verification on their own — resulting in streamlined operations and cost efficiency across the ecosystem. Moreover, blockchain ecosystems also become better equipped to comply with evolving regulatory frameworks, avoiding potential legal hurdles. Because of this compliance-friendliness, coupled with reduced operational costs, the ecosystem becomes attractive for web3 builders as it presents a conducive environment for creating new solutions and applications.

In light of its key benefits, it is safe to say that as blockchain ecosystems strive to generate greater user adoption, portable identity solutions are the biggest step forward yet. However, fully harnessing the collaborative nature of the decentralized web to propel further innovation requires an even greater leap — cross-chain interoperable identity solutions.

5. The Immediate Next Step: Identity Interoperability

While portable identity allows for smoother user onboarding and interaction within a single blockchain network, the true power of identity in web3 lies in its interoperability across different chains. Traditionally, users have had to maintain different wallets across chains to interact with dApps. This leads to considerable security risks as there is no way to verify the true ownership of a wallet across chains. In this light, identity interoperability is a crucial necessity. By embracing it, dApps can effectively manage users across various chains, creating a convenient experience that simplifies user interactions and fosters steady traction. Because users can effectively engage with different dApps across chains with a single check, interoperable identity solutions help accelerate the growth of blockchain ecosystems. This approach places users at the center of a more secure, private, and interconnected third web, enabling them to maintain control over their identities and data while seamlessly navigating the decentralized landscape.

Let’s consider an example to understand how this works:

Imagine you’d like to get started with a platform similar to Galxe — a multichain dApp that serves as a platform for building the web3 community via reward campaigns. Since this dApp lives on multiple chains, traditionally a user would have to log in with a different wallet in each of the chains. This would be a cumbersome process, and at the same time, it would not prevent a single user from participating in the same reward campaign multiple times through different blockchains. However, with an interoperable identity that verifies uniqueness, you will need to onboard only once and create a shared identity across all chains, enabling a more fair experience for everyone.

All this makes sense in theory, but what about practical considerations while implementing identity solutions?

Just like its USPs, each blockchain ecosystem is also faced with a set of unique challenges when it comes to leveraging portable/interoperable identity solutions to enhance security and user experience. The need of the hour then, are adapted, tailored solutions that can help remove pain points like compliance needs, slow user adoption, and poor UX for ecosystem growth — all in a cost-effective and interoperable manner.

Here’s where we introduce Fractal ID: The vertically integrated decentralized identity stack for web3 ecosystems.

6. Fractal ID Solutions: Uplifting Your Ecosystem’s Potential

Founded in 2017, Fractal ID is the leading provider of identity solutions for web3, with nearly one million users distributed across more than 250+ web3 projects. We are building the user-owned identity data layer for web3 with customized identity solutions and integration options to cater to the specific requirements of different blockchain ecosystems. From complying with data and regulatory standards, including GDPR regulations, to facilitating seamless user verification via KYC and AML, alongside human liveness checks, Fractal ID is committed to establishing trust and efficiency across chains — thus maximizing the benefits of the web3 economy.

What makes Fractal ID different from other identity providers out there?

With re–usability, use-case-specific on-chain tooling, and interoperability embedded in our DNA, Fractal ID’s identity solutions have grown with the market’s needs. From integrating incremental developer-friendly solutions like the DID registry and building multiple ways to manage access to data, (e.g. APIs and Fractal ID credential wallet), to building and implementing full DID and Verifiable Credential systems, Fractal ID covers the full identity process from identity creation to developing tooling and access management infrastructure. Our solutions allow your ecosystems and dApps to do more and build innovative web3 use cases. This is why top projects like Polygon, NEAR Protocol, XRP Ledger, Avalanche, Gnosis, and more, leverage our decentralized identity management capabilities to manage user identities and make their ecosystems more conducive to building. What’s more — our solutions are also fully interoperable across these leading blockchains empowering users to have a smooth experience across cross-chain dApps.

The identity revolution is here and Fractal ID is collaborating with blockchain ecosystems across the space to make decentralized identity adoption a reality.

Want to understand what our decentralized identity solutions can do for your project? Book a meeting with our team today.

Access our medium blog to catch up on all things decentralized identity that we explore on a regular basis.