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Web3 blockchain enables users to take control of identity

A centralized identity model creates security and privacy risks. Decentralized identity through Web3 could mitigate these risks, but companies must adapt to keep pace.

Web2 customer identity services are no longer scalable. As decentralized identity products give control back to users, application leaders need to know how to move support for Web2 identity and access management processes to Web3 decentralized identity frameworks.

The number of digital interactions via smartphones continues to grow, but the model for identity assertion is stuck in decades-old technology. Users repeatedly have to prove their identity when opening new accounts. This is inefficient for the following reasons:

  • It causes user friction.
  • It results in poor UX.
  • It hinders business opportunities.

Old identity and access management (IAM) processes also create risk for identity fraud and financial theft to occur. IAM leaders must make changes to their frameworks to ensure users' security and privacy needs are met.

Decentralized identity products that rely on blockchain-based ledgers enable users to receive credentials that prove their identity from multiple issuers. These credentials can be stored within a digital wallet and presented to service providers to verify the data via the distributed ledger. Gartner predicted that, by 2026, at least 500 million smartphone users will regularly make verifiable claims using a digital identity wallet built on distributed ledger technology.

The promise of decentralized identity involves tackling issues of assurance and privacy in a novel way, disrupting traditional, centralized approaches to managing identity data. IAM vendors continue to invest in decentralized identity products, and more and more are working to find scalable use cases. A number of decentralized identity products have been put into production for focused use cases, such as data verification for air travelers and checking healthcare worker qualifications.

Benefits of decentralized identity systems

Web3 provides new technology constructs that include non-fungible token (NFT) identity and decentralized identity standards. These constructs give users control of their identity data and enable them to set up perpetual conditions to share the data under their control.

Decentralized identity systems provide several benefits. Namely, users have more control over what data they share and can eliminate repeated identity proofing across services.

With the shift in identity ownership to consumers, however, new data markets will be required to support personalized user interactions across use cases such as Web2 social media advertising. Platforms that use targeted advertising need to aggregate Web3 user data and behavior patterns to sustain their advertising and marketing programs.

By 2027, social media platform models will shift from "customer as product" to "platform as customer" with decentralized identity sold through data markets. Gartner projected social media platforms that ignore this trend will experience a 7% drop in users by 2025 as Web3 social network applications begin to offer consumers opportunities to monetize their identity data.

Application leaders can support decentralized identity use cases to decentralize identity ownership and disrupt social media advertising models that are invasive to user privacy. They should develop pilot programs that rely on user-owned identity data that is aggregated on an opt-in basis and run them parallel with existing marketing programs to measure their effectiveness. Use influencer marketing to spread the word about new Web3 business models that use decentralized identity data.

How to resolve contention between decentralized and centralized identities

In Web3 applications, such as the metaverse, there is contention between decentralized and centralized identities. Gartner predicted that, by 2027, hybrid NFT identities -- identity wallets, with both certifiable claims and NFTs -- will be used by more than 50% of metaverse users for their online persona. With hybrid NFT use on the rise, IAM leaders should familiarize themselves with Web3 and NFT IAM technologies and prepare to bridge their current Web2 assets with a new Web3-enabled paradigm.

Metaverse and Web3 platforms continue to gain traction in the market. IAM leaders must track and analyze changes to new IAM products being implemented in social media platforms so they are ready to adopt them in the near future.

About the author
Avivah Litan is distinguished vice president at Gartner Inc., where she provides thought leadership on blockchain innovation and risk management. Gartner analysts will provide additional analysis on security and risk management at Gartner Identity & Access Management Summit, taking place March 20-22 in Grapevine, Texas.

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