Decentralized Identifiers (DID) and the prospects of identity coins in 2024-2025

The cryptocurrency market is experiencing another phase of transformation, this time in the field of digital identity management. While DID projects previously remained in the shadows, the launch of Worldcoin in 2023 has radically changed the situation. Sam Altman, behind OpenAI, has proven that decentralized identification is not just a theory but a real solution for the blockchain ecosystem. Today, identity coins and DID protocols are becoming a key trend, attracting the attention of both investors and developers.

Why DID solutions are changing the crypto market

Traditional identity management systems are centralized structures where your data is controlled by banks, social networks, and government agencies. Decentralized identifiers are radically changing this paradigm.

In Web3, DID represents a cryptographic pair consisting of a public and private key. The public key functions as your open identifier in the network, while the private key remains under your full control and is used to confirm access to your identity.

The significance of this technology cannot be overstated. As digital interactions become an integral part of daily life, the need for a secure and confidential personal data management system grows exponentially. DID provides exactly what traditional systems cannot — transparency, security, and full user control over their information.

How blockchain creates secure identity

At the core of DID technology is a distributed blockchain database that is immutable and resistant to tampering attempts. No organization can monopolize or manipulate your identification data. Each transaction in the system is linked to a verified identity, but your private information remains protected.

This opens new opportunities to combat fraud. In the cryptocurrency environment, where trust is currency, DID offers an authentication method that is tamper-proof and completely transparent. For DeFi applications, this is critically important as it allows each operation to be linked to a verified identity without revealing confidential information.

Key advantages of decentralized identities

Full control over data: Unlike traditional systems where third parties decide who and how your information is used, DID transfers this control to you. You determine who can access your data and under what conditions.

Maximum privacy: The absence of a single point of failure means mass hacking is impossible, as happens with centralized databases. Cryptographic methods further protect your transactions and identity.

Works across platforms: DID can be used simultaneously on multiple blockchain networks without the need to create separate accounts. This cross-platform compatibility significantly simplifies the user’s digital life.

Cost savings on verification: Eliminating intermediaries reduces the cost of identity verification and management. This is especially relevant for industries requiring constant data verification.

Leading DID projects and their approach to identity coins

Worldcoin (WLD): biometrics as the basis of identity

Worldcoin uses an innovative approach based on biometric scanning of the iris. This method creates a unique World ID identifier, ensuring the principle of “one person — one account” across all platforms.

Current WLD metrics:

• Price: $0.50
• Change over 24 hours: -0.06%
• Market capitalization: $1.29 billion
• 24-hour trading volume: $1.44 million

Tools for Humanity, a team of developers, introduced World Chain — an Ethereum layer-2 network reimagining the blockchain industry by prioritizing interaction with people rather than bots.

Strengths: Innovative approach to universal basic income, inclusivity for the unbanked, potential for broad application.

Challenges: Privacy concerns regarding biometric data, complexity of global deployment.

Worldcoin actively interacts with major players (PayPal, OpenAI), which could significantly expand its influence in the financial sector and AI sphere.

Lifeform: 3D avatars as digital identity

Lifeform is at the forefront of visual DID solutions, specializing in creating hyper-realistic 3D avatars. The company develops visual DID protocols, decentralized identification systems for Web3, and SDKs for the metaverse.

Financial indicators of Lifeform:

• Valuation: $300 million
• Series B funding completed under the leadership of IDG Capital
• Series A: $100 million raised
• Initial round: $15 million
• Support: over 3 million unique addresses

Integrating 3D avatars with Web2 social networks creates a bridge between physical and digital reality, giving users new tools for independent management of their Web3 identity.

Advantages: Modern encryption and authentication methods, accessibility from anywhere in the world, optimized identification process, user-friendly interface.

Challenges: Vulnerability to cyberattacks, requires specialized knowledge for implementation, potential compatibility issues between systems.

Polygon ID: privacy through zero-knowledge

Polygon ID uses zero-knowledge proofs (ZKPs) to create a private identification solution. Users manage credentials on their own devices, gain access without passwords, and exchange information securely.

In February 2024, Human Institute announced a partnership with Polygon Labs and Animoca Brands to develop Humanity Protocol, utilizing palm recognition technology. In April 2024, Polygon launched a full identification protocol based on ZKP.

Advantages: Enhanced privacy, scalability, compatibility with the Ethereum ecosystem.

Disadvantages: Relatively new in the market, potential integration challenges.

Ethereum Name Service (ENS): human-readable addresses

ENS converts complex hexadecimal addresses into simple names like “alice.eth,” making blockchain interaction more intuitive.

Recent developments:

• Partnership with GoDaddy Inc. (February 2024) to link ENS names with web domains
• Integration of .box domains approved by ICANN (April 2024) — the first on-chain TLD in the ENS application

Advantages: Ease of use, widespread adoption in the Ethereum community, universal utility.

Disadvantages: Ethereum network bandwidth limitations, scalability issues.

Space ID: cross-chain namespace

Space ID allows users to register and manage domain names across multiple blockchains simultaneously. This universal solution supports crypto trading, token lending, NFT mining, and other applications.

Advantages: Cross-chain compatibility, ease of use, broad applicability.

Disadvantages: Competition with other domain name services, limited recognition outside the crypto community.

Galxe: reputation credentials

Galxe uses account data to create a decentralized credential network supporting Web3 infrastructure. The platform enables creating and managing credentials in a decentralized environment, applicable in reputation systems and access management.

Advantages: Innovative use of data, potential for diverse applications.

Disadvantages: Early development stage, challenges in mass adoption.

Main challenges in the development of the DID sector

Despite prospects, DID technology faces serious obstacles.

Migration from the old paradigm: Transitioning from centralized systems requires radical changes in technological infrastructure, legislation, and user behavior. This is a long and complex process.

Technical complexity: DID systems require deep understanding of cryptography and blockchain. Ensuring interoperability between different blockchains (interoperability) remains a critical task requiring coordinated efforts from multiple stakeholders.

Private key management: Full responsibility for the private key lies with the user. Losing it means irrevocable loss of access to the identity.

Regulatory uncertainty: Different jurisdictions impose various data protection requirements. Balancing compliance with the decentralized nature of DID is a constant challenge.

How identity coins and the DID sector will develop

Mass adoption: As awareness grows, significant increases in DID use in DeFi, NFT marketplaces, and decentralized autonomous organizations (DAOs) are expected.

Advanced privacy: Privacy concerns will drive the development of more sophisticated privacy features, including advances in zero-knowledge proofs and biometrics.

Interoperability between blockchains: DID will evolve to support greater network compatibility, allowing users to maintain a single identity across multiple platforms.

KYC and regulatory compliance: Increased oversight in the crypto market makes DID a valuable tool for meeting Know Your Customer requirements and anti-money laundering measures.

Beyond crypto: DID technology will begin penetrating healthcare, finance, e-governance, and the Internet of Things (IoT). Integration with AI systems could create new standards for security and automation.

Conclusion

Decentralized identifiers are not just another crypto hype. They represent a fundamental shift in how we manage and protect personal information in the digital age. DID projects and identity coins pave the way to a world where security and privacy are not privileges but norms.

Worldcoin, Lifeform, Polygon ID, ENS, Space ID, and Galxe—all these projects offer different approaches to the same problem: how to give users control over their digital identity. As the Web3 ecosystem develops, the role of identity coins will only grow, becoming an integral part of crypto finance and the broader digital economy.