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duals and entities build trust through direct interactions and endorsements within a network. Each participant functions as a node, forming connections grounded in mutual trust. These connections create a distributed trust network where reputation is established through social validation rather than centralized authority. The decentralized nature of this network aligns with the ethos of Web3, empowering users to control and manage their own trust relationships. To ensure the reliability of endorsements, a Web of Trust typically employs veriﬁable claims and attesta- tions. Participants sign their endorsements with private keys, creating cryptographic proofs of authenticity. These veriﬁable claims can be audited and traced back to their origin, adding a layer of accountability and transparency. This mechanism mitigates the risk of misinformation and manipulation, ensuring that trust is based on veriﬁable data. 3.2 Identity and credential veriﬁcation Identity and credential veriﬁcation are foundational to establishing trust in both centralized and decentral- ized systems. These processes involve not only conﬁrming that individuals or entities are who they claim to be, but also validating the authenticity of their credentials and assessing their trustworthiness and reputa- tion. This is crucial for nearly every interaction in society - ranging from opening bank accounts, accessing government services, or entering establishments with age limits (such as a liquor-serving bar), to making informed decisions about hiring someone for a job, verifying university degrees, buying authentic products, and ensuring the integrity of transactions. 3.2.1 Centralized Identity and Credential V eriﬁcation In centralized systems, identity veriﬁcation typically relies on authoritative entities such as government agencies and major service providers. These entities issue credentials like passports, driver’s licenses, and 21 diplomas, which are used to authenticate individuals and authorize transactions. However, centralized systems come with signiﬁcant drawbacks, including security vulnerabilities, privacy concerns, and the risk of power abuse. Centralized databases are prime targets for hackers, and breaches can result in the exposure of sensitive personal information. Additionally, individuals have limited control over their digital identities, relying on central authorities to manage and protect their data. This centralization creates single points of failure and can lead to exclusion and discrimination, particularly for individuals who do not have access to required documentation or are marginalized by the system. 3.2.2 Decentralized Identity and Credential V eriﬁcation In contrast, decentralized identity solutions aim to return control of personal data to individuals. Leveraging core cryptographic principles, these solutions create secure, self-sovereign identities that can address both quantitative and qualitative veriﬁcation needs. At the core of the oﬀ-chain decentralized identity ecosystem are the speciﬁcations developed by the W orld Wide W eb Consortium (W3C) . The W3C’s work on Decentralized Identiﬁers (DIDs) and V eriﬁable Credentials (VCs) has been instrumental in shaping the decentralized identity landscape. Figure 5: Simple example of a decentralized identiﬁer, https://www.w3.org/TR/did-core/ Decentralized Identiﬁers As mentioned earlier, decentralized identiﬁers serve as an ideal fulcrum point for aggregating data. DIDs are a modern type of identiﬁer that enable veriﬁable, self-sovereign digital identities. Unlike traditional identiﬁers such as email addresses or usernames, DIDs are not tied to a cen- tralized registry, identity provider, or certiﬁcate authority. Instead, they are created, owned, and managed by individuals themselves. Each DID document contains the public keys and service endpoints necessary to authenticate the DID owner and facilitate secure interactions. The W3C DID speciﬁcation provides a standardized framework for creating and using DIDs across diﬀerent platforms and services, ensuring inter- operability and fostering a cohesive ecosystem where users can seamlessly manage their identities. Figure 6: The roles and information ﬂows forming the basis for the W3C VC speciﬁcation, https://www.w3.org/TR/vc-data-model-2.0/ V eriﬁable Credentials (VCs) VCs are cryptographically secure credentials that individuals can present to verify their identity or claims. These credentials are typically issued by trusted entities and can be independently veriﬁed without the need for a centralized intermediary. VCs can encapsulate a wide range of information, from university degrees and professional certiﬁcations to personal attributes like age and nationality. The W3C VC speciﬁcation outlines how credentials can be formatted, issued, and veriﬁed in a decentralized manner, ensuring interoperability across various platforms and enabling users to present their credentials to multiple veriﬁers with conﬁdence in their authenticity and integrity. 22 Figure 7: Information graphs associated with a basic veriﬁable credential, https://www.w3.org/TR/vc-data- model-2.0/ 3.2.3 Beneﬁts of Existing Decentralized Identity Solutions Decentralized identity solutions oﬀer several signiﬁcant advantages over centralized systems. Individuals have full control over their digital identities, deciding when and how their personal information is shared. Decentralized systems reduce the risk of large-scale data breaches, as personal information is not stored in a central repository. Cryptographic principles ensure that data is securely transmitted and veriﬁed. DIDs and VCs are designed to be interoperable across diﬀerent platforms and services, enabling seamless interactions in a decentralized web. Moreover, decentralized solutions can provide a richer context for trust assessments, with VCs including endorsements from peers, work performance reviews, or detailed educational records, allowing for a more comprehensive evaluation of an individual’s trustworthiness and qualiﬁcations. 3.2.4 Requirements of Existing Decentralized Identity Solutions Despite the promise of these technologies and their applicability to enhancing trust in our interactions, they have substantial requirements that must be addressed if they are to realize their full potential: Secure and Eﬃcient Storage Solutions One of the primary concerns in decentralized identity systems is the development of secure and eﬃcient storage solutions for Decentralized Identiﬁers (DIDs) and Veri- ﬁable Credentials (VCs). Oﬀ-chain storage needs to ensure data integrity, conﬁdentiality, and availability. Unlike centralized systems, where data is stored in a single location and controlled by a central authority, decentralized systems distribute data across multiple nodes, increasing the complexity of data management. 1. Data Integrity: Ensuring that data remains unaltered and accurate over time is crucial. In decentralized systems, where multiple copies of data may exist, maintaining consistent and tamper- proof records is a signiﬁcant challenge. 2. Conﬁdentiality: Protecting sensitive information from unauthorized access is paramount. Decen- tralized systems must implement robust encryption and access control mechanisms to ensure that only authorized parties can view or modify data. This is particularly challenging when dealing with personally identiﬁable information (PII) or other sensitive data, which requires stringent privacy protections. 23 3. A vailability: Ensuring that data is accessible when needed, despite the decentralized nature of the storage, is essential. Decentralized storage solutions must provide high availability and fault tolerance, so users can access their identity information reliably. Technologies like InterPlanetary File System (IPFS) and Arweave oﬀer decentralized data storage with built-in redundancy and availability, but integrating these solutions seamlessly into decentralized identity systems remains a complex task. Interoperability Between Identity Providers Ensuring interoperability between diﬀerent identity providers is essential for the decentralized identity ecosystem to function smoothly. The diverse range of platforms and services must communicate and understand each other’s DIDs and VCs to enable seamless user experiences across multiple contexts. Developing and adhering to common standards and protocols is critical for interoperability. The W3C’s DID and VC speciﬁcations provide a foundational framework, but widespread adoption, consistent implementation across various platforms, and convergence on data schemas are still necessary. Without these common standards, users face friction when attempting to use their identities across multiple platforms, limiting the utility of decentralized identities. Protocols for Issuing, Managing, and V erifying Credentials Creating secure, scalable, and user- friendly protocols for issuing, managing, and verifying credentials is another complex task. These protocols must facilitate the seamless creation and revocation of credentials, as well as provide mechanisms for users to manage their credentials eﬀectively. 1. Security: Ensuring that the protocols are secure and resistant to attacks is paramount. This includes protecting against unauthorized issuance or revocation of credentials and ensuring the integrity and authenticity of the credentials themselves. 2. Scalability: The protocols must be able to handle a large number of users and transactions without becoming ineﬃcient or overly costly. This is particularly important in decentralized systems, where network congestion and high transaction fees can pose signiﬁcant challenges. 3. User Experience: The protocols must be designed with the end-user in mind, ensuring that they are easy to use and understand. Users should be able to manage their credentials without needing deep technical knowledge, and the processes for issuing and verifying credentials should be intuitive and straightforward. 4. Standard Schemas : There is a need for standardized schemas to ensure interoperability and con- sistency. Protocols must adopt and adhere to common data schemas, enabling seamless interaction and understanding between diﬀerent platforms and services. This standardization is essential to prevent fragmentation and ensure that credentials can be universally recognized and veriﬁed. Adoption Adoption is particularly vital for Decentralized Identiﬁers (DIDs) and Veriﬁable Credentials (VCs) to achieve their full potential. Without broad adoption, the advantages of these inherently communal technologies cannot be fully utilized, which limits their impact and eﬀectiveness and creates a chicken-and-egg dilemma. • Critical Mass of Users : For DIDs and VCs to function eﬀectively, a signiﬁcant number of indi- viduals, organizations, and institutions need to participate. A critical mass of users ensures that there are enough entities issuing, managing, and verifying credentials to create a robust and func- tional ecosystem. This widespread participation enhances the utility and reliability of decentralized identity solutions. • Interoperability: Adoption by a diverse range of platforms and services is necessary to achieve true interoperability. When multiple stakeholders use standardized DIDs and VCs, it ensures seamless interaction and veriﬁcation across diﬀerent systems. This interoperability reduces friction for users and increases the overall eﬀectiveness of decentralized identity solutions. • T rust Network Expansion: The success of DIDs and VCs depends on a broad network of trusted issuers and veriﬁers. As more entities adopt these technologies, the trust network expands, making it easier for individuals to prove their identity and credentials across various contexts. This expansion is crucial for establishing a reliable and universally accepted system of digital identity. 24 • Market Conﬁdence: Adoption by major players in various industries, including ﬁnance, healthcare, education, and government, can signiﬁcantly boost market conﬁdence in DIDs and VCs. When rep- utable institutions integrate these technologies, it signals their reliability and security, encouraging more users to adopt them. • Policy and Regulation : Government and regulatory bodies play a pivotal role in the adoption of DIDs and VCs. Clear policies and regulations that support the use of decentralized identities can provide the legal framework necessary for widespread adoption. Regulatory support can also address concerns related to security, privacy, and compliance, making it easier for organizations to integrate these technologies. • Education and A wareness: Educating the public and organizations about the beneﬁts and func- tionalities of DIDs and VCs is essential for driving adoption. Awareness campaigns, workshops, and training programs can help demystify these technologies and demonstrate their practical applications. Increased understanding leads to greater acceptance and use. • Infrastructure Development : Building the necessary infrastructure to support DIDs and VCs is crucial for adoption. This includes developing user-friendly interfaces, secure storage solutions, and eﬃcient protocols for issuing and verifying credentials. Investments in infrastructure ensure that decentralized identity solutions are accessible and practical for everyday use. • Community Engagement : Engaging with the community of developers, businesses, and end- users is vital for fostering innovation and addressing challenges. Collaborative eﬀorts can lead to the development of best practices, standards, and solutions that drive the adoption of DIDs and VCs. A supportive community also helps in addressing technical and regulatory hurdles. Ultimately, widespread adoption is the major linchpin for realizing the full potential of DIDs and VCs. It requires a concerted eﬀort from all stakeholders, including users, organizations, regulators, and developers, to create a thriving ecosystem that leverages the advantages of decentralized identity solutions. 3.3 Ethereum as a Decentralized Identity Platform Recognizing it as a potential solution for many of the previously-mentioned requirements, some early de- centralized identity experiments, such as ConsenSys’s uPort, chose Ethereum as the platform for building decentralized identity / attestation / veriﬁable claim / Web of Trust oﬀerings, with Ethereum’s potential for identity and reputation systems even being highlighted as a key use case in Vitalik Buterin’s original whitepaper. Ethereum solves for many of these requirements by providing several advantages, including a permissionless and decentralized ledger, widespread adoption, the ability to create programmatic value ﬂows, and robust security guarantees. The use of self-sovereign private keys, cryptographic signatures, and times- tamped data entries oﬀers a strong foundation for secure and veriﬁable identity management, addressing many of the challenges in the decentralized identity ecosystem. One of the earliest eﬀorts was the drafting of EIP 725, which proposed Proxy Accounts. Proxy Accounts were designed to act as a proxy for individuals’ identiﬁers. The concept emerged from the realization that leveraging a private key as an identiﬁer poses several issues, particularly the inability to rotate keys if they are compromised. The solution was to create a singular proxy contract representing an individual, which could allow for key rotation. uPort was among the pioneers in developing these Proxy Accounts. They introduced some of the earliest social recovery mechanisms, allowing a pre-determined list of addresses to recover the wallet or change the controller of the proxy contract through a multi-signature method. This innovation addressed the vulnerability of losing access to the identity due to key loss or compromise. Building on the Proxy Accounts, uPort introduced EIP 780, which proposed the Ethereum Claims Registry. This development aimed to enhance the trust and reliability of the identity system by enabling attestations. However, signiﬁcant concerns arose regarding the architecture of these systems. The primary issue was the gas costs associated with deploying smart contract wallets for each new user and for every attestation. The cost of creating new accounts and recording attestations on-chain was prohibitive, especially considering the goal of extending ﬁnancial and identity system access to underdeveloped and underprivileged regions. To address the high gas costs, the uPort team developed the concept of metatransactions. These Ethereum transactions could be funded by a third party, allowing uPort to subsidize identity creation and attestations while keeping identiﬁers self-sovereign. Despite this innovation, the solution was not scalable. Subsidizing transactions for a growing user base proved to be impractical in the long term. However, metatransactions have since been open-sourced and have fostered a whole ecosystem, contributing to broader advancements in reducing transaction costs and improving accessibility in decentralized applications. 25 In response to these scalability issues, uPort began leaning into an increasing amount of oﬀ-chain mechanisms. They introduced EIP 1056, known as “Lightweight Identity. ” This standard aimed to create and update identities with minimal use of blockchain resources. In EIP 1056, an identity could have an unlimited number of delegates and attributes, and identity creation was as simple as generating a regular key pair Ethereum account, incurring no gas costs. Despite these advancements, concerns about identity correlation and social recovery mechanisms persisted. In the social recovery scheme, the addresses capable of recovering an identity were recorded on-chain, making them publicly available. This raised the risk that these addresses could be correlated with individuals, who could then be compromised to recover an identity on behalf of an attacker, eﬀectively stealing the identity. To mitigate these risks and others (especially around privacy and scalability), many identity projects began moving signiﬁcant portions of their stack—or the entire stack itself—oﬀ-chain. This migration led Ethereum identity players to contribute to the broader oﬀ-chain decentralized identity ecosystem, inheriting the chal- lenges of the decentralized identity ecosystem and signiﬁcantly hindering adoption. 3.3.1 Renewed Interest in Ethereum as a Decentralized Identity Solution Recent advancements in the Ethereum ecosystem have catalyzed a renewed interest in decentralized identity solutions, making it increasingly feasible to build these solutions on Ethereum. Layer 2 scaling solutions, such as rollups, have signiﬁcantly reduced transaction costs and increased through- put, enabling the storage and management of identiﬁers and data on-chain. As these Layer 2 solutions continue to drive gas costs towards zero, scalability concerns become less signiﬁcant. The introduction of smart contract wallets and account abstraction mechanisms, exempliﬁed by EIPs 4337, 3074, and 7702, marks a signiﬁcant leap forward in decentralized identity management. These innovations provide users with enhanced ﬂexibility and security features essential for robust identity solutions. EIP 4337 introduces account abstraction via a higher-level protocol, allowing users to leverage smart con- tracts for managing their accounts. This enables advanced functionalities such as multi-signature setups, meta-transactions, and automated recovery options, thereby enhancing the user experience and security of decentralized identity systems. EIP 3074 focuses on allowing users to delegate control of their externally owned accounts (EOAs) to a contract, providing the ability for any EOA to act like a smart contract wallet without deploying a contract. This abstraction simpliﬁes the user experience and reduces friction, making it easier for users to interact with