On-chain Identity: The Future of Digital Verification

The internet faces a fundamental challenge: identity verification. In our current AI era, fake accounts and AI-generated personas manipulate online discourse. Identity theft and fraud are at all-time highs. Users must repeatedly verify themselves across platforms, often compromising privacy in the process. As Web3 and artificial intelligence continue to evolve, the need for verifiable, decentralized, and privacy-preserving identity solutions is becoming increasingly urgent. On-chain identity is the solution to solving this issue.?

We don’t know yet if there is a vertical named on-chain identity, or this vertical falls under SocialFi, but the need for verifiable, decentralized, and privacy-preserving identity solutions is real. Several projects such as Worldcoin, Proof of Humanity, and Humanity Protocol are tackling this challenge with different approaches to proof of personhood (PoP), each with its own advantages and tradeoffs. Although some of these projects have a history of 4 years already, on-chain identity did not gain much spotlight until recently Humanity Protocol closed a new round led by Pantera with a valuation of $1.1 billion. These projects now have a combined FDV of at least $13 billion, demonstrating their rising relevance in the Web3 space.?

Alongside its remarkable total FDV, on-chain identity systems also have quite some important use cases. In digital governance and voting, decentralized identity can ensure that only verified individuals participate in decision-making, preventing Sybil attacks and vote manipulation in Decentralized Autonomous Organizations (DAOs). In the field of regulatory compliance, on-chain reputation and credit systems could enable users to build financial credibility without relying on centralized credit bureaus. Regulatory compliance processes, such as Know Your Customer (KYC), could also be streamlined, allowing individuals to verify themselves once and use that verification across multiple services securely. With such on-chain identities, users could leverage their one and only credit and identity and save the efforts to do KYC whenever they are trying out a new DeFi protocol.

In the following parts, we will dive deeper into some of the prominent projects in this vertical to show how on-chain identity is secured, illustrating why this is relevant to the broader blockchain ecosystem.

Worldcoin: Iris-Based Proof of Personhood

Founded by OpenAI’s founder Sam Altman in 2019, Worldcoin’s approach to on-chain identity is built on biometric verification using iris scanning. Users verify their uniqueness by scanning their iris with a device called the Orb, which you can find physically in 19 countries. Upon scanning a human’s iris, the Orbs generate a unique World ID, a decentralized identity that can be used across various applications. As an incentive, verified users receive Worldcoin tokens.

Despite its novel use cases, Worldcoin has faced quite some challenges. This iris scanning requires users to interact with The Orb, a less familiar and more intrusive device, which may pose challenges in user acceptance and scalability. Worldcoin has encountered regulatory pressure in certain countries such as Kenya, with authorities scrutinizing its methods and, in some cases, halting its operations due to concerns over user safety and data privacy. The project’s approach has also raised concerns about the storage and potential misuse of biometric data, leading to debates over user privacy and data security.

Humanity Protocol: Palm-based Proof of Personhood

Humanity Protocol utilizes palm vein scanning technology. This method involves capturing the unique vein patterns beneath the skin using near-infrared light, a technique considered non-invasive and familiar to users. Palm vein patterns are difficult to replicate, enhancing security. Importantly, the Humanity Protocol ensures that no sensitive information is stored or shared, as the project leverages zero-knowledge proofs (ZKPs) for privacy-preserving identity verification. Their integration of ZKPs can greatly help with regulatory compliance.?

While different projects take varying approaches—whether iris-scanning based like Worldcoin or zero-knowledge empowered solutions like Humanity Protocol—the overarching goal remains the same: to create a decentralized, verifiable, and privacy-preserving identity system that empowers users while mitigating security risks. However, the key question remains: Can these projects strike the right balance between verifiability and privacy while ensuring widespread adoption? The answers will become clearer as more decentralized identity solutions evolve, regulatory frameworks adapt, and real-world use cases expand.?

Ultimately, widespread adoption of on-chain identity hinges on solutions that are both verifiable and privacy-preserving, guided by proper regulatory frameworks. Beyond mere verification, these technologies can redefine interactions with key sectors—such as finance, governance, and social platforms—giving greater control to users over their data. While on-chain identity is still in its infancy, the convergence of biometric scanning and zero-knowledge proofs points to a shared vision of secure, decentralized identities. Challenges remain, but the promise of a more transparent and user-centric digital world makes the journey worthwhile.