Decentralized Identity in Web3: Which DID Projects Lead the Market in 2024

With the growing demand for decentralized data management solutions, DID (decentralized identifiers) projects have become one of the most discussed niches in the cryptocurrency market. Following a surge of interest triggered by the launch of Worldcoin, investors and developers are actively seeking alternative solutions for managing digital identities without centralized intermediaries.

Why Decentralized Identity is Becoming a Critical Task

Decentralized identity (DID) represents a fundamentally new approach to managing personal data. Instead of trusting social networks, banks, or government institutions with identity data, users gain full control over their digital identity.

Traditional identification systems operate on a model where large corporations store data of millions of people on centralized servers. This creates a single point of failure: if the server is hacked, data of all users is compromised. DID addresses this problem differently.

In the Web3 ecosystem, decentralized identity is based on cryptographic key pairs. Your public key functions as an open identifier visible to everyone. The private key remains only with you and is used to verify your identity. This means no one but you can impersonate you or access your data.

For the cryptocurrency market, such a system is critical because DID allows:

• Verifying transaction authenticity without revealing personal information
• Reducing phishing and account theft risks
• Building a user reputation that transfers across platforms
• Automating verification processes in DeFi applications

How Blockchain Ensures DID Security

Blockchain serves as an immutable and transparent database for DID. Each identity record is encrypted and linked to a wallet address. Even if a hacker gains access to the chain, they cannot alter identity data without the owner’s private key.

Add to this zero-knowledge proofs (Zero-Knowledge Proofs) — a technology that allows confirming a fact (for example, “I am of legal age”) without revealing the fact (date of birth). This makes DID an ideal tool for complying with KYC requirements on the blockchain while maintaining user privacy.

Worldcoin (WLD): Biometrics as the Foundation of Identity

Current WLD Data:

• Price: $0.50
• 24h Change: +0.34%
• Market Cap: $1.28B
• 24h Trading Volume: $1.54M

Worldcoin proposed a radical solution: using biometrics to create a unique identifier. Users visit special kiosks and undergo iris scanning. The resulting code becomes the World ID — a digital identity credential on the blockchain.

At first glance, this solution seems controversial: collecting biometric data sounds like a privacy violation. However, Worldcoin claims that biometric data itself is not stored on servers. Instead, a cryptographic hash is created, which becomes a unique identifier. The original scan data is destroyed.

World ID operates on multiple blockchains: Ethereum, Optimism, and Polygon. This allows users to use a single identity to interact with decentralized applications across different networks.

Worldcoin also launched World Chain — its own Layer 2 for Ethereum. This network prioritizes human interactions over bots, requiring verification via World ID to participate.

Strengths:

• Innovative approach to combating bots and fraud
• Integration with multiple blockchains
• Focus on financial inclusion in developing countries

Weaknesses:

• Privacy advocates criticize it
• Challenges with global regulation of biometric data
• High entry barriers (need to find a verification kiosk)

Lifeform: 3D Avatars as Digital Identity

Lifeform took a different path: transforming digital identity into a visual object. The company creates hyper-realistic 3D avatars that become your representation in Web3.

On paper, it sounds like a metaverse application, but Lifeform addresses a real problem. In Web3, users often want to interact anonymously but also build a reputation. A unique 3D avatar solves both issues: it’s your representation recognized by others, but without linking to your real identity.

Lifeform recently completed a Series B funding round with an valuation of $300 million. The company supports over 3 million users. Integration with Web2 social networks allows users to transfer their avatars between platforms.

Competitive Advantages:

• Consistent user experience
• Integration of Web2 and Web3
• Support from major investors (IDG Capital)

Challenges:

• Requires specialized knowledge for implementation
• Compatibility with different metaverses remains complex

Polygon ID: Privacy via Cryptography

Polygon ID uses zero-knowledge proofs to create decentralized identities. This means you can verify virtually any claim about yourself (age, citizenship, credit score) without revealing the data itself.

In February 2024, Human Institute announced a partnership with Polygon Labs and Animoca Brands to create the Humanity Protocol. The system uses palm recognition — a less intrusive alternative to eye scanning. In April of the same year, Polygon launched a full identification protocol based on ZKP.

This approach is ideal for DeFi. Platforms can verify that a user is not a repeat borrower (protection against defaults), not sanctioned, or has a minimum credit score — all without knowing their actual identity.

Advantages:

• Maximum privacy
• Compatibility with Polygon/Ethereum ecosystem
• Flexible use cases

Limitations:

• New technology requiring developer adaptation
• Not yet widely adopted

Ethereum Name Service (ENS): People Remember Names, Not Addresses

ENS solves a simpler but equally important task: replacing cryptic addresses with human-readable names. Instead of sending funds to an address like 0x742d35Cc6634C0532925a3b844Bc9e7595f42439, you just write alice.eth.

In February 2024, ENS partnered with GoDaddy, enabling users without technical skills to link their regular domain names to the blockchain. Since April 2024, ENS has integrated .box domains — the first top-level domains (TLD) approved by ICANN and operating directly on the blockchain.

It may seem trivial, but proper UX is critical for mass adoption. If an average user has to copy a 40-character address instead of typing a name, they simply won’t use cryptocurrency.

Strengths:

• Maximum ease of use
• Supported by the Ethereum community
• Integration with the regular internet

Weaknesses:

• Limited to the Ethereum ecosystem
• Scalability issues as the number of domains grows

Space ID: Identity Across All Blockchains

Space ID goes beyond ENS, offering a universal namespace for all blockchains. Registering a name in Space ID allows you to use it on Bitcoin, Ethereum, Solana, and other networks simultaneously.

This solves the fragmentation problem: each blockchain has its own ecosystem of applications and addresses. Space ID creates a single entry point for interacting with all of them. The project supports various scenarios: from token lending to NFT marketplaces.

Advantages:

• Cross-chain compatibility
• Unified user experience
• Universal applicability

Disadvantages:

• Competition from other domain name systems
• Perception outside the crypto community remains weak

Galxe: Reputation as Digital Identity

Galxe addresses a different task: turning a user’s interaction history into a digital reputation. The platform tracks on-chain activity, creates verifiable credentials, and allows organizations to embed reputation systems into their applications.

This is especially valuable for access management. A decentralized DAO might require members to have a reputation of at least 5 out of 10 in Galxe before voting. Or a DeFi protocol might give high-reputation users better loan rates.

Pros:

• Innovative use of on-chain data
• Scalable access management solutions

Cons:

• Still in early development
• Takes time for mass audiences to understand

Major Challenges for Decentralized Identity

Despite progress, DID faces serious obstacles.

Technical complexity: Users must manage private keys. Losing a key = losing access to identity. This contrasts with Web2, where account recovery via email is possible.

Regulation: Governments have yet to decide how to regulate DID. AML requirements (Anti-Money Laundering) conflict with privacy. Data protection laws (GDPR) are incompatible with immutable blockchain records.

Adoption: Transitioning from centralized to decentralized identity requires rewriting entire infrastructure. Banks, government agencies, and large services must integrate DID into existing systems.

What to Expect for DID in the Coming Years

Mass adoption: As awareness grows, DID will be integrated into everyday crypto transactions. Every new DeFi protocol will require DID verification as a standard.

Privacy improvements: New versions of zero-knowledge proofs will become faster and more reliable. Biometric systems will evolve toward greater data protection.

Cross-chain interoperability: DID will work seamlessly across any blockchain — becoming a standard rather than an exception.

Regulatory clarity: Regulators will start developing coordinated approaches to DID. This will open opportunities to use DID in traditional finance and government services.

Beyond crypto: Integration of DID with IoT devices and AI systems. For example, you could authorize an autonomous robot to access your medical data using DID instead of a password.

Final Thoughts

Decentralized identity is not just another crypto fad. It represents a fundamental shift in how we manage personal data in the digital age. The projects described above demonstrate different approaches to solving one problem: how to create a system that is simultaneously secure, private, and user-friendly.

Worldcoin chose biometrics, Lifeform — visual avatars, Polygon ID — cryptography, ENS — simplicity. Each approach makes sense for different scenarios.

As technology develops, we will see convergence: the best ideas from various projects will merge into universal standards. Decentralized identity will become as natural and everyday as passwords are today.

Investors and developers should keep a close eye on this sector. DID is not just a trend; it is the infrastructure of future Web3.