On-Chain Identity and Its Future

Standardization and Interoperability Challenges

The ideal state for on-chain identity is for users to seamlessly transfer their identities across different chains and applications. However, in practice, the diversity of DID methods, resolution mechanisms, and credential formats has become the main obstacle to interoperability.

Currently, each ecosystem implements DID solutions independently, making it difficult to reuse identities across platforms. This not only increases development complexity but also undermines the overall value of “self-sovereign identity.” From both technical and ecosystem perspectives, the main challenges include:

• Multiple DID methods coexist, with inconsistent resolution and registration approaches
• Varying levels of standard support among different wallets and applications
• Inconsistent user experience when using verifiable credentials across chains and protocols

Addressing these issues requires further convergence on technical standards, as well as collaboration among ecosystem participants at the implementation level.

Regulation, Privacy, and Sovereignty Conflicts

The core concept of on-chain identity is user sovereignty, but this inevitably clashes with regulatory demands in the real world. Regulators in different countries want to ensure compliance, anti-money laundering measures, and accountability, while users want to maximize privacy and control over their data.

This tension is not black-and-white; it requires finding balance points in various scenarios. For example:

• How to prove compliance without revealing specific identity details
• Whether trustworthy and auditable identity paths exist when regulators intervene
• Whether users can revoke or update previously issued identity credentials

Therefore, the future of on-chain identity is not just a technical challenge—it is also a matter of institutional design and societal consensus.

The Next Phase of On-Chain Identity

Looking ahead, on-chain identity will likely evolve from a standalone component into an embedded infrastructure layer deeply integrated with wallets, protocols, and operating systems. Identity verification and authorization will become increasingly invisible, occurring without user awareness.

Key features of the next phase may include:

• More automated, low-interaction identity verification processes
• Integration of credentials with behavioral data to form dynamic reputation systems
• Native incorporation of identity capabilities into DeFi, DAOs, and real-world applications

When identity shifts from simply “who you are” to “what you can do” and “how much you are trusted,” on-chain identity will truly become the foundation of Web3’s trust architecture.