Coinbase: Why we need to build an identity layer on Web3

Build the Web3 identity hierarchy in a way that prioritizes user privacy, security, and control.

In order to create an open financial system for the world, we need to make sure that everyone can use Web3. This requires us to build an intuitive, forgiving, trustworthy identity experience based on combining the advantages of Web2 and Web3, the first step of which is to make it easy for anyone to obtain a free Web3 (ENS) username , we still have a lot of work to do in this step.

Coinbase: Why do we need to build an identity layer on Web3?

If you’ve used cryptocurrencies, you’ve probably experienced the anxiety of sending tokens or NFTs to a 42-character address like 0x2133a64a3bE8B64827B26B08e166d0b478bd09D3. To make this easier, Coinbase has partnered with the Ethereum Name Service (ENS) to allow users to claim the “” username using the Coinbase Wallet browser extension.

To create an open financial system for the world, we need to ensure that people from all walks of life can use Web3. Promoting the adoption of human-readable username standards is a key part of making Web3 look friendly to everyone. With this feature, anyone can now request a free “” Web3 username for sending and receiving cryptocurrency (instead of using a 42-character address), interacting with others, and using it as their Web3 the basis of identity.

While this is an important milestone, your username is only part of your online identity. There are other identity-related gaps that need to be filled before Web3 can be used by billions of people. While Web3 had early promise, it was often unintuitive and lacked a viable way to communicate and assess trust and legitimacy. To fill these gaps, we need to combine the convenience of Web2 with the privacy, security, and control of Web3.

What is identity? Why is this important?

When we create an account or log into a product, we are using our identity to gain access. Identity is how products and platforms represent, manage access and authorization, and assess trust. Identity has three core parts:

  • Representation: how you are represented as a user (for example, your username and profile).
  • Access: Prove that you are the owner of the identity (for example, log in) to gain access to the product.
  • Authorization: Based on our identity to determine what access is allowed.

In today’s Web3, we can use wallet addresses or usernames (like nick.eth or to represent this. It is also possible to enter Web3 by using a mnemonic phrase to configure our wallet or restore access to the wallet. Certain tokens or NFTs can grant us access to exclusive communities, etc.

Didn’t Web2 already solve this problem?

The Web2 company has invested heavily in developing intuitive and convenient identity products. But the vulnerabilities of Web2 identification are starting to emerge: the need to manage multiple accounts and passwords; having to deal with “relentless” spam; a lack of privacy, security, and control.

Many of us give up privacy, security, and control for convenience. We only realize the shortcomings of Web2 when we are affected by data breaches, organizational overreach, or loss of access. But in today’s world, these events are becoming inevitable.

What does it take for Web3 to thrive?

The basic customer requirements for Web2 and Web3 identities are the same. The difference is how they meet. Web2 is centralized, offering convenience and flexibility at the expense of privacy, security, and control. Web3 is trustless and decentralized, but it has the shortcoming of usability. For Web3 to thrive, we need to combine the best of both worlds (flexibility and usability without sacrificing privacy, security, or control) and create an experience that:

  • Intuitive. It needs to make it easy for every user to transact and communicate with others via human-readable usernames, not daunting 42-character addresses.
  • tolerant. Every user needs security, and they need a way to restore access without relying on securely storing sensitive recovery phrases — in which case a single mistake could cost someone their livelihood.
  • trustworthy. People need to be able to understand whether the person or app they interact with is trustworthy, and apps and users need tools to demonstrate trust to others.

Coinbase: Why do we need to build an identity layer on Web3?

Evolving Web3 Identity

Web3 has the opportunity to address many of Web2’s shortcomings. With encryption, we can control the keys to our identity, and security is in our hands. But the reality is: Web3 today is daunting. So what does the Web3 community need to do to make the benefits of Web3 available to everyone?

user ID

We need to make it easy to define and manage portable, interoperable, human-readable usernames on top of rich, customizable public identities (from anonymous to fully public). Users should be able to maintain multiple identities in different environments (eg one for work and one for gaming).

Tools to help everyone stay safe and feel safe

Today, Web3 violates one of the fundamental laws of security because our identities are vulnerable to a single point of failure: the recovery phrase. Compromised applications, devices, or social engineering attacks can all lead to identity theft. Multi-factor authentication (MFA) is a classic example of Web2, and Web3 will require an equivalent solution that protects every user.

Recovery when something goes wrong

We’ve all forgotten our passwords at some point, and we shouldn’t expect the recovery phrase to be any different from the password. We can’t scale an ecosystem where losing a recovery phrase takes someone out of their livelihood – the user needs a way to regain access. Products such as social recovery or multi-party computation (MPC) technology offered by Coinbase’s dapp wallet are creating a more forgiving experience, enabling wider Web3 adoption.

trust and legitimacy

Passports are valid because the government certifies their legitimacy. The utility of Web3 identities also relies on the proof of the legitimacy of the identity by trusted parties. Users will need to collect and manage proofs of credentials and legitimacy. Applications will need a way to issue and verify the legitimacy of user identities and credentials.

Interoperability Across Web2 and Web3

Over time, the concepts of “Web2” and “Web3” will become blurred, and later users will not see a clear distinction between the two. They expect seamless access to “Web2” and “Web3” from one identity and one set of credentials, and we need to implement that experience. Likewise, we need to provide users with a chain-agnostic identity that they can use across all Web3.

Establish an identity for Web3

Building a strong Web3 identity layer requires intense focus from a strong team that can build and iterate quickly. This often means building and improving locally before scaling globally (and in a decentralized way). Coinbase and many of these organizations need to embrace this long-term vision from the start: open source, open standards, and working closely with the wider Web3 ecosystem.

Most importantly, we cannot ignore the core promise of Web3 identity. We need to build in a way that prioritizes user privacy, security, and control, while being intuitive, forgiving, and trustworthy.

Coinbase has already started this journey with organizations like ENS and Verite to provide everyone with a free Web3 identity (, and they will continue to expand the identity service.

Posted by:CoinYuppie,Reprinted with attribution to:
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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