Wallet concepts perplex non-crypto users, discouraging adoption of Web3: Civic

A new insight report from Civic Technologies suggests that current wallet-based authentication may be slowing mainstream adoption. The “State of Authentication and Identity in Web3” report says that “the rapid growth of Web3 has generated intense excitement around decentralized applications (dApps) and digital ownership, yet the underlying authentication methods, which are critical to user security and experience, remain limited and often misunderstood.”

Wallet-based authentication, it seems, may not be the best route to mainstream penetration. “Non-crypto users struggle with wallet concepts, making onboarding difficult. Complicated steps and seed phrases push users away from promising platforms before they even get started.”

The paper collects and summarizes insights from more than 20 interviews with industry experts, which Civic says have presented a clear picture of “current limitations in Web3 authentication, including usability, security, and data management challenges, which alienate non-crypto-native users and stifle broader adoption.”

Still, Civic remains bullish on decentralized identity. “By placing control of identity directly in the hands of users, decentralized identity addresses key pain points of traditional systems,” it says.  “Unlike centralized databases, it allows individuals to securely manage and share their credentials through digital wallets, leveraging selective disclosure to protect sensitive information.”

Technology is ready; language is often incomprehensible

Having identified a major pain point in communications, the paper makes a turn to the technical, to explore “practical implementations of decentralized identity that enable multi-layered verification, hybrid Web2 and Web3 logins, and privacy-first design to solve today’s pressing challenges.”

“Decentralized identifiers (DIDs), combined with technologies like biometrics, passkeys, and non-transferable tokens (SBTs), address critical needs in applications requiring Sybil resistance, such as gaming and DeFi. Furthermore, these systems bridge the gap between Web2 and Web3 by offering familiar onboarding options, such as email or OAuth-compatible authentication.”

Civic is effective in making the standard arguments in favor of biometric authentication, which it says adds “critical layers of protection beyond traditional methods like wallet connections.”

“As the need for secure, flexible, and user-friendly identity verification grows, MFA and biometric technologies are shaping the standards for the next generation of decentralized applications,” it says.

However, it seems unable to grasp that the core ask is for simplicity. The paper quotes one interviewee, who suggests “it’d be nice if you could verify the person who brings them in, and then you just log in with Gmail. Almost everything in the world works that way. Instead, I have to explain wallets and seed phrases to people who don’t know anything about this stuff – and then they have to verify themselves. It feels like the process should be reversed.”

Gaming an ideal use case for decentralized identity systems

Civic has suggestions for when decentralized systems make sense. It highlights the problems that gaming platforms face in maintaining identity integrity. “Fake accounts and bots frequently disrupt ingame economies, exploit rewards, and undermine the balance of play-to-earn ecosystems. Traditional solutions rely on centralized identity systems that often require players to share personal data, a notable drawback for a demographic that highly values anonymity.”

It highlights hybrid identity systems, of which it says platforms must balance regulation with user empowerment by offering both centralized compliance tools and decentralized privacy solutions. It covers trends in authentication and identity for Web3, interoperability and more. It notes the functionality of passkeys, and how video-based facial recognition can verify human presence without requiring traditional identity documents, enabling privacy-preserving verification.

But it risks overlooking its key pain point: for users seeking simple identity solutions, much of Civic’s language is unlikely to resonate. Its note on wallet and private key abstraction underlines the issue: “by removing the complicated parts of crypto, wallet abstraction ensures that users can interact with blockchain applications without needing to understand their technical underpinnings.”

The necessary level of abstraction on a conceptual and descriptive level remains elusive, and until decentralized identity can present itself as a simpler option out of the box, the fog of misunderstood authentication methods seems unlikely to abate.

Article Topics

biometric authentication  |  biometrics  |  Civic Technologies  |  consumer adoption  |  decentralized ID  |  digital identity  |  identity verification  |  proof of personhood  |  web3