Our online identity is currently managed by centralized institutions. It's either a government (log in with your social security number) but more often an e-mail provider or social media provider. Ethereum provides an alternative. Crypto wallet provider MetaMask has recently integrated this 'Sign in with Ethereum' functionality. 

Non-custodial crypto wallets are wallets in which you are responsible for storing your own private key/seed phrase. A great responsibility, but with the benefit that you can transact or communicate without the need for an institution as a middleman. When you own your online identity, you can choose if you want to share information with other parties. No company can share or sell your personal data without your consent. 

MetaMask's support

With MetaMask's new support of Sign in with Ethereum (by the way, the Phantom wallet already offered it), users can securely authenticate off-chain web services using their crypto wallet. To make this possible, the most popular web3 wallet has adopted Ethereum's EIP-4361 standard. 

By implementing EIP-4361, wallet users like those of MetaMask can sign a standard message format to log in to websites. Compatible websites will display a pop-up for users to review information, such as the site name, session specifics, and security measures like a nonce, as well as confirm the accurate domain name to prevent unauthorized entry from malicious sites. 

Examples of decentralized identity

Decentralized forms of online identiy are springing up left and right in recent years. Here are three examples. 

Soulbound tokens: a soulbound token (SBT) is a type of NFT that cannot be traded. Why not? Because this token is inextricably linked someone's identity, or 'soul'. After all, some things you collected are inextricably linked to you: for example your drivers license, your university degree. 

Nostr: this censorship-resistant version of Twitter is popular with the Bitcoin crowd. Even though it doesn't use a blockchain (and as such won't benefit BTC or ETH prices) it is based on cryptographic keys and signatures, so it is tamperproof. If you generate an account, you get a private key, which will safeguard access to your account. You send your 'notes' to multiple relays, so no central server can block you from the network

Ethereum Name Service: The Ethereum Name Service (ENS) is a naming service that allows giving wallet addresses easily readable names. Users get a .eth domain that would replace the long alphanumeric string that marked their wallet’s public address. Similar to DNS for domain names, which replace long IP addresses.

Decentralized identity a catalyst for next bull run?

Ethereum's prior bull runs have come from emerging use cases for decentralized ownership. The ICO boom of 2017 revolved around issuing and owning tokens for new projects. In 2020, booming decentralized finance applications ran on Ethereum, for example decentralized exchanges. In 2021 came NFT's. While DeFi and NFT's probably aren't going away, it would be nice to see one or two new emerging use cases for Ethereum. Gaming is one, decentralized identity is another one - and a really sensible one, that goes beyond just speculative activity.