The Web3 Digital Identity Rush: Progress, Friction, and What to Look For in a Solution

Over the past year, a wave of Web3 digital identity solutions have entered the market. Each one approaches the domain challenge a little differently. None of them are exactly the same. And that’s not necessarily a bad thing. What we’re seeing is an industry experimenting in real time.

As registries, registrars, and infrastructure providers push the boundaries of what a top level domain can represent, new models are emerging. Along the way, solutions have discovered both friction points and meaningful breakthroughs. Some approaches have simplified the experience for users. Others have revealed just how complex it can be to merge the worlds of DNS and Web3.

Where Many Web3 Digital Identity Solutions Struggle

While there is no right or wrong solution out there, some have more friction points than others. This is inevitable. It’s nearly impossible to merge two platforms, educate users, and create a new user experience in one sweep. For domain customers, though, this creates different challenges as they enter the Web3 ecosystem as Web2 natives. Some of the most common pain points for customers include:

Steep learning curve. For Web2 customers, Web3 can feel like a completely different internet, and that’s because it is. Some solutions expect users to understand concepts like digital wallets, blockchain transactions, and network fees right off the bat. Often, this thinking results in UX that is built for experienced Web3 users, not Web3 beginners coming from a domain registrar onramp. If beginners can’t easily navigate the solution and understand what actions they’re completing, then the solution isn’t fulfilling the true need of the customer.

Registrar-level integration. With certain solutions, the Web3 digital identity connection operates at the registrar-level. Registrars often need to complete a technical integration with the benefit being that customers can manage their digital identity connections within the registrar’s control panel. This is a great feature, but it comes with tradeoffs. Per ICANN, registrants should have freedom of choice with registrars, and registrar-level integrations often limit the customer. Either they are locked into a single registrar in order to keep their Web3 connections or they have a limited selection to choose from. If a customer does choose to transfer their domain to a new registrar, they will need to complete configuration again. That’s only if the registrar has the same integration, though. If they don’t, the customer may be out of luck for their Web3 digital identity.

Registries should pay particular attention to how registrar-level solutions influence namespace control and governance. ICANN does not have a say in how Web3 namespaces are managed and , in some cases, there are virtually no restrictions on which TLDs can be used as a digital identity. With registrar-level integrations, registrars have the power to decide which TLDs are on chain, not registries. As the registry operator of .locker, Orange Domains believes that registries should maintain control of their TLD and namespace- regardless of platform or ecosystem. Removing management power from registries allows registrars to manage digital identities in a grey area, putting all parties at potential risk.

Different ownership models. Connecting DNS with Web3 and keeping records in sync is tough, but there are workarounds that make it easier. One workaround some solutions have found is using their own contact information for the domain name registration, and then allowing the customer to use their own information for the digital identity. The customer gains self-sovereignty on Web3, but they lose control over their Web3 presence. Using someone else's information for a domain's administrative contact is generally not recommended by the domain industry. Domain ownership disputes are not uncommon, and it's a clear cut rule that the administrative contact is the owner of the domain.

Individually, these challenges may seem manageable. But collectively, they highlight an important truth: bridging DNS and Web3 requires more than simply adding blockchain functionality. It requires designing systems that work for both ecosystems.

A Different Approach: Designing a Solution for Registries

Orange Domains suggests a different solution that addresses some of the bigger challenges.

Designed for domain beginners. Rather than assuming domain customers already understand Web3, the solution should focus on simplifying the experience from the start. The onboarding process should guide users through each step directly on screen, including digital wallet configuration, and provide eduaction. The goal is to make the process accessible, even to customers who have never interacted with blockchain tools before. The domain industry knows that customers who engage with a domain are more likely to renew, so the solution should provide a direct path to engagement without the friction. 

Registry-level integration. Solutions that are integrated at the registry level offer benefits to all parties and remove the bigger drawbacks. For registries, they can maintain control over their TLD. With this setup, anywhere a registry chooses to sell their domain, Web3 digital identities can be offered. Registrars are also free from any integration requirements. And because a registry-level integration operates independently from registrars, customers can choose where they want to manage their domain, even if the registrar doesn't offer Web3 services. They can keep their digital identity without breaking connections.

Self-sovereignty. Self-sovereignty is a principle of Web3 and ownership matters. Registrants should always be the administrative contact of their domain name, to match the ownership of their digital identity. This may mean the solution becomes more complex or takes more technical work, but it is a key feature that’s non-negotiable for Orange Domains.

Regulatory peace of mind. Web3 is a brand new frontier for ICANN and DNS. There are no policies in place, no regulations, and no standards to follow yet. The upside is that there is a namespace framework to follow and a lifecycle to mimic. Tapping into the robust knowledge of ICANN to help design a solution is a must, especially if Web2 and Web3 are going to merge. Solutions that work outside of this framework will not be compatible with DNS, making it difficult to keep the domain and digital identity working in tandem. Both the domain name and the digital identity need to behave similarly to prevent customer confusion, fragmentation, and name collision. This doesn't mean that a digital identity itself needs to have its own registration and renewal fees. That's not what Web3 users want. It just means that the digital identity needs to complete the actions of registration, renewal, and other lifecycle milestones at the same time as the domain.

Orange Domains took all these lessons to the drawing board. The result is Minting as a Service (MaaS), a white-label digital identity solution for domain registries. MaaS transforms .tlds into high utility, multi-chain digital identities that are minted on Bitcoin and resolve on Ethereum. This isn’t just a technical bridge. It’s a strategic evolution that gives .tlds and registries the edge to compete in today’s market. And it's important to consider that MaaS was built by domain registry experts for domain registry operators. With over 50 years of domain industry experience, the Orange Domains team knows what it takes to launch, manage, market, and sell a domain + digital identity in today's modern landscape.

The Bigger Lesson for the Domain Industry

Minting as a Service isn’t the only solution making strides. There are multiple strong solutions bumping against each other in the market, and we’re learning from each other’s strengths and weaknesses. As the Web3 market matures, solutions will mature alongside it. We celebrate healthy experimentation, and we also celebrate the lessons we learn along the way. 

For more information on Minting as a Service, visit my.locker or contact Don Ruiz and don@orangedomains.com.