Why SSI Will Fragment the Identity-as-a-Service Market

Legacy IAM vendors like Okta and Auth0 create custodial honeypots, centralizing sensitive user data. This model is fundamentally incompatible with privacy and creates systemic risk.

• Single Point of Failure: A breach at the IAM provider compromises all connected applications.
• Vendor Lock-In: Switching providers is a multi-year, multi-million dollar migration project.
• Regulatory Liability: Holding PII creates massive GDPR/CCPA compliance overhead.

SSI standards like W3C Verifiable Credentials and DIDs enable users to hold cryptographically signed attestations (e.g., a KYC proof from Coinbase) in their own wallet.

• Zero-Knowledge Proofs: Prove you're over 21 without revealing your birthdate or driver's license number.
• Instant Portability: Credentials move with the user, breaking vendor lock-in.
• Selective Disclosure: Share only the specific data a service requires, minimizing exposure.

Public blockchains like Ethereum and Polygon provide a decentralized, global registry for Decentralized Identifiers (DIDs) and credential schemas. This is the missing infrastructure for SSI at scale.

• Immutable Audit Trail: Credential issuance and revocation states are publicly verifiable.
• Censorship-Resistant: No single entity can de-platform a user's core identity.
• Interoperability Foundation: A shared root of trust enables seamless cross-application and cross-chain identity, akin to how UniswapX uses intents for cross-chain swaps.

Legacy IaaS platforms like Auth0 and Okta create vendor lock-in, single points of failure, and expose aggregated user data. Their ~$50B+ market cap is built on renting access to your own identity.

• Data Breach Liability: Central honeypots for PII.
• Incompatible Standards: Walled gardens prevent portable reputation.
• Extractive Fees: Recurring SaaS tax for a core utility.

SSI standards like W3C Verifiable Credentials and DIDs enable trustless, cryptographic proof of claims. Projects like SpruceID and Disco are building the signing/verification layer.

• Zero-Knowledge Proofs: Prove age without revealing birthdate.
• Interoperable Stack: Credentials work across any compliant app.
• User-Held Keys: Revocation and selective disclosure are user-controlled.

SSI fragments the market into vertical-specific credential issuers. A DAO's membership proof (Orange Protocol) is issued differently than a DeFi credit score (ARCx) or a KYC attestation (Verite).

• Vertical Sovereignty: Each domain controls its own trust roots.
• Composable Reputation: Mix credentials from GitHub, Coinbase, and a DAO.
• New Business Models: Pay-per-verification, not per-seat SaaS.

EAS provides a public good primitive for on-chain attestations, becoming the SQL database for reputation. It's schema-less, permissionless, and avoids the oracle problem by letting anyone attest.

• Infrastructure, Not App: Does not issue credentials itself.
• Immutable Graph: Creates a global web of verifiable social data.
• Forkable State: Prevents platform risk; community owns the graph.

Wallets like Privy and Dynamic evolve from key managers to SSI agents, managing credentials, facilitating logins, and paying for verifications. They are the new user-facing moat.

• Seamless UX: Replace 'Connect Wallet' with 'Prove Credential'.
• Cross-Chain Portability: Same identity on Ethereum, Solana, Cosmos.
• Monetization Shift: Fees move from SaaS to transaction/verification layers.

The $10B+ IaaS market fragments into a modular stack: specialized issuers, public attestation layers, and agent wallets. The value accrues to credential graphs and user relationships, not to centralized intermediaries.

• Regulatory Arbitrage: Credentials can be issued in compliant jurisdictions, used globally.
• Composable Capital: On-chain credit scores unlock undercollateralized lending.
• Anti-Fragile: No single entity can de-platform a global identity system.

SSI's value is unlocked by universal verifiability across contexts (DeFi, gaming, social). This requires competing standards (W3C VC, DIDs) and verifier ecosystems, preventing any one provider from capturing the entire stack.

• No Network Lock-In: Users can switch credential issuers or wallets without losing their identity.
• Protocols Over Platforms: Value accrues to open standards like Iden3 and Veramo, not proprietary SaaS.
• Fragmented Revenue: Fees are distributed across issuers, verifiers, and wallet providers, not centralized.

Trust is contextual. A KYC credential from Coinbase holds different weight than a DAO reputation credential from Gitcoin Passport. The market will fragment into vertical-specific, trusted issuers.

• Vertical Specialization: Gaming (Ready Player Me), Professional (Orange), Financial (Circle) will run their own issuance.
• Sovereign Data: Issuers cannot monetize the underlying data, only the trust signal.
• Regulatory Silos: Jurisdiction-specific compliance (e.g., eIDAS 2.0 in EU) creates regional walled gardens.

User custody shifts the point of aggregation from the service provider to the wallet (e.g., MetaMask, Privy, Web3Auth). Wallets become commodity interfaces competing on UX, not proprietary data.

• Commoditized Interface: Any wallet can present any verifiable credential, destroying service moats.
• Thin Margins: Wallet revenue is from key management & gas abstraction, not identity data.
• Fierce Competition: Leads to ~90% of wallets failing, with no single winner capturing the full identity stack.

Apps that verify credentials (the demand side) will integrate multiple SDKs (SpruceID, Disco, Trinsic) to maximize user reach. Verification becomes a low-margin, infrastructure-level service.

• Multi-SDK Integration: DApps hedge by supporting multiple credential formats and issuers.
• Cost Race to Zero: Verification is a simple cryptographic check; pricing power is negligible.
• Value Upstream: The real value is in the credential use case (e.g., a loan), not the verification itself.