Forget Wallets, Web3 Needs Identity

Think about how we interact online today. We create digital identities, profiles, usernames, and social spaces that express who we are. Yet, in Web3,  our identities are reduced to long, impersonal strings of characters that say nothing about who we are: a wallet address.

This is more than a technical inconvenience, it’s a fundamental design flaw. Blockchain wallets were built for transactions, not identity. This transactional focus has made Web3 feel complex, fragmented, and impersonal. Users have to manage multiple wallets across different blockchains, struggle with lost keys, and operate in a system that prioritizes assets over people. While the internet evolved to be social, Web3 stays fundamentally financial.

For nearly a decade, wallets have been the main gateway to Web3, doubling as both financial tools and identity markers. But as blockchain technology matures, it’s clear that wallets alone aren’t enough for a truly user-friendly, social, and immersive Web3 experience.

The future of Web3 isn’t just about transferring assets, it’s about creating digital identities that users fully own and control. Identities that represent who we are, not just what we own.

Why Wallet-Centric Approaches Are Holding Web3 Back

Traditional crypto wallets were an important step forward for digital ownership, but they are now one of the biggest blockers to mainstream adoption. Their limitations are becoming increasingly clear as Web3 expands beyond financial transactions into social and creative spaces.

1. High Barriers to Entry
   Managing private keys, seed phrases, and gas fees creates unnecessary friction for new users. Many potential Web3 adopters hesitate out of fear of making mistakes, sending funds to the wrong address, losing access due to forgotten seed phrases, or struggling with clunky security measures.  Traditional crypto wallets offer little to no recovery options, meaning a single misstep can result in permanent loss. These aren’t minor concerns; billions in crypto remain forever lost due to simple errors.
2. A Fragmented Experience
   Users constantly switch between wallets for different chains and applications, creating a disconnected experience. Instead of a single, cohesive digital identity, Web3 forces people to manage fragmented financial tools. Compare this to Web2, where users maintain a consistent digital presence across platforms, from social media to gaming to commerce. Web3’s wallet-based approach goes against this natural user behavior.
3. Reducing Users to Financial Entities
   Wallets were built to store and transfer assets, not to facilitate meaningful social interactions. Web3, in its current form, lacks the social, creative, and interactive layers that make digital experiences engaging and meaningful. As Fabian Vogelsteller, the creator of ERC-20 and founder of LUKSO, pointed out in a recent interview, Ethereum evolved in a way that prioritized developers over users. Blockchain has become a highly technical space, where usability takes a backseat to functionality.

Developers have asked users to adapt to technology, rather than building technology that aligns with how users naturally interact online. This needs to change.

The Rise of Identity-Driven Web3

Recognizing these challenges, a new wave of solutions is emerging, designed not just for asset management, but for comprehensive digital identity. These approaches unite fragmented experiences under user-controlled identities that are portable, secure, and reflective of how people actually engage online.

The most promising next-gen Web3 identity solutions share several key characteristics: 

• User-centric design – Intuitive interfaces that reduce complexity
• Cross-platform interoperability – One identity across multiple apps and ecosystems
• Self-sovereignty – Full control over data, assets, and reputation
• Social integration – Reputation, relationships, and creative expression
• Extensibility – Modular identity solutions that evolve with user needs

Through my research into these emerging trends, I discovered LUKSO’s Universal Profiles, a unique approach that incorporates these principles and points toward a new direction for digital identity in Web3. 

LUKSO’s Universal Profiles: Reimagining Digital Identity

LUKSO, a layer-1 EVM blockchain designed for social, cultural, and creative applications, has introduced Universal Profiles, a new approach to blockchain-based identity.

Unlike wallets, which focus primarily on financial transactions, Universal Profiles act as full-fledged digital identities, integrating social presence, assets, and interactions into a single user-controlled profile. Each profile is secured on the blockchain, modular, and fully owned by the user, an important step toward a more intuitive Web3.

Some key innovations:

• Human-readable identities – Instead of long wallet addresses, profiles have recognizable usernames (@name#1234), making interactions more intuitive. The profiles are remarkably versatile, and capable of representing individuals, brands, communities, or even AI agents. 
• Gasless transactions – Powered by LUKSO’s relay service, users can interact without having to worry about gas fees, one of the biggest barriers to Web3 adoption. At the moment, users get a free monthly gas quota.
• Modular and extensible – Users can link their profiles to social connections, creative works, applications, and communities without the limitations of traditional wallets.
• Built-in security – Universal Profiles are powered by LUKSO Standard Proposals (LSPs), a set of blockchain standards designed to improve security, usability, and interoperability in Web3. Unlike externally owned accounts (EOAs), Universal Profiles leverages smart contracts for better access control, customizable permissions, and recovery mechanisms. Features like social recovery and key rotation ensure that users can regain access without depending on a single private key, making Web3 security more resilient and user-friendly.

By moving past wallets, Universal Profiles offers a consistent and portable identity, one that can be used across multiple dApps, platforms, and ecosystems without fragmentation.

To see this innovation in action, I explored profiles like virtual musician Teflon Sega (@teflonsega@E126) and NFT artist Dave (@dave@3BD7), whose Universal Profiles serve as central hubs for their digital presence, smoothly integrating their creative works, social connections, and digital assets in one cohesive space.

Beyond Identity: A Social and Creator-Centric Web3

Universal Profiles can solve digital identity, they can improve how we interact in Web3. Fabian Vogelsteller envisions Web3 as a space where people, not just assets, are at the center.

LUKSO extends this vision with two important innovations:

• Mini dApps – Portable Web3 applications that travel with users inside their profiles, instead of requiring them to reconnect a wallet on every new platform.
• The Grid – A customizable digital dashboard where users can organize dApps, digital assets, and social content, creating a holistic digital experience. Profiles like @modez@F76e show how collectors can display their digital assets in curated layouts, while podcast host @ethalorian@26e7 uses his Grid to feature podcast episodes and community resources.

These innovations address the gap between Web3’s decentralized nature and the usability of Web2, removing the friction that has slowed adoption.

The Path Forward: From Wallets to Identity

The wallet-centric model that represented blockchain’s early years is giving way to something more dynamic: a Web3 that prioritizes people over addresses, interactions over transactions, and creativity over complexity.

Projects like LUKSO understand that blockchain needs to develop into complete digital ecosystems rather than just financial tools in order to become widely used. Just as social media changed Web2 by making online interactions intuitive and expressive, identity-based innovations will influence Web3’s next phase.

A blockchain built for creators, communities, and culture is no longer a vision, it’s already taking shape. Universal Profiles shows that Web3 can be a place where people genuinely own their digital presence, collaborate easily, and interact without friction. It can be more than fragmented wallets and technical obstacles. 

The future of Web3 isn’t about better wallets, it’s about integrated, user-controlled identities. And as this change takes place, one thing is clear: Forget wallets. Web3 needs identity.

Photo by Shubham Dhage on Unsplash