Market Report

Digital Identities Report

The Digital Identities Report addresses the questions of what digital identity means for us as humans and why we need it, the pros and cons of real-world vs. fictional avatars in the Metaverse, and the role of digital fashion to enable self-expression. It is aimed to provide an overview for people trying to understand the space and facilitate the discussion about the topic of digital identity. For the report, we have collaborated with selected leaders from the Metaverse, NFT, and digital fashion space to dive into current market structures and dynamics.

The key insight for us is that the digital identity market is still in its infancy — but will grow exponentially over the next years. We forecast the digital identity space may generate more than $600bn by 2030. And the more our lives shift into the digital realm, the more important it becomes to find answers to some of the core questions of digital identity that guide this report: What should our digital identities look like in the future and why? What do web3-native companies and established brands do? What happens in terms of M&A activity in the space? Leading-edge companies are laying the foundations of the digital identity infrastructure and creating a landscape that is divided into various core pillars:

The metaverse is being touted as one of the biggest opportunities in tech. And while definitions are still evolving, it’s clear that a new kind of digital identity is needed to navigate it seamlessly. We have seen the move from physical, over online to metaverse identity, which in the ideal state should allow you to share only the information you want. In the expression of one’s digital identity in virtual space, avatars play an important role today. While many companies focus on the virtual representation of one’s real-world features with human-like avatars, other innovators are moving towards borderless avatars that open up creative freedom to enable new perspectives on self-expression, diversity, and interaction possibilities. Where activity will center remains to be seen and will largely be determined by the individual interests of market participants, especially the big tech players and emerging web3 native companies. Verticals that enable digital identity come to the forefront. First and foremost, digital fashion offers a way to enable self-expression in the digital space on a granular level. Market-leading established brands are starting to recognize the value and are investing heavily in the space, while innovation-leading start-ups are creating the fundamental concepts behind it. Besides working on the visual expression side, many smart minds are trying to solve the trust gap in digital identities. For this, the concept of cryptographic credentials seems to offer the first promising practical concept to combine safety, security, and privacy controls. Two main aspects are driving M&A activity in the space: (i) large players in established industries are trying to get involved by acquiring smart teams and internalizing their technologies, and at the same time, (ii) the first wave of consolidation emerges as network effects and economies of scale become more apparent and large players expand their offering horizontally by acquiring adjacent businesses or vertically by integrating parts of the value chain.

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