The transformation extends to data storage and sharing mechanisms. Web3 replaces centralized server storage with distributed systems, effectively creating individual digital vaults under user control. This architecture enables granular control over information sharing, including specific data elements, recipient selection, and duration of access. The system maintains transparent records of all transactions while preserving revocation capabilities. Implementation challenges persist, particularly regarding user accessibility and regulatory compliance with existing privacy frameworks (Bernabe et al., 2023). Nevertheless, the new web represents a significant architectural advancement toward enhanced individual control over digital presence and data sovereignty.

The theoretical foundation for understanding such networked systems traces back to Milgram’s (1967) seminal “small-world experiment,” which demonstrated that human beings are connected through surprisingly short chains of social relationships. This concept of interconnectedness extends beyond social networks to various natural and technological systems. Network theory has proven valuable in analyzing diverse phenomena, from epidemiological spread patterns (Barabási & Pósfai, 2016) to protein-protein interaction networks in cellular systems (Vidal & Cusick, 2011).

The Internet’s evolution follows similar network principles, with its growth and adoption driven by network effects – the phenomenon where a service’s value increases with its number of users (Shapiro & Varian, 1999). While these network effects have been crucial for digital business success, they also present significant challenges. Just as biological networks can propagate beneficial or harmful elements (such as pathogens), digital networks can similarly amplify both positive and negative outcomes. This duality particularly manifests in data privacy and control issues in contemporary digital platforms.

The contemporary digital economy is predominantly driven by advertising-based revenue models, significantly centralising the World Wide Web’s economic infrastructure (Srnicek, 2017). This centralization has facilitated the emergence of dominant platform companies that have established proprietary digital ecosystems, systematically collecting and analyzing user-generated data to create comprehensive digital identity profiles (Zuboff, 2019).

The success of digital businesses follows a recursive pattern: advanced algorithms enable sophisticated digital products and services, which, when delivering perceived value, generate increased user engagement and more detailed behavioural data (Alaimo & Kallinikos, 2017). This self-reinforcing cycle creates an expanding data repository that drives corporate profitability. Nguyen et al. (2013) highlight the fundamental tension in this ecosystem, emphasizing that current platform architectures create an inherent power imbalance between service providers and users. Their analysis reveals that while users contribute valuable personal data, they lack meaningful control over collecting and monetising information. This asymmetry necessitates a shift toward user-centric data architectures and policies.

This recognition of data asymmetry has prompted significant responses from both users and regulatory bodies. At the individual level, users are increasingly implementing privacy protection measures, including encryption tools and data minimization strategies (Acquisti et al., 2016). Simultaneously, regulatory frameworks have emerged globally, with the European Union’s General Data Protection Regulation leading the way by introducing fundamental rights such as data portability and explicit consent requirements (Hoofnagle et al., 2019). These regulations aim to rebalance the power dynamics between data controllers and individuals, creating new standards for data protection across jurisdictions (Greenleaf, 2019).

All this leads to the hypothesis that the area of living in a land of milk and honey is ending for the large players in the digital economy. The current centralized data monetization approaches appear to be reaching their limitations (Kenney & Zysman, 2020). Established platform companies are demonstrating awareness of this impending transformation. For instance, major social media corporations actively diversify their revenue streams beyond traditional advertising-based data monetization (Nieborg & Poell, 2018). Meta’s strategic pivot toward virtual reality and digital payments exemplifies this transition, reflecting broader industry recognition of evolving market dynamics. But this is another story. Before painting a picture of the future and outlining solutions, we must ask ourselves: How did it come to this?

The answer to this question can be found in a simple fact:

“The Internet was created without an identity layer”.

This increasingly popular quote from Kim Cameron, Chief Architect of Identity for Microsoft, leads to the root cause that can make network effects a counterproductive force. Although the triumphant progress of the internet brought the information age to a new level, it led digital business models towards the described impasse. Whereas the Hypertext Transfer Protocol (HTTP) as the underlying protocol used by the World Wide Web led to the unpanelled, successful growth of the Internet, the web community failed to establish an adequate system to assign and verify identity. How the internet works fundamentally differs from how identity on the web works. The latter is a network of connected devices. Each device connected to a network is centrally assigned a numerical label, the Internet Protocol address. Instead of identifying human beings as endpoints on the network, the system connects physical devices. That’s why it is nearly impossible today to identify people and authenticate their messages uniquely. In addition, we currently define and authenticate accounts not necessarily tied to real people or organizations. We do this often separately for each service. For the sake of convenience, we even allow giants like Facebook or Google to authenticate our identities on third-party platforms. This leads to the unfavourable side effect that online identities can dramatically differ from real-world identities and that information spread in digital communication might not be true. Politics has established new expressions such as “alternative facts” or “fake news” to describe this phenomenon better.

A certain degree of anonymity in digital communication is not harmful by nature. Anonymity may lower barriers to engaging in discussions and, therefore, to participate in a network. It can support the rapid growth of networks and its positive externalities. This effect describes the fact that an additional node in a network positively affects the value of this network to others. Anonymity also drives the success of many use cases on the blockchain. Bitcoin is one of them. Due to inherent anonymity, the most prominent among the new cryptocurrencies is also used for shady transactions. Without anonymity, the rapid adoption of Bitcoin would not have happened, and its value would have been much lower.

Another aspect that sheds a bad light on anonymity is the popular assumption that online anonymity is one of the principal factors that promote aggression. This must not necessarily be the case. Anonymity can produce the “stranger on a train” phenomenon, wherein people share intimate self-disclosures with strangers. They do not expect a reunion and, hence, do not fear any risks and constraints (Bargh et al., 2002). Recent studies in social norm theory show that non-anonymous individuals are more aggressive than anonymous individuals in the context of online firestorms (Rost et al., 2016). When introducing an identity layer for the web, the major focus should not be making anonymity a thing of the past. It should rather lay on enabling and supporting authenticity and, eventually, data veracity. In this context, authentication can be defined as the act of confirming the truth of an attribute. If we could more easily and reliably authenticate data on the web, the degree to which data we use to make decisions is accurate, precise and trusted will be much higher.

Many interesting attempts have been made in the last few years. Among them are trust networks such as the Secure Access For Everyone (Safe) network (https://safenetwork.org) or the respect network. The latter launched its platform globally in 2014 with around 50 founding partners, including Neustar, Swisscom, and NEC. In a nutshell, these trust frameworks provide a set of guidelines, rules and tools together with an assessment and enforcement infrastructure that operationalizes them. In addition, trust networks usually rely on decentralized concepts for data storage. The individual shall own their data using Personal Data Services or Personal Data Stores (PDS). These services let the individual store, manage and deploy their key personal data in a highly secure and structured way.

However, despite all efforts and well-intentioned ideas, it is a cumbersome endeavour to establish such a new type of contract that may legally bind the trust community members to the policies. It is, therefore, not a big surprise that many attempts have failed so far to get traction and eventually establish a well-anticipated industry standard.