In October 2021, Sotheby’s sold a semi-shredded Banksy painting “Girl With Balloon” for $25.4 million—a record for the artist, whom no one knows by his real name.¹ But that doesn’t make him anonymous. Unlike anonymity, which conceals a person’s identity so that it’s untraceable, Banksy is a pseudonym, a false name or alias, that can be traceable and accrues reputation (see Table 1).

He’s not the only one. Satoshi Nakamoto, Robert Galbraith (aka JK Rowling), Bored Elon Musk are all influential creators who use pseudonyms to hide their legal names while exploring and often monetizing other facets of their identities that are just as real as their “real” identity.

Indeed, renowned 20th century sociologist Erving Goffman posited that identity is not singular; it’s a role that shifts among audiences and contexts, and pseudonyms provide a means for that fluidity.² Fifty years later, pseudonymity is no longer just for the iconoclast or celebrity. It’s gone mainstream. Regular people can discover, manage, and promote their multiple identities through:

Social media. Research shows that using pseudonyms fosters a more civil environment for online discourse than either anonymity or using real names.³ Pseudonymity also lets people express themselves more authentically. Venture capitalist Sarah Guo says, “Social media platforms have made us all minor celebrities, and celebrity is an unpleasant thing...burdening us with constant performance, self-consciousness, and self-censorship. It limits our sense of self, and our self-expression." That might explain why every month 150 million people flock to Discord channels and 400 million to Reddit boards where they can interact pseudonymously.⁴ And while fluid identities are especially pervasive among young digital natives, older people have caught on. In 2020 the Dolly Parton Challenge took social media by storm (see Figure 1), encouraging people to showcase their various and true selves.

Gaming. Almost a third of men prefer gaming as female characters.⁵ Why? Some prefer looking at a female character, and female avatars may be improperly perceived as weaker and thus provide an advantage. But a good number also want to explore gender identity in a safe, pseudonymous environment. Much like social media, gaming with an alias or avatar also provides a means of self-expression. Forty-five percent of Gen Z gamers feel that their in-game identity is a truer expression of who they are, and 40% say that their created identity gives them self-confidence.⁶ Some YouTubers, known as VTubers, use digital avatars and real motion capture technology to better express themselves.⁷ Given that viewership of VTubers is growing twice as fast as Twitch viewership overall, more are getting in the game. Valak VTuber, for example, says online gaming is his dream job, and doing it pseudonymously offers him privacy and the flexibility to ignore his looks while on camera.

Virtual worlds. Digital existence, mediated through one or more pseudonymous identities, is quickly becoming a core component of our full, authentic lives. And it’s not just in social media and games; people are mirroring their lives in virtual worlds too. Released in 2003, Second Life was one of the first online virtual worlds, a place where people can socialize, create, and trade more than two billion currently active user-generated assets as an avatar in any form they choose—human, animal, vegetable, or mineral. Second Life has continued to grow; last year creators cashed out more than $80 million from sales, higher than the previous two years. Avatar-based phone app, IMVU boasts five million monthly active users who hang out and chat in 3D rooms. IMVU’s research shows that digital natives don’t perceive a difference between online and in-person friends and often consider the relationships to be equally valid.

Why Pseudonymity Is Going Mainstream Now

Writers including Mark Twain, George Eliot, Elena Ferrante, and John le Carré have donned pen names for hundreds of years. And at the advent of the internet, aliases and screennames dominated chat room culture. That changed when Facebook ushered in the “real name” web. But the tide is turning back. Pseudonymity is becoming more widespread and accepted thanks to:

Rapidly advancing avatar technology. Second Life’s early avatars, called primitars, were basic 2D human-like characters that didn’t support long hair or skirts. We’ve come a long way. Ready Player Me generates a fully customizable 3D avatar from a selfie taken on one’s phone; the avatar can easily be ported into hundreds of apps, games, and virtual worlds. Oasis Labs creates realistic avatars for use in Zoom calls. The avatar tracks nods and expressions through a webcam so people can go incognito or can multitask without looking distracted. And Hologram turns images or characters from peoples’ NFTs into avatars that they can use in Zoom or Google Meet.

A fear of public scrutiny. Since the dawn of Facebook, teens have been warned that what they post online could come back to haunt them as adults. So younger generations have become savvier by adopting Finstas (fake Instagram accounts) or pseudonymous TikTok accounts. These aliases are popular for adults, too, who might want to voice unpopular opinions on platforms like Twitter without fear of backlash. Says Bored Elon Musk, a pseudonymous Twitter user with 1.7 million followers, “In a world where this is a frequent risk, separating out your personal identity and your career identity can be a good idea so that your ability to earn a living isn’t one outrage mob away from being permanently impaired. Perhaps even more importantly, you protect your family and friends who should not suffer from being associated with you.”¹⁰

People seeking to diversify their income, often discreetly. Through independent work and side hustles, Americans are assembling a mosaic of income sources. With diversified income often comes diversified identity. This is especially needed for risqué sites like OnlyFans, as a teacher recently learned when she was fired after her employer learned of her side hustle.¹¹ But pseudonymity is just as warranted for Etsy sellers, freelancers, or artists on Patreon who may want to separate their career from their other professional or artistic pursuits. And pseudonymity doesn’t limit economic potential. Indeed, the top paid finance newsletter on Substack as of November 2022 is a green cartoon chicken called Doomberg (real identity unknown) that boasts more than 200,000 Twitter followers.

Why It Matters

Avatar and digital world technology continues to advance. It’s set off a wave of investment in AI, augmented and virtual reality, and digital ecosystems. Looking ahead, fear of public scrutiny seems unlikely to wane, and neither does the desire to diversify income sources in a turbulent economic environment. As these trends persist, pseudonymity will likely continue to mainstream, and become more prevalent in areas like education, finance, and work. As that happens, we’ll see:

Young investors who seek greater control over their identity. Members of virtual worlds skew young, as do social media users and crypto investors who view their pseudonyms as an essential part of themselves. So young investors will likely want to control or mask aspects of their identity, even in interactions with financial providers. They may want to alter credit card names, account names, the tone of their voice when they call in, or their image when they video chat a financial consultant. Fintech Lithic issues single-use credit cards which provide an intermediation layer between a person’s payment and real-world identity. Ultimately, some people often feel safer, more confident, and more authentic as their alter ego than as themselves.

Innovation in identity technology. Digital ID is a $20 billion a year market dedicated to digital authentication of customers based on their government IDs.¹² But the burgeoning field of self-sovereign identity believes that reputation should not be tied to a single identity or identification card, but rather to tens or hundreds of verifiable credentials, issued by trusted organizations, that people can separately share upon demand. It can form a foundation for any type of relationship: ephemeral, pseudonymous, ad hoc, or permanent. The Department of Homeland Security is adopting self-sovereign identity for its digital Green Cards, as is the European Commission for its electronic identity service to be rolled out to all EU citizens by the end of 2023. While the initial focus of these government initiatives is digitizing credentials, pseudonymity is core to decentralized identity in the blockchain space. Startup Spruce ID is developing a credentialing system for users to verify themselves (or their pseudonym) with high assurance information, like a government ID, or with low assurance information, like a Twitter handle. If a collector knows that an NFT artist on OpenSea also tweets under a reputable Twitter handle, that low assurance information may be sufficient for trusting and buying their art.

A proliferation of digital wallets. Most people are familiar with the Apple or Google Wallet on their phone that stores airline tickets, credit cards, and in some states, driver’s licenses. In fact, a half-dozen states have plans to issue digital licenses, expediting a move from physical wallets to a mobile-first future. Another initiative supporting that move is called OpenWallet, launched by the Linux Foundation in September 2022. Through a consortium, it intends to support development of interoperable wallets that can exchange currencies, tokens, tickets, assets, and identity credentials that users can control. If this interoperability initiative proves successful, consumers won’t just have Apple or Google; they can port their credentials into a wide range of third-party wallet and manage their multiple identities from a centralized location. As pseudonymity expands, and the features of digital wallets broaden to hold resumes, DAO contributions, tweets, degree credentials, NFTs, and more, wallets will become a tool for managing, sharing, and accentuating one’s identities.

Talent with different forms of reputation and credentials. The freelancer economy is already upon us; 20 million Americans work independently, and another 30 million part-time freelancers are trialing that independence. But even those who work for an employer are signaling their desire for independence through greater control over their time, information, and ultimately, what they share about their identity. Sixty percent of Americans with an employer say that they are hiding at least one thing about their identity and 72% say that they expend some or a lot of energy hiding their persona at work.¹³ But if they can find jobs under their pseudonym, expending that energy becomes unnecessary. And as more people seek this type of recourse, it may become more acceptable to limit the personal information shared with employers and colleagues in the workplace.

New approaches to risk modeling that support a pseudonymous economy. It’s hard to develop risk-based finance among unknown participants, but that’s what’s happening in decentralized finance (DeFi) today. To that end, startup Spectral aims to develop credit scores, analogous to FICO scores, based upon on-chain transaction data. Its Multi-Asset Credit Risk Oracle (MACRO) score promises to ease DeFi lending decisions and lower collateral needs without sacrificing privacy and pseudonymity.¹⁴ Further, some may view investing in startups with pseudonymous founders as too risky, but it’s a chance VCs in the crypto space may consider taking. Olympus DAO, SushiSwap, Saffron Finance, and dozens of others sport pseudonymous founders. And while receiving financing through VCs still requires at least one founder to reveal their legal name to meet KYC requirements, startups funded through DAOs can remain completely pseudonymous.