What is Decentralized Identity (DID)? Future of Digital Identity

For years now, centralized means have been used for identity verification within the Internet space. Centralized social media networks, large tech companies, and centralized identity providers serve as gateways and store massive amounts of personally identifiable information (PII) in centralized databases.

However, keeping personal information in centralized hubs results in the formation of easily hackable “honeypots” and poses serious threats to user privacy. 

In order to learn about what is decentralized identity, one needs to explore a new identity approach, which allows people to take control over their own digital identities via cryptographic verification.

Basics of Decentralized Identity: What is Decentralized Identity?

In order to grasp the concept of what is Decentralized Identity, one might think of a leather wallet that carries a driver’s license, passport, and various membership cards. 

In order to prove someone’s age at a particular event, the user shows a physical card to a venue without any need in registering the fact that the person presented his or her document. 

A Decentralized Identity (DID) system brings exactly this principle into the digital realm. No third-party servers will be needed to verify your account every single time you log in.

Core Elements of a DID System

The creation of a privacy-focused identity network involves three technologically related components, namely:

• Decentralized Identifiers (DIDs): A globally unique and cryptographically generated identifier that acts as the address of the owner alone and does not require any kind of registration from a centralized authority.
• Verifiable Credentials (VCs): Cryptographically signed digital versions of physical credentials such as university certificates or government IDs issued by authorized authorities.
• Digital Identity Wallets: Mobile/desktop application for storing DIDs, encryption keys, and presenting verifiable credentials to third parties.

Centralized vs Federated vs Decentralized Architectures

The progression of digital identification schemes will explain why decentralized models are becoming popular on a worldwide scale:

• Centralized Identity

  User credentials are issued, stored, and validated by one entity. In case of any data breach of this single centralized database, all user data becomes vulnerable at once.

• Federated Identity

  Users access multiple websites using one identity from the third-party service provider. Although easy to use, this system allows the centralized provider to see each site the user visits, which is an issue with privacy.

• Decentralized Identity

  Ownership of data fully passes to an individual. Identity is tied to the decentralized network/blockchain technology, allowing peer-to-peer identification.

Real-World Applications of Decentralized Identity

The real-world application of self-sovereign identity involves various global sectors. In healthcare, individuals keep their verifiable healthcare records stored in personal digital wallets for access by emergency doctors without having to go through fragmented hospital databases. 

Financial organizations use verifiable credentials to facilitate the Know Your Customer (KYC) onboarding process, which allows users to authenticate themselves across various banks without uploading their personal identity documents again.

Furthermore, colleges and universities issue digital diplomas as verifiable credentials, which enables employers to verify the academic performance of individuals instantly without having to go through tedious background checks and credential fraud.

International travel and border control agencies use verifiable e-visas that allow people to get through international customs efficiently while ensuring the security of passport telemetry.

Key Benefits Associated with DID-based Architecture

Abandonment of centralized logins brings many security and privacy benefits to both companies and customers:

• Selective Disclosure

  Individuals will be able to demonstrate only certain attributes without providing their entire identity information. For example, it is possible to prove someone’s age is more than 21 without disclosing their birthday and home address.

• No Honeypots of Sensitive Data

  As companies no longer keep centralized databases with passwords and PII of users, both the risk and cost of data breaches dramatically decrease.

• Passwordless Authentication

  Public key infrastructure makes password management unnecessary.

Also Read: Strengthen Founders’ Financial Security Through Secondaries

Conclusion

Looking at what is decentralized identity, one can see the clear transition to user empowerment, enhanced data security, and perfect privacy. The use of verifiable credentials, digital wallets, and cryptographic proofs enables the creation of a reliable basis for future digital interactions.   

Frequently Asked Questions