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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.
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.
The creation of a privacy-focused identity network involves three technologically related components, namely:
The progression of digital identification schemes will explain why decentralized models are becoming popular on a worldwide scale:
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.
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.
Ownership of data fully passes to an individual. Identity is tied to the decentralized network/blockchain technology, allowing peer-to-peer identification.
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.
Abandonment of centralized logins brings many security and privacy benefits to both companies and customers:
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.
As companies no longer keep centralized databases with passwords and PII of users, both the risk and cost of data breaches dramatically decrease.
Public key infrastructure makes password management unnecessary.
Also Read: Strengthen Founders’ Financial Security Through Secondaries
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.
Ans: User’s possession and control over digital credentials.
Ans: No, personal data is kept private in users’ wallets.
Ans: It lets users prove specific information without sharing full documents.