For a fact, everyone has at least one form of digital identity. Talking about identity goes far beyond a name. Email addresses, Internet Protocol addresses, DNA, date of birth, and biometrics are also forms of identification.

With the revolutionary force of technology, most of our digital IDs are controlled by service providers. The reason is that our data is connected to services and devices, which are susceptible to attacks. For instance, we visit various sites, verify emails, and create new accounts and passwords. These and many more are ways we contact the Internet daily. In effect, they all play a significant part in our digital identities.

However, the problem is the risks associated with digital identity. Access to certain services can be denied or hacked, resulting in temporary or permanent loss of ownership or access. What about the time spent creating new accounts and profiles? One can easily go around that by connecting to new sites via a Google account. If someone gains access to your Google details, it automatically means they can also access other affiliated sites and apps.

That births the question; individually, are we in control of our digital IDs? Since we cannot confidently say that our private information is safe under centralized storage, something has to be done to protect such data. In this article, you will discover how Decentralized Identity is instrumental in eliminating the arrays of uncertainties and worries surrounding data protection.

What is Decentralized Identity (DID)?

DID in blockchain is an identity management method that grants users control over the generation and management of their digital identities without any reliance on a central service provider. The basis for a DID system is the blockchain-based ledger used to verify important credentials from significant issuers like government, employers, and educational corporations. Using blockchain in this ecosystem prevents theft and data breaches, as an individual’s information is not stored on the blockchain.

In Centralized Identity Management, data can be stored or even shared without the awareness and authorization of the individual. On the contrary, users can control their private information, their use, which information to tend to, and who should access specific information in a decentralized system. This way, individuals and organizations can interact securely and transparently.

Decentralized Identity With Blockchain: How Does it Work?

Cryptography

The primary factor responsible for securing decentralized identities is called cryptography. Individuals can create their DID using a blockchain-based wallet or identity wallet. After that, individuals can send or receive data with cryptographic keys. A public key differentiates each wallet and is widely disseminated. In contrast, a private key is only known to the user and reserved in each digital wallet until it is needed for authentication.

A user’s identity comprises unique credentials that define such an individual. Some are issued by organizations or institutions, while others are self-owned. An example of an identity issued by institutions is a driver’s license, while email addresses are self-owned.

Personally Identifiable Information (PII) and Verifiable Credentials (VCs)

Users can use an identity wallet to keep their Personally Identifiable Information (PII) and control their Verifiable Credentials (VCs) rather than storing their personal information on sites governed by a third-party system. VCs stored in a blockchain include passports, virtual credentials, licenses, and so forth.

Verifiable Credentials are usually encrypted or tamper-proof. It creates a trustworthy environment for both the verifier and the holder. These credentials can be used anywhere at any time due to their portability. Other metadata contained in a VC can be the authorized issuer, cryptographic methods, the validity date or period, and more.

Blockchain and Identity Management

Blockchain is a decentralized storage system that is encrypted and designed to reduce the risk of cyberattacks or unauthorized access of intruders to users’ data. The ability to be uncontrolled or governed by a central body, and also data interoperability across over a thousand applications, makes blockchain unique.

With the use of Blockchain, decentralization may finally eradicate problems like costly verification processes and certificate forgery, all of which originate with a traditional identity. Apparently, what sets Decentralized Identity Management (DIM) apart from Centralized Identity management (CIM) is the method used for storing and sharing data with other parties.

Another concept is the Self-Sovereignty Identity used when referring to how distributed data are used to manage PII. It is made up of DIDs, VCs, and the blockchain. Rather than keeping multiple identities in different apps or platforms, SSI users can easily create digital wallets to house documents accessed through authorized apps.

A self-sovereign Identity allows users to access different applications on their mobile devices with just an ID number and a few more pieces of information for verification. Thus enhancing flexibility, security, and simplicity and enabling individuals to share their data whenever they wish without any intermediary.

Benefits of Decentralized Identity

• Rather than relying on a third-party server, users have complete control over their credentials.
• It replaced the stress of entering passwords and usernames with only a digital Identity wallet.
• Top security and privacy are the rich benefits of using blockchain for Decentralized Digital Identity (DDID).
• No part of an individual’s credential will be used, shared, or stored without the owner’s digital signature.
• Verified and recorded data cannot be altered once stored on the distributed ledger.
• It brings about discoverability, enabling users to identify other entities through their DIDs and interact with them.
• It is designed with features that make it easier to understand and deploy.
• Fake credentials often create an environment powered by fake interaction. The DID system lowers the possibility of users creating fake identities.

Limitations of Decentralized Identity

One big issue is how individuals, businesses, and the government will adopt this system.

• Those with little or no knowledge about Decentralized Identity may find it strange and unappealing.
• Governments, individuals, and businesses currently benefiting from the traditional identity system may not welcome this new development with open arms.
• Those who do not have the requirements for an ID may find it challenging to adapt to this new form of digital recognition.
• Some social media services may not be interested in supporting a Decentralized Identity System, believing it would affect their productivity and capabilities.
• Lastly, failure on the part of users to keep their seed phrases, which grants them access to their data, will be disastrous. It will jeopardize the safety and security of their identity wallet and allow hackers to access their private information.

Stakeholders in Decentralized Identity

Holder

A holder can be either an organization or an individual. The holder owns the verifiable credentials and the public SOD on a blockchain. SOD means separation of duties, which refers to separating responsibilities among different entities so that no single entity has complete authority over users’ data. By ensuring that different individuals or groups have distinct and complementary roles and responsibilities, SOD helps to maintain the security and integrity of blockchain-based identity management systems.

Issuer

This can be an organization or entity that generates and approves a verifiable credential before issuing it to the holder. These issuers could be the government, financial institutions or banks, educational institutions, health organizations, or other organizations with Proof of Employment.

Verifier

Verifiers are entities responsible for the verification of documents. They ensure that the presented credentials are relevant and digitally signed by the right issuer. They can be individuals or companies who need to ascertain the authenticity of a holder’s credentials.

Decentralized Identity vs. Centralized Identity

Centralized Identity

• The database is centralized.
• Organizations or servers with whom the data is shared control and manage the storage and usage of such data.
• Data can be gathered and shared without your awareness.
• High risk of attack or data breaches.

Decentralized Identity

• The database is decentralized.
• Complete ownership and belongs to the individual with verifiable credentials.
• No one can access or tamper with your personal information.
• It eliminates the worries of cyber theft or attack unless your DID or seed phrase is exposed.
• It can be used with apps and systems that allow DID methods.

The Importance of Decentralized Identity (DID)

Importance of DID for Individuals

Here are some ways in which decentralized identity is important for individuals:

• Data Control: Decentralized identity systems give users absolute control over their data. Users can choose what info they wish to share, and individuals can also determine whom they wish to share their data with.
• Privacy: Data control comes with privacy. With DID systems, users can conceal private information normally exposed on centralized identity systems. For example, when verifying certificate ownership in a decentralized system, an individual may choose to share his degree but conceal his date of birth.
• Convenience: Decentralized identity systems are also more convenient for users. They make it easy for users to manage their digital identities across multiple systems and platforms.

Importance of DID for Developers

Decentralized Identity also has numerous benefits for developers. Some of the benefits are interoperability, security, and innovation:

• Interoperability: Decentralized identifiers and verifiable credentials make it possible for developers to build interoperable decentralized applications.
• Security: With decentralized identity, the amount of personal data developers need to share is reduced. This limits the risk of data breaches and identity theft.
• Innovation: Decentralized identity unlocks new doors in blockchain innovation. With DID systems, developers can build unique dApps that were formerly not available. One such example is self-sovereign identity system (SSI) which gives users absolute control over their identities.

Importance of DID for Organizations

Below are some of the benefits of decentralized identity for organizations:

• Swift Verification: DID systems support the swift and accurate verification of data. Data verification processes which may take days or weeks with traditional identity organizations can be completed within seconds in decentralized systems.
• Cost Saving: Organizations can save costs when they implement decentralized identity systems. With DID, time-intensive and expensive verification procedures are avoided, and time and money can be saved.
• Halt Document Fraud: Organizations can stop document fraud by integrating DID.
• Compliance: Decentralized identity can help organizations comply with data protection regulations by giving individuals more control over their data.

Conclusion

Although Decentralized Identity is still in its infant stage, much effort has to be put in place for an enormous impact to be felt. The system possesses the potential to build a transparent and secure ecosystem.

Users can bid goodbye to case risks and data breaches associated with traditional centralized ID systems. Individuals can now have absolute ownership and control over their data usage. Since a trust-based method is used, it promotes a great degree of trustworthiness among users.

Blockchain and decentralization are likely the keys to a convenient and secure physical and virtual world. Although DID is already established theoretically, only time will tell how swiftly it will generate enough support.