The Decentralized Digital Identity Revolution

Updated: Jul 13


In recent years, identity verification primarily has relied on human interactions and physical documents issued by local and central governments. However, in today's world, these physical identification approaches can't be the only ones to be relied on, with the ongoing digitalization and never-ending connectivity which is transforming our everyday life.


What is decentralized identity?


This is an emerging concept of granting the users all the control of identity through identity wallets. The users collect all their verified information from certified issuers while controlling the information shared with third parties from the wallet. This allows people to manage their identities and privacy online easily.


It's also a trust framework that enables identifiers like usernames to be replaced with personal IDs and allows sharing of data with blockchain and distributed ledger technologies to secure the transactions and protect privacy. Digital identities are types of identity formats where a person’s identity is represented through digital means.


Currently, we’re living in a world where identity is the key to all the things we do. Having the ability to prove who you are and what permission you have to access certain information is critical in the digital world. This is also what happens in digital business. Digital identity is typically the gateway for organizations to access the systems that their employees, customers, and partners rely on.


However, it’s difficult to establish the parties accessing certain information unless the organization has sufficient knowledge of identity management. The current business processes might be based on multiple interconnected systems running on different clouds. To access specific information about the business, you need to have privileges to do so, which is ensured at every step of the process.


Blockchain for digital identity


As earlier mentioned, identity is a critical aspect of our lives, and accessing it without issues will genuinely revolutionize the industrial sector. The digital identity phenomenon is slowly absorbing the old-fashioned paper-based identity systems. But, digitizing identity won't just solve the myriad of issues that come with it. However, because blockchain has been around for years now, we can utilize this technology for digital identity.


Some of the issues of typical identity management systems include:

· Lack of regulation for access restriction

· Bad password combinations

· Inadequate security for identities in devices and browsers

· Failure to utilize security measures

· Identity risks

· Persistent hacks and theft

· Mishandling of personal information

· Weak authentication protocols

· Identities being given out by only centralized servers


Frankly speaking, digital identity and blockchain is a great pair. We have emerging innovations across various industries now, and the identity field still has the digitization problem. To fill this gap, we have to employ a technological aspect that provides a decentralized identity solution. So, blockchain has it all!

But how can blockchain be used for digital identity?


Decentralized and self-sovereign identity (SSI)

With the digital identity format, the identities of individuals are typically presented via digital means. On the other hand, self-sovereign identity (SSI) is a digital identity format that exclusively belongs to the organization or individual. It means the owner has complete control over the data and sharing abilities.


Blockchain is an ideal solution for the risk of misuse of information by third parties. Subsequently, blockchain for enterprise has the potential to power the frameworks of decentralized identities. It offers both security and a readymade infrastructure for decentralized identity.


· Consent and access rights

An individual can use the blockchain digital identity platforms to control who can or can’t access their credentials. For instance, you may want to share certain information on several platforms, but only for a limited time.


· Credential notarization

This functions by putting a hash address to the information on the blockchain digital identity platform, just like putting a seal on your ID. This mean that it will not only store the ledger's details, but it will act as a timestamp and provide an electronic seal.


For instance, if a university provides a hash for a degree after students graduate. This will help the student know when their degrees were issued along with proof of their certificates. So, when applying for jobs or using the certificates for other purposes, they can show that those are the certificates with the hash function from the institution. This eliminates the problems of false certificates faced by many organizations when recruiting candidates, and also it revolutionizes how people handle certifications from any university.


· Creation of Decentralized unique identifiers

It worth knowing that blockchain addresses are all unique. Also, these addresses can be used to make decentralized identifiers (DIDs). These are pseudo-anonymous identifiers for people, things, and companies. The owners generate the DIDs by themselves, and they are cryptographically secured.


· Registry for all the DIDs

Digital identity blockchain platforms can also be used as a registry for DIDs. The information of the IDs can be securely stored in the immutable ledger. This is an ideal storage solution as it offers maximum security keeping your information safe from any unauthorized access.

Various sectors benefit from decentralized digital identity, including government, banking, gaming, trade, media, travel, insurance, and health sectors.


Many advocates for the decentralized digital identity are now talking about blockchains. Besides, decentralization and cryptographically secured transactions are all that we are looking for. However, we should also understand that despite being a very promising solution in the sector of decentralized identity, blockchain isn’t the only means available. Other powerful ideas can still work without the technology. But there are solid reasons as to why it has a critical role in decentralized digital identity. Blockchain has great potential in various applications, which makes its enthusiasts overly excited about it.


A revolution of the digital era?


The current centralized digital identity frameworks are not trustworthy, don't grant consumers control, and are not portable. This creates a technological gap, and one of the most promising solutions is based on decentralized identity. This approach allows organizations and people to gain sufficient control over their identities while ensuring trust in all the interactions.

According to the Global Head of Technology at ThoughtWorks, Dave Elliman, this approach is powerful because it allows individuals to share different parts of their identity with various services that they trust.


For instance, you might exchange some of your information with your health insurer that was inappropriate to be known by your mortgage provider. On the other hand, centralized identity systems guarantee only one system that will allow you to authenticate yourself with several entities.


However, it’s not just people who will benefit from the decentralized approach to identity and authentication. When it comes to customer data, many organizations are struggling with incredible complexities. The director of data and AI practice at ThoughtWorks, David Colls, claims that customers may adopt multiple identities when dealing with a particular company.

For example, let's say a particular person is a high-value long-term client for an organization and has the position of treasurer of a given football club that also has an account with the organization. So, suppose there's a decentralized identity framework as a deliberate architectural construct. In that case, all the power is returned to the customer's hands so that the organization will quickly provide services to the multiple identities that the customer chose to adapt. This will now be a fundamental enabler for dealing with the complexities experienced due to the growing decentralized digital identity frameworks.


Every aspect of our lives has been revolutionized by multiple technological advancements across the digital space. The emergence of the internet has made identity management critical, with billions of money being spent on security, privacy, and usability.


Blockchain has the potential to replace all of the traditional systems with highly trusted mechanisms of managing digital identities. This technology empowers the users to have better control over their identities, while organizations can only use their customers' details upon their consent. With the self-sovereign identity, we can change how we use identities when connecting to various online services. Blockchain allows anonymous authentication and makes the management of multiple identities easier.


Such blockchain-based approaches to decentralized digital identity are satisfying proofs of concept, although there is still a long way before blockchain is declared the mainstream business technology in use worldwide. Business leaders have experienced hardships when dealing with identity issues, but it's time they focus on taking a different path. If even you do not begin initiating decentralized identity management systems today, just think of what they would mean for your organization in the future!