What is a decentralized identity?
A decentralized identity is a proprietary and independent identity that enables reliable data exchange.
The decentralized identity is an emerging Web3 concept based on a trust framework for identity management. Such decentralized identity management includes an identity and access management approach that allows individuals to generate, manage, and control their personally identifiable information (PII) without a centralized third party such as a registry, identity provider, or certificate authority.
PII is considered private and confidential information and refers to any information about specific individuals that directly or indirectly identifies them. It typically combines name, age, address, biometrics, citizenship, employment, credit card accounts, credit history, etc.
In addition to PII, the information that makes up a decentralized digital identity includes data from online electronic devices, such as usernames and passwords, search history, purchase history, and others.
A decentralized identity allows users to control their own PII and provide only the information necessary for verification. Decentralized identity management supports an identity trust framework in which users, organizations, and things interact transparently and securely.
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Why does decentralized identity matter?
The decentralized identity aims to give people official proof of identity and full ownership and control over their identity in a secure and user-friendly way.
Verifiable proof of existence is often required for citizens to access essential services such as health care, banking, and education. Unfortunately, according to the World Bank, there are still a billion people on our planet without official proof of identity. A significant portion of the population is in a precarious position, unable to vote, open a bank account, own property, or find work. The inability to obtain identity documents restricts people's freedom.
Moreover, traditional centralized identification systems are insecure, fragmented, and exclusive. Centralized identification databases are in danger because hackers frequently choose them as their top targets. From time to time we hear about hacks and attacks on centralized identity solutions, stealing thousands and millions of customer records from major retailers.
The ownership issues remain, too. Users with traditional forms of digital identity do not yet have full ownership and control over it and are often unaware of the value their data generates.
In a centralized setting, third parties store and manage PII. As a result, it becomes more difficult, if not impossible, for users to claim ownership of their identities.
Decentralized digital identity addresses these issues by providing users with a path to digital Identity offers is used with multiple participants. Platforms without sacrificing security and user experience. In a decentralized identity framework, users only need an internet connection and a device to access it.
Moreover, in decentralized identity systems, distributed ledger technologies and blockchain in particular validate the existence of a legitimate Identity. By providing a consistent, interoperable, and tamper-resistant architecture, blockchain enables the secure storage and management of personal data with significant benefits for Internet organizations, users, developers, and management systems.
What is self-sovereign identity?
Autonomous identity is a concept related to the use of distributed databases to manage PII. The notion of autonomous identity (SSI) is central to the idea of decentralized identity. Rather than having a set of identities across multiple platforms or a single identity managed by a third party, SII users have digital wallets that store multiple credentials and can be accessed through trusted applications. Experts distinguish three main components, known as the three pillars of SSI: Blockchain, Verifiable Credentials (VC), and Decentralized Identifiers (DID).
Blockchain is a decentralized digital database, a record of transactions that is duplicated and distributed between computers on the network, recording information in a way that makes it difficult or impossible to alter, hack or cheat. Secondly, there are VCs, so-called tamper-resistant, cryptographically protected, and verified credentials, which implement SSI and protect user data.
They can represent information found on paper evidence, such as a passport or license, and digital evidence with no physical equivalent, such as possession of a bank account. And for good Last but not least, SSI includes DID, a new type of identifier that allows users to have a cryptographically verifiable decentralized digital identity. A DID refers to any subject such as a person, organization, data model, abstract entity, etc., as determined by the DID's controller. They are user-created, user-owned, and independent of organizations.
Designed to break away from centralized registries, identity providers, and certificate authorities, DIDs allow users to demonstrate control of their digital identity without having to seek permission from a third party.
Along with SII, Based on blockchain, DID and VC, the decentralized identity architecture includes four other elements. They are a holder who creates a DID and obtains the verifiable credential, an issuer who signs a verifiable credential with their private key and issues it to the holder, and a verifier who verifies the credentials and enters the issuer's public DID in the chain can read from blocks. In addition, a decentralized identity architecture includes dedicated decentralized identity wallets that power the entire system.
How does a decentralized identity work?
The basis for decentralized identity management is using decentralized wallets based on encrypted blockchains. As part of decentralized identity, users use decentralized identity wallets: special applications that allow them to create their decentralized identifiers, store their PII, and manage their VC instead of storing identity information on numerous websites controlled by intermediaries. These decentralized identity wallets have a distributed architecture in addition to encryption.
The passwords to access it are replaced with non-phishing cryptographic keys, which do not pose a single vulnerability in the event of a breach. A pair of public and private cryptographic keys are generated via a decentralized wallet. The public key distinguishes a specific wallet, while the private key stored in the wallet is required during the authentication process.
Wallets authenticate decentrally by Making identity cards transparent to users and also protect users' communications and data. Decentralized Applications (DApps) store personally identifiable information, verified identity details, and information needed to establish trust, provide authorization, or simply complete a transaction. These wallets make it quicker and simpler for users to grant and withdraw access to identification information from a single source.
Additionally, this information in the wallet is held by multiple trusted parties signed to prove its accuracy. For example, digital identities can be approved by issuers such as universities, employers, or government agencies. A decentralized identity wallet allows users to prove their identity to third parties.
The pros and cons of decentralized identity
The four main advantages of decentralized identity management include control, security, privacy, and ease of use. However, the main concerns are low adoption, lack of regulation, and interoperability. Identity owners and digital devices are in control of their digital identifiers. Because users have full control and ownership of their identities and credentials, they can choose what information to disclose and prove their claims without having to rely on another party. Security reduces attack surfaces on PII storage.
Blockchain is a safe, adaptable, and impenetrable encrypted decentralized storage system that minimizes the possibility of an adversary getting unauthorized access to steal or profit from user data. Organizations can lower security risks by using decentralized identity management.
Depending on how organizations collect, process, and store user data, they are subject to regulations. Businesses face penalties and fines even for unintentional rule violations or data breaches. With decentralized identity management, they can collect and store fewer identity data, simplifying their compliance responsibilities and reducing the risk of cyberattacks and information misuse.
Privacy allows organizations to use the Principle of Least Privilege (PoLP) to specify minimal or selective access to identity credentials. PoLP is a term from information security. It states that any person, device, or process should only have the minimum rights necessary to perform the task under consideration. And last but not least, decentralized identity technology offers Users the advantage of creating and managing their identities with easy-to-use neoteric decentralized identity platforms and applications.
As for the shortcomings and disadvantages, there are many of them, mainly: Adoption. Governments and organizations are still trying to figure out how to implement decentralized identity technology at scale, while most non-tech users haven't even heard of this phenomenon.
Overcoming outdated systems and regulations and creating interoperable global standards and governance are also important issues. Although still a secondary issue, identity data fragility is related to duplication, confusion, and imprecision in identity management.
Decentralized identity protocols
Various identity protocols, from crypto startups to large technology solutions, deal with decentralized identification and each has its specific characteristics and properties. Although decentralized identity technology is fairly new, there are numerous initiatives and players in the field of decentralized identity, software to implement decentralized identity wallets, and support services. They include some of the top names in the sector, a variety of decentralized identity systems, and the open-source development group Hyperledger.
Decentralized identity protocols and private identity stores like uPort or 3Box are called identity hubs. Recently, the Ethereum-based uPort platform was separated into two new initiatives: Serto, which aims to decentralize the internet, and Verano, an open-source token, and credential framework. 3Box Labs, in turn, plunged headlong into the development of the Ceramic Network, a decentralized data network that offers web3apps unlimited data composition possibilities, and the Identity Index (IDX), a cross-chain protocol for decentralized identity and identity-interoperable data.
Other DID platforms include ION, a public, open, decentralized identity level 2 network built on the Bitcoin (BTC) blockchain based on the purely deterministic side tree protocol runs. The prominent Polkadot (DOT) ecosystem player Dock protocol enables anyone to issue and develop solutions for decentralized identity and verifiable credentials that can be instantly verified using blockchain. The Sovrin Network is an open-source, decentralized public identity network metasystem for creating, managing, and controlling autonomous digital identities.
ORE ID is the universal cross-chain authentication and authorization platform for blockchain. By connecting blockchain with crypto biometrics, the Humanoid project enables liveness checks that help identify real and unique people while accessing wallets, and platforms and Sybil Network provides resiliency for any decentralized identity.
In addition, many vendors that offer decentralized identity wallets or help organizations integrate the technology into their applications are members of the Decentralized Identity Foundation, Decentralized Identity, and Trust Over IP Foundation. The World Wide Web Consortium provides standards for identity and interoperability technologies through the W3C DID and VC projects. These organizations work tirelessly to standardize and shape a decentralized identity.
The future of decentralized identity
The decentralized identity space is still in its infancy; However, it clearly has the potential to transform existing identity management for the better. The world is moving more towards Web3, the next evolution of the Internet.
More and more people are regaining control of their data through decentralization and blockchain technology. The digital identity space is still in its infancy; however, from all the above discussions, it is clear that decentralized identity with blockchain has the potential to make identity management decentralized, simplified, and transparent, and completely change the landscape.
The prospects for decentralized identification are expanding as entrepreneurs and DID efforts continue to create proofs of concepts for decentralized identity in several industries, including healthcare, finance, and government.
Overall, the goal is to make users feel stronger online and build and share a verifiable reputation and proof of existence. Analysts predict that one of the hottest new trends in the technology industry, the Metaverse, could become a major initiator for decentralized identity propagation.
With the advancement of avatars in the form of Non-fungible tokens serving as the digital identities of users in virtual spaces, soul-bound tokens, blockchain, biometrics, and related cutting-edge technologies, decentralized identity will soon reach the masses in the burgeoning Web3 ecosystem set to grow in the years to come.
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The content is for informational purposes only, may include the author’s personal opinion, and does not necessarily reflect the opinion of TheDailyCryptoZ. All Financial investments, including crypto, carry significant risk, so always do your complete research before investing. Never invest money you cannot afford to lose; the author or the publication does not hold any responsibility for your financial loss or gains.
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