What Is a Decentralized Blockchain ID? – MakeUseOf


For many, the current identity management models don’t always work in their favor. For example, if it’s a paper-based identity system, such as a birth certificate stored in a town hall’s basement, it’s subject to loss, fraud, and theft.

But what if there was a better way? Decentralized blockchain identity systems could make using and protecting your important identity documents much easier while keeping them in your possession for good.

What Is a Decentralized ID?

A digital identity minimizes the risk of loss, but it’s prone to attacks from cybercriminals if the identity is stored on a centralized network. In 2020 alone, the FBI’s IC3 received 791,790 cybercrime complaints, with reported losses exceeding $4.1 billion.

Most of the identity systems in use today are weak and outdated. But this is about to change with the introduction of decentralized blockchain IDs.

The concept of Decentralized IDs (DIDs) was conceived by the World Wide Web Consortium (W3C) with multiple organizations, including the Decentralized Identity Foundation, Microsoft, and IBM, on board. The idea centers around the core concept of giving back users control over their identities by replacing usernames with Decentralized IDs.

Decentralized identity is essentially a point-to-point exchange of information about individuals, organizations, or things enabled by blockchain technology. It’s created specifically for a world of many devices, networks, and systems implemented on global standards.

Related: What Is a Blockchain and How Does it Work?

Once implemented, Decentralized IDs will allow users to have ultimate control over their own identity. Users will be able to control the extent of the information they want to share or restrict in a certain situation or during a certain interaction. This revolutionary idea eliminates the need to reveal and share information unnecessarily.

Why Do We Need Decentralized IDs?

What is a data breach - how to protect yourself

The current identity systems, in most cases, aren’t under our control. They are issued by external bodies who decide how or where to share them and when they can be revoked. They can reveal certain personal information that we might want to remain confidential. In many cases, malicious actors can fraudulently replicate these identities, resulting in “identity theft.”

To better understand the need for Decentralized IDs, it’s important to analyze the current models of identity management and the associated drawbacks.

  • The first identity management model relied on credentials issued to individuals to access certain services. Each organization issues a username and a password to every user who wants to interact with the organization. This provides a poor user experience as you have to register and remember your login credentials for each website you want to visit.
  • Due to the poor user experience of the first identity management model, third parties began issuing identity credentials to log in to services and websites. Common examples of this model are the “Login with Google” and “Login with Facebook” functionalities. With this model, users have to remember a single password and use it to log in to services and websites. As a result, corporations like Google and Facebook became the middlemen of trust. While this improved user experience, it raises privacy and security concerns.

The emergence of Blockchain technology and Decentralized Identifiers allowed the creation of Decentralized Blockchain IDs that bring security and privacy to identity management.

Data Privacy for Individuals

The US has no central federal privacy law like the GDPR, several state privacy laws have been passed already

Individuals are often required to grant applications access to their personal information and data, most of which is unnecessary and can be avoided. Decentralized IDs will give more control to the users over their own data, allowing them to restrict the amount and scope of data they would have to share otherwise.

Moreover, by ensuring that their data is stored securely, users can protect themselves against breaches of privacy, which have resulted in tremendous amounts of tangible and intangible losses.

Better Compliance for Organizations

Legislation is being created and passed to address cybersecurity, data breaches, and privacy

Decentralized Blockchain IDs are potentially equally beneficial for organizations as stricter data regulations make operations and projects involving user data riskier for companies. With regulations such as the GDPR coming into effect, organizations face massive business risks and liabilities in case of a breach.

Decentralized IDs minimize these risks by allowing the organizations to avoid collecting sensitive data that might be of no use to them. They can minimize their data collection and storage scope to what they actually require, allowing them to ensure corporate IT responsibility.

Improved Accessibility

A World Bank report suggests that there are approximately 1 billion people without official proof of identity. While the world continues its journey towards the digital revolution, the disparity identified by the World Bank remains unaddressed. To ensure the digital divide does not grow further, the concept of Decentralized IDs is a step in the right direction.

Lack of identity is a barrier that restricts people’s access to crucial facilities and services. Blockchain-based Decentralized IDs would reduce the disparity by providing more people with identities. This will improve their access to facilities that will elevate their living standards and provide them with better opportunities.

How Does the Decentralized Blockchain ID Work?

There are several key components required for Decentralized Blockchain IDs to work.

Decentralized Identifiers

The first and foremost component is the globally unique and persistent decentralized identifiers or DIDs. They are created and controlled entirely by the user. DIDs are secured with a private key, and only the actual owner can access it. Moreover, one individual can have multiple DIDs, allowing users to determine the scope and amount of data they want to share for a certain purpose.

Decentralized Systems

Unsplash stock image of an illustration of blockchain against a dark blue background

Decentralized Public Key Infrastructure (DPKI) links and enables all of it and contains public key material, authentication descriptors, and service endpoints. The mechanism and features required for DPKI are established through blockchain, which creates a secure and trusted medium for distributing all the information. Needless to say, identities that are based on blockchain-backed mediums are inherently more secure and safe, compared to traditional mediums, which is exactly why Decentralized IDs is something that should work the way it is supposed to.

DID User Agents and Attestations

DID user agents (applications) would be required to enable the actual users to engage with the ecosystem by helping them create, manage, and utilize DIDs. Microsoft is creating such an agent, which would essentially be a wallet and would allow users to manage their DIDs and everything associated with them.

The DID attestations component will enable users to generate, present, and verify claims to foster trust between users and the system. These attestations would be based on standard protocols and formats, contributing to the integrity and reliability of the entire system.

All of the components would close the loop of a user’s interaction with the systems and allow this ecosystem to function smoothly and without intervention.

Decentralized Blockchain Identity—Own Your Identity

The idea of Blockchain-based DIDs allows us to continue developing, growing, and innovating without compromising on our privacy and autonomy to choose what we want to share. Of course, the practicality of this idea depends on the seamless integration into the existing ecosystems, but introducing decentralization into the picture is certainly a step in the right direction.

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