A decentralized identity can be described as a self-owned, independent identity that enables trusted data exchange.
With a decentralized identity, people can create, manage, and generate their information without requiring third-party services, such as registries and authorities.
A person’s identity is typically accumulated using their personal identifiable information and these can consist of:
- Name
- Age
- Address
- Biometric data
- Country
In addition, for digital identity, information such as search history, buying history, and usernames can be part of a person’s identity.
We are all familiar with the identity information that we provide to the government in exchange for a card. This is an example of a centralized identity.
There are 4 key differences separating decentralized from centralized identities.
- Users have full ownership and control of their decentralized identity
- Decentralized user data can only be shared with other parties with the permission of the owner
- User data is stored in personal wallets, and this limits the chance of breaches
With wallets, users can set up their decentralized identity for use across multiple applications rather than having several identities for entering different platforms. This concept is called sovereign identity and it is supported by blockchain, verifiable credentials, and (DIDs) decentralized identifiers.
This system enables 3 key benefits for decentralized identifiers:
(1) Control
This simply means that users have full control of their information and can choose whole gets to see and get access to this information. This contradicts centralized identity where registries and authorities have control of your data and can use it even if you did not know.
Wallets are key to this function as they provide both public and private keys, and only owners have access and knowledge of their private keys.
(2) Security
The blockchain is a decentralized distributed ledger that is secured by a consensus mechanism such as POW (proof-of-work) and POS (proof-of-stake).
Wallets are built on the blockchain and used to explore through it. They come with cryptographically encrypted private keys that are user-protected.
On top of that, with decentralized identity, security attacks to steal data from organizations become reduced.
(3) Privacy
Since users can create and control their information without third parties, this enhances their privacy.
Their decentralized identities are usable across multiple applications and these applications do not generate this information for them.
