Decentralised identity in blockchain. What is it?

Decentralised identity in blockchain. What is it?

We are seeing a proliferation of identity systems. Nearly every day a new method or system for verifying someone’s identity arises. In the era of big data and heightened awareness around personal privacy, this is not surprising. What is surprising, however, is that we have yet to settle on any one system as the de facto standard. Centralised identity management systems are falling out of favour, while decentralised alternatives are gaining traction. So what does a decentralised identity in blockchain mean?

Decentralised identity in blockchain refers to a digital identity that is not owned by any central authority but is instead distributed across a network of computers.

Decentralised identity is a emerging Web3 concept that provides people with a trust framework to manage their identity without the need of a central third-party, like an authority. This approach includes generating, managing and controlling ones personally identifiable information (PII).

PII, or private and sensitive data about specific individuals that directly or indirectly identifies them, usually combines name, age, address, biometrics, citizenship information employment history credit card accounts and more. In addition to PII decentralised digital identity includes data from online electronic devices such as usernames and passwords search history buying  history and others.

When users have a decentralised identity, they control which personal information is verified. This creates a secure environment where organisations and individuals can interact transparently with one another.

Does decentralised identity matter?

Decentralised identity is important for several reasons. First, it allows individuals to take control of their own data and identities. Second, decentralisation removes the need for central authorities to manage and store sensitive personal information. Third, a decentralised system is more resilient to security breaches and hard to manipulate or censor.

Over 1 billion people around the world do not have an official proof of identity, according to World Bank data. This means that a significant portion of the population is unable to vote, open a bank account, own property or find a job. The lack of identification documents limits people’s freedom and opportunities.

In addition, old-fashioned centralised identification systems are often insecure and leave some people out. When a company has all its customer records in one place, it becomes a especially tempting target for hackers. We occasionally read about attacks on these kinds of systems where criminals get away with stealing information from thousands or even millions of customers at once.

Furthermore, the issue of ownership remains. Those who have digital identity in its more traditional forms still don’t have full control over it or knowledge of how much value their data generates. In a centralised system, PII is stored and managed by someone else. Therefore, it becomes harder for users to lay claim to their identities.

Decentralised digital identity provides a solution for using digital identity across multiple platforms while maintaining security and user experience. With only an internet connection and a device, users can access decentralised digital identity from anywhere.

Decentralised identity systems use distributed ledger technologies and blockchain to validate the existence of a legitimate identity. By providing a consistent, interoperable and tamper-proof architecture, blockchains enable the secure management and storage of PII, with significant benefits for organisations, users, developers and IoT management systems.

Self-sovereign identity. What is it?

Self-sovereign identity means that users have control over their personal data instead of centralised authorities. With SSI, every user has a digital wallet in which they store credentials like driver’s licenses or passports. This allows people to prove their identities online without relying on third-party platforms.

There are three main components of SSI: blockchain, verifiable credentials (VCs) and decentralised identifiers (DIDs).

Blockchain is a distributed digital database that records transactions in a way that makes it difficult to change, hack, or cheat.

Second, there are VCs that implement SSI and protect users’ data. They can represent information found in paper credentials, such as a passport or license and digital credentials with no physical equivalent, such as ownership of a bank account. These VCs are tamper-proof and cryptographically secured so they cannot be changed without the user’s consent.

Finally, SSI includes DIDs, a cutting-edge identifier that allows for decentralised digital identities that can be verified through cryptography. A DID refers to anything determined by the controller of the DID – this could be a person, organisation, data model, abstract entity etc. DIDs are independently created by the user, owned by the user, and unassociated with any organisation. They don’t rely on centralised registries, identity providers, or certificate authorities for verification and instead allow users to prove control over their digital identity without needing permission from a third party.

The five core components to decentralised identity architectures are blockchain, DIDs and VCs, a holder who creates a DID/receives credential, an issuer that signs credential/issues to holder, verifier(checks credentials), & decentralised wallets.

How does decentralised identity work?

Decentralised identity management is based on the use of decentralised encrypted blockchain-based wallets.

A decentralised identity framework allows users to store their personal information and manage their virtual currencies using special apps called decentralised wallets. These wallets are powered by the user instead of being controlled by intermediaries like most websites.

Furthermore, these decentralised identity wallets use distributed architecture and are encrypted. instead of passwords that could be guessed or hacked, they use un-phishable cryptographic keys to access the wallet. This provides an extra layer of security in case of a breach. A decentralised wallet generates a pair of cryptographic keys: public and private. The public key is associated with a specific wallet while the private one is needed during authentication and only stored on the device.

Decentralised identity wallets not only transparently authenticate users but also protect their communications and data. DApps store PII, verified identity details, and the information needed to establish trust, prove eligibility or just complete a transaction. These wallets help users give access to their identity information from a single source while revoking it faster and easier.

With a decentralised digital identity wallet, users can present proof of their identity that is signed by multiple trusted parties, such as employers, universities, or government structures.

The pros and cons of decentralised identity

Decentralised identity management has several advantages, such as control, security, privacy and ease of use. Nevertheless, slow adoption rates, the dearth of regulation and interoperability are some primary concerns associated with this technology.

Control over digital identifiers empowers users and digital devices. With complete control and ownership of identities and credentials, individuals can pick what information to reveal while not needing to rely on anyone else for confirmation.

Having security reduces the risk of someone Attack surfaces by storing PII. Blockchain is an encrypted, decentralised storage system that is designed to be safe, flexible and unable to be broken into, which decreases the chances of an unauthorised person accessing and stealing or making money off of user data.

Decentralised identity management also aids in reducing security risks for organizations. Breaches and misuse of data often result in sanctions and fines for the organisation, even if it was unintentional. However, by simplifying their compliance responsibilities and collecting less identity data with decentralised identity management, they can reduce GDPR breaches as well as other cyberattacks.

The term “privacy” encompasses the principle of least privilege (PoLP), which is an information security measure that designates limited access to identity credentials. PoLP dictates that anyone, any device, or any process should only be granted the minimal rights necessary to complete a given task.

Decentralised identity technology allows users to manage their identities securely and efficiently with cutting-edge decentralised identity applications.

The main issue slowing down worldwide adoption is a lack of understanding from non-technical users. Meanwhile, governments and organizations are still trying to work out how to use the decentralised technology on a large scale.

In addition to overcoming the legacy systems and regulations, creating interoperable global standards and governance are also important. Identity data fragility, which refers to duplication, confusion, and inaccuracy in identity management is still a problem but remains secondary.

The protocols of decentralised identity

There are several identity protocols that deal with decentralised identification, each with its own specific features.

Despite being a new technology, there are already many initiatives and players venturing into the decentralised identity space. These include open-source developers, startups and some of the biggest names in the industry. There is also an array of software available to support decentralised wallets and services.

Decentralised protocols and stores that manage digital identities are called identity hubs. These platforms enable users to take control of their personal data, managing it in a secure and decentralised way. Recently, the uPort platform – which is based on Ethereum – split into two new projects: Veramo and Serto. Both of these projects aim to decentralise the internet. 3Box Labs has also been working hard on the development of Ceramic Network and Identity Index (IDX) – both of which will bring unlimited data composability to Web3 apps.

Decentralised platforms such as ION and Dockit offer Layer 2 solutions that run on popular public blockchains. These protocols enable users to build decentralised applications for identity management and verifiable credentials with instant blockchain verification. Sovrin Network is open-source, decentralised, and public. Its purpose is to help with identity management bymeta-systematically creating and controlling digital identity. ORE ID serves as a authentication platform for blockchain that works cross-chain.

The Humanode project enables liveness detection checks that help identify real and unique human beings while accessing wallets and platforms. This provides Sybil-resistance to any decentralised identity network.

Decentralised identity wallets are managed by many vendors who are members of the Decentralised Identity Foundation and the Trust Over IP Foundation. The World Wide Web Consortium provides standards for interoperability among different identify technologies via the W3C-DID and VC projects. These organizations work together to standardise decentralised identity.

The future of decentralised identity

Identity management is an important but difficult topic, and the decentralised identity space has the potential to improve it.

The internet is evolving into Web3, which is based on decentralisation and blockchain technology. This allows people to take back control of their data. The digital identity space is still new; however, it is evident that decentralised identity with blockchain has the potential to make identity management much simpler and more efficient.

Decentralised identity is quickly becoming the new standard for startups, DID initiatives, and forward-thinking companies in various industries.

The goal is to make users feel more in control online, with a verifiable reputation and proof of existence that can be easily shared. One of the latest trends in the tech industry – the Meta-verse – may become a key driving force for decentralised identity spread, according to analysts.

NFT avatars as digital identities in virtual spaces, soul-bound tokens, blockchain, biometrics and related technologies are making decentralised identity more accessible then ever before. In the coming years we will see a huge increase in adoption of these technologies as they become more refined and user friendly.

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