What Is Blockchain Decentralized Identity and Why Does It Matter?

What Is Blockchain Decentralized Identity, and Why Does It Matter

The crypto industry has seen a slew of new developments thanks to blockchain Decentralized technology. It has created a purchasing system that facilitates customer registration and login. As an added bonus, it provides a secure system without making users deal with unnecessary hassles like complex passwords or identity verifications.

However, the decentralized nature of blockchain technology is currently trending everywhere. The developers of the blockchain are mulling over this idea to give users more control over their possessions and finances. This article serves as a comprehensive resource for anyone interested in learning more about the decentralized identity concept as it pertains to blockchain technology and its potential future uses.

What Exactly Does “Decentralized Identity” Imply?

A user’s decentralized identity is one that is not controlled by any external entity, as suggested by the term’s name. It’s purpose is to guarantee honest data transfer between parties. The idea of “decentralized identity” is predicated on a trust framework for handling individual identification documents. It’s a concept from the third generation of the Internet.

As a result of decentralized identity management, individuals can exercise agency over their personally identifying information (PII) and efficiently manage and generate it. It makes managing user accounts and accessing other administrative features straightforward. Users don’t have to rely on any certificates, registries, or other identity providers.

Personally Identifiable Information (PII) is the data that can be used to specifically identify a single individual or a group of individuals. Personally Identifiable Information, or PII, is information that can be used to identify a specific individual. Age, citizenship, employment status, biometrics, address, credit card accounts, and credit history are all part of the information that has been collected.

Decentralized digital identities also necessitate data from electronic devices in addition to personally identifiable information. The user’s search history, passwords, usernames, purchase history, etc.

By utilizing a decentralized identifier, users are able to regain command of their personal data and only share the information that is required for verification purposes. Using decentralized identity management, users and businesses can interact in an open and trusted environment.

problems with the centralized identity system

A primary benefit of decentralized identity is that it gives users control over their own credentials and data. It gives them control over how their data is used and makes the interface easy to navigate. Below, we list a few of the issues plaguing centralized systems that highlight the need for decentralized identity management.

  • Evidence of Who You Are

Having a verifiable proof of existence is typically required for citizens to gain access to certain mandatory services in daily life. However, many people around the world do not have access to a government-issued form of identification.

Because of this, they are socially vulnerable because they cannot protect themselves by owning property, opening a bank account, obtaining gainful employment, or exercising their right to vote. Lack of access to necessary forms of identification threatens the social freedom of the people.

  • Safety

The already existing identification systems are centralized and considered to be unsafe and are usually avoided by the public. Centralized data bases are easy targets for cybercriminals because of their increased vulnerability to fraud. The lack of adequate security measures has resulted in a number of reported incidents in the past where the information of investors has been stolen by scammers.

  • Ownership

Users have no say over who has access to their data or credentials in centralized systems. Users cannot learn about the value created by their data using the conventional method of establishing digital identity. Other parties have access to users’ personally identifiable information. As a result, the system becomes more convoluted because no single user can lay claim to the identity.

Why and how does decentralized identity solve these problems?

When it comes to identity, the problems with the centralized mechanism are solved by decentralized identity systems, which give users full authority over their data and resources. It opens the door for digital identities to be used across multiple services while still maintaining security and user interest. The decentralized identity network requires only a secure internet connection and a device to operate.

The existence of the identity is also validated in some of the decentralized identity systems. The blockchain provides a consistent and tamper-proof infrastructure for decentralized identity to store and manage users’ personally identifiable information. Programmers and users all over the world are reaping the benefits of easier system administration.

Define “Self-Sovereign Identity.”

When personally identifiable information is managed via distributed data bases, the term self-sovereign identity is used. Self-sovereign identity is the foundation of the decentralized digital identity concept (SSI).

Identities are typically handled by a separate entity or distributed across multiple platforms. However, digital wallets are owned by the users relying on SSI where they can store a number of personal credentials. Multiple programs provide convenient access to these credentials.

What Constitutes an Individual’s Sovereign Identity?

In this section, we will discuss the three aspects of SSI as defined by experts.

  • Blockchain

Blockchain refers to a distributed ledger of digital transactions. A copy of the data is sent to other computer networks so that they, too, can keep track of all of the transactions that have taken place. Making multiple copies makes it more difficult to steal or alter the information.

  • Verifiable Credentials (VCs)

Users’ data is stored and protected using verifiable credentials, which are verified with the help of the SSI to ensure that they have not been tampered with. Paper records are typically stored in the VCs. Licenses, passports, and other forms of identification that are not carried on the person, such as the details of a bank account, may be stored in such a device.

  • Decentralized Identifiers (DIDs)

A digital identity that can be owned and verified cryptographically is made possible by this type of identifier. It includes the user’s organization, data model, and other abstract information requested by the DID owner. User-generated content is completely independent from third-party organizations and belongs solely to the person who generated it.

There is no connection between these credentials and any central databases, identity registries, or certificate issuers. User control over their digital identity is not dependent on the consent of any outside parties.

  • The decentralized identity system has four additional parts in addition to the SSI ones.
  • A person or entity who requests a DID and is thus responsible for receiving the verifiable credentials.
  • One who signs the verifiable credential with the private key. The holder then receives additional copies.
  • A trusted third party who can access the issuer’s public DID on the blockchain and verify the user’s claimed identity.
  • The essential identity wallets in a decentralized identity system.

Methodology Behind Decentralized Identities

The blockchain provides the foundation for decentralized identities in the form of encrypted, distributed wallets. Users make use of these distributed identifier wallets. These are the specialized programs that enable users to generate their own decentralized identifiers. Additionally, users’ VCs and personally-identifiable information can be managed and stored using these apps.

Instead of giving their information to multiple websites whose security is monitored by third parties, users can keep it all in one safe place. Compared to conventional wallets, decentralized identity wallets offer higher levels of security due to encryption. They’re safe because of the cryptographically generated keys. These keys cannot be guessed and are much more secure than standard passphrases.

In a decentralized wallet, you can generate two different kinds of cryptographic keys: private and public. The private key is used for authentication and is stored securely within the wallet, while the public key is used to identify a specific wallet. Using these decentralized wallets, user identities are easily accessible from a centralized location. Due to this, users can complete their transactions quickly and easily.

Decentralized identity wallets are used to safeguard user information and communications in addition to providing transparent authentication of user data. Data necessary to complete a transaction, including users’ personal information, identity credentials, and other details, is stored in decentralized applications (dApps).

Obtaining signatures from several reputable parties can be used to verify the integrity of the data stored in the wallets. Digital identities can be verified and validated by the issuing institution or individual, such as a university or government agency. If you have a decentralized identity wallet, you can use it to prove your identity to anyone else who needs to see it.

Decentralized Identities and the Various Types of Attestation

The methods of verification used by distributed ID systems are as follows.

  • Off-chain Attestation

Users who prefer to maintain a level of privacy may be coaxed into disclosing more information than they’re comfortable with if they opt to store data off-chain. Therefore, they are thought to benefit most from on-chain attestation. These are encrypted certifications bearing the issuer’s digital signatures.

  • On-chain Attestation

Smart contracts on the Ethereum blockchain are used to conduct this type of verification. After reviewing all relevant information, the company will issue an on-chain attestation in the event of a sale of ownership. During this procedure, the user is not required to reveal any personal information.

When it comes to decentralized identification, what protocols are available?

Using the decentralized identity principle, each startup strategy is unique in terms of its characteristics and prerequisites. Decentralized wallets are eagerly being implemented by a number of services, softwares, and initiatives, despite the fact that the decentralized space is still maturing. There could be a large number of prestigious businesses involved in this effort.

The distributed id protocols are also stored in Identity Hubs like 3Box and uPort. Veramo and Serto are two new initiatives developed recently using an uPort built on Ethereum. The goal of both of these initiatives is to make the internet less centralized.

Many merchants and suppliers are engaged in this effort as well, with the goal of embedding decentralized identity into user-friendly software and hardware. Many groups, including the World Wide Web Consortium, are working tirelessly to make decentralized identity for customers the norm.

Is there any benefit to having a decentralized id?

We’ll go over some of the main benefits of decentralized identity that make it so trustworthy.


By utilizing a decentralized identity, owners gain control over their online personas and associated devices. Those utilizing the system can have full and total ownership of their identities. This way, they can be selective about the information they share, rather than sharing everything with everyone.


By keeping this data safe, you can also lessen the likelihood of cyberattacks. Because of this, the blockchain network is significantly safer and more protected. There is less chance of an attack or theft of data because the storage system is unbreakable and unalterable.

There must be many controls in place to ensure that companies are appropriately managing the data they process, collect, and store. Anyone found in violation of our rules and regulations must pay a fine to our company. The key to this is decentralized identity management, which streamlines the process of data collection and storage.


With the help of decentralized identity privacy, the principle of least privilege (PoLP) can be put into practice. Data privacy is what’s meant by PoLP. As a result, only authorized individuals can access the saved credentials. It also states that any tool, entity, or process may be granted limited permission to complete any task.

Protecting Data Integrity

Users’ information is safely stored in the blockchain, where it cannot be altered by a third party. A decentralized identity system will use this mechanism to ensure that sensitive information is protected from unauthorized changes.


Multiple iterations of the regulation process are applied to the data. This means that the information stored in the distributed identity management system can be relied upon.

Simplicity of Operation

Users are able to easily manage and create their information and then store it in whatever manner they see fit thanks to the decentralized identity management system’s user-friendly and engaging platform.

Is there any downside to having a decentralized identity?

The following are a few of the disadvantages and problems with decentralized identity management.

Adoption Rtes Are Low

Though growing in popularity, many people in the blockchain space still don’t know how decentralized identity management works. There is still much deliberation about how best to implement this mechanism in the public sector to improve the user experience by many higher authorities and businesses.

Unregulated Markets

Decentralized identity management has many advantages, but the fact that it is not controlled by a central authority raises security concerns for most users.


An additional challenge of decentralized identity management is the formulation of globally applicable, interoperable standards. When providing data in duplicate to different networks, there is still the possibility of data inaccuracy.

When Will Decentralized IDs Become the Standard?

While the blockchain network is still trying to gain traction, the decentralized world already offers users many conveniences that centralized systems simply cannot match. People are becoming more informed and vocal about the need to reclaim ownership of their personal information and data. The internet is undergoing changes, including decentralization, as a result of web3 technology.

The advent of decentralized identities has the potential to revolutionize the blockchain industry as we know it. Startups are developing proofs of concept in many practical areas, including healthcare, education, banking, and others, to help speed up the decentralized identity movement.

The primary objective is to design a system that is both technologically advanced and able to provide credible evidence of its existence and reputation for reliability. One of the hottest topics in tech right now, the Metaverse has been predicted by experts to maintain its decentralized identity.

In the coming years, the decentralized identity is expected to make its mark in the technological space in the same way that NFTs, blockchain, biometrics, and other forms of virtual identities have.


With decentralized identity, individuals can retain control over their personal data and credentials. When it comes to user data security, it addresses a number of issues brought on by more conventional, centralized approaches.

Royal Seed
Royal Seed is a brand new contributor to Alltechcraft, and his writings focus on cryptocurrency news and platform reviews. We highly suggest keeping up with his most recent writings, since they are both quite insightful and fascinating. (Follow him on [email protected]_nba )