Decentralized Identity: The Next Revolution Powered by Blockchain Technology

Why Trust Techopedia Crypto
Key takeaways:

Decentralized identity or self-sovereign identity refers to the concept of self-owned digital identities that are not controlled, managed and stored by centralized third parties. It aims to ensure that each person has complete control and privacy over their identification data. Zero Knowledge Proofs is a significant blockchain innovation that allows users to verify their identity without revealing any information. Overall, a decentralized identity holds the promise to revolutionize various industries and pave the way for a more secure and user-centric digital future.

Identity plays a critical role in our daily digital lives, from accessing websites and applications to proving our credentials online. Today, traditional identity systems can no longer be trusted following countless data breaches and unethical corporate use of consumer data for advertising, market research, and algorithms.

Enter decentralized identity, a revolutionary concept that aims to set higher standards for data privacy and user empowerment. 

In this article, we dive into the world of decentralized identity, explaining its principle, key components, and how decentralized identity systems powered by blockchain technology are being used to revolutionize the way we use the Internet.

What Is Decentralized Identity?

Decentralized identity, also sometimes called self-sovereign identity, refers to the concept of self-owned digital identities that are not controlled, managed, and stored by centralized third parties.

Decentralized identity technology aims to ensure that each person has complete control and privacy over their identification data. At the same time, the technology looks to provide a universal and trustworthy system where digital IDs can be seamlessly used for personal verification across the internet and in person.

Blockchain technology is used as the underlying infrastructure for decentralized identity solutions. This is because public blockchains provide (nearly) immutable databases that can be used to store and retrieve data in a decentralized manner. Blockchains like Bitcoin and Ethereum have distributed databases with a diverse and global network of participants who verify and process transactions. The decentralized nature of these public blockchains makes it extremely difficult for a centralized entity to gain control, change, or hack the system.


Principles of Decentralized Identity Solutions

Decentralized identity solutions are modeled on the following principles:

  • Reliable and secure

Decentralized identity solutions must be secure enough to prevent data leaks, hacks, and impersonation. They also ideally ensure that verifying your identity doesn’t require giving over all of your personal information. 

  • Privacy protection

Decentralized IDs ensure that users have full control over their personal data and information and prevent users from being tracked by websites.

  • Open and easy to use

Decentralized IDs must be open to everyone regardless of age, gender, race, nationality, political status, and socio-economic status. Decentralized ID solutions must be easy to use and readily available so that it is universally recognizable.

  • Decentralized

All the components of decentralized ID technology must be sufficiently decentralized. This could encompass identifier solutions, underlying databases, authentication and authorization protocols, recovery solutions, and more.

How Do Decentralized Identity Systems Work?

A decentralized identity system is heavily dependent on its underlying network called a trust system, which can be a blockchain protocol or a non-blockchain protocol. In the case of blockchain, the numerous independent nodes that maintain and update the blockchain ledger in a decentralized manner help establish a trustless system.

Decentralized identity systems can also be established in non-blockchain infrastructure. For example, Nostr is a non-blockchain, open protocol that provides developers with the infrastructure to create decentralized social media networks.

The two main components of a decentralized identity system are decentralized identifiers and verifiable credentials. 

Decentralized Identifiers

You can compare decentralized identifiers to the current use of email addresses and social network handles used when logging in to a website. However, these Web 2.0 identifiers are not designed to protect user information and privacy. 

In contrast, each decentralized identifier is designed to be globally unique and verifiable across any platform. These decentralized identifiers provide users with (near) immutability, censorship resistance, and enhanced security. Additionally, decentralized identifiers will also empower users to delete data associated with their ID.

Verifiable Credentials

Verification of the authenticity of the decentralized ID is key. This is where verifiable credentials come in. Think of it as your driver’s license or passport that you can use to prove your identity. 

Verifiable credentials allow users to verify their identity without giving away too much personal information. In a decentralized identity system, the user will own and have control over their verifiable credentials. One of the most promising verifiable credential innovations in the blockchain world is called zero-knowledge proof (ZK proof).

Zero Knowledge Proofs

ZK proofs are arguably the most significant blockchain technology that enables decentralized digital identity solutions – at the time of writing.

What is ZK proof? It is a cryptographic method that proves the validity of a statement without revealing information about the statement. ZK-proof-powered decentralized identities enable personal verification and attestation without giving away any personal information to third parties.

For example, if you want to create an account on a social media platform. You can simply submit your ZK-proof decentralized ID to verify your identity. You will not be required to submit personal information like email address, age, name, location, or date of birth, as required at the moment when “signing up” or “creating an account” on a website.

All you need to complete a series of actions that can only be done with the underlying identity information but that don’t contain any of the information itself. The verifier can plug in those actions into a specific cryptographic function to check if the information is valid. 

ZK proofs can be used for cryptographic verification of real-world credentials such as driver’s licenses, memberships, academic degrees, and national IDs. The technology will also enable passwordless login, reusable IDs, and composable verification methods across websites and applications.

Use Cases of Decentralized Identity in Blockchain

Polygon ID

Polygon ID, made by the same team as the Polygon network and token, is a decentralized identity infrastructure stack that provides developers with the tools to build decentralized and private identity solutions. Polygon ID utilizes ZK-proof technology.

With Polygon ID, developers can create “private-by-default” applications that do not collect, store and manage user data. This will not only result in the elimination of customer data management and compliance for businesses but will also give individuals control over their private data.

Polygon ID provides the following tools to developers:

  • Wallet software development kit (SDK): Tools that enable developers to create digital ID wallets and wallet identity solutions.
  • Issuer Node: An application that allows users to issue and manage digital IDs.
  • Verifier SDK: A set of tools that enables applications to verify user information based on digital IDs.
  • Java Script SDK: Allows developers to create applications, browser extensions, and issuer nodes. Existing applications can also use this SDK.

Decentralized Social Media

Decentralized social media apps are censorship-resistant social platforms that are not owned, operated, and managed by a centralized entity.

There are several blockchain-powered decentralized social platforms, including Decentralized Social (social media), Status (messaging), Mirror (publishing platform), and Lens Protocol (social media) allow users to exchange information, publish and distribute content to audiences.

As these platforms run on public blockchains, they provide users with a decentralized underlying layer that is (almost) immutable and resistant to censorship. Some blockchain-based decentralized social platforms like DeSo have native crypto tokens that enable users to monetize their digital activity. 

Lens Protocol is an example of a decentralized identity social network. It aims to solve the problem of ‘portability’ experienced by users on Web 2.0 platforms like Twitter and Instagram. Portable accounts on Lens allow users to seamlessly transfer their content and followers between different platforms built on top of Lens Protocol.

There are numerous applications built on the Lens Protocol across various categories, including social media, gaming, music, live streaming, and more.

Is Decentralized Identity the Future?

Decentralized identity could be the future, and this would likely be best for the interest of internet users. Unfortunately, personal data is so incredibly precious to corporations that it will be a hard-fought fight for technology.

If decentralized identities succeed, they will not only allow us to sidestep the data privacy problems plaguing the web2 space but will also create a higher standard for data protection, privacy, and user empowerment. Decentralized identity solutions like ZK-proof technology have the potential to make a global impact and disrupt industries ranging from finance to retail.


Related Reading

Related Terms

Mensholong Lepcha
Crypto & Blockchain Writer
Mensholong Lepcha
Crypto & Blockchain Writer

Mensholong is an experienced crypto and blockchain journalist, now a full-time writer at Techopedia. He has previously contributed news coverage and in-depth market analysis to, StockTwits, XBO, and other publications. He started his writing career at Reuters in 2017, covering global equity markets. In his free time, Mensholong loves watching football, finding new music, and buying BTC and ETH for his crypto portfolio.