Decentralized Identity Management

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What Does Decentralized Identity Management Mean?

Decentralized identity management (DIM) is an approach to identity and access management (IAM) that that allows individuals and computing devices in the internet of things (IoT) to manage their own personally identifiable information (PII).


In a decentralized identity framework, the distributed database is used to validate the existence of an legitimate identity credential — the credentials themselves are stored in a digital wallet app controlled by the entity whose identity is being sought.

The advantages of a decentralized identity management include:

  • Control – gives humans and digital devices power over their digital identifiers.
  • Security – reduces attack surfaces by storing personally identifiable information such as credit card numbers once.
  • Privacy – enables entities to use the principle of least privilege (PoLP) to designate minimal or selective access for identity credentials.

The concept of using distributed databases to manage PII is also known as self-sovereign identity (SSI). Interest in a distributed approach to managing identity credentials has increased in recent years as blockchain distributed ledgers have gained wide-spread acceptance.

Techopedia Explains Decentralized Identity Management

Decentralized identity management is often described as a “trust framework” made possible by blockchain.

How Decentralized Identity Works

Instead storing identity credentials on multiple vendor sites, identity credentials are stored in the user’s digital wallet. Because the wallet uses encryption as well as a distributed architecture, it does not present a single point of failure if hacked.

Essentially, decentralized identity allows a user to create a “new” digital identity by aggregating all their identity credentials in a digital wallet app that generates public and private cryptographic keys.

The public key is used to identify a specific wallet. The private key, which is stored in the user’s wallet, is used during the authentication process.

Future of Decentralized Identity

Decentralized identity management is expected to play an important role in:

  • Web3
  • Decentralized finance (DeFi) transactions
  • Zero trust network access (ZTNA) automation
Margaret Rouse
Senior Editor
Margaret Rouse
Senior Editor

Margaret is an award-winning technical writer and teacher known for her ability to explain complex technical subjects to a non-technical business audience. Over the past twenty years, her IT definitions have been published by Que in an encyclopedia of technology terms and cited in articles by the New York Times, Time Magazine, USA Today, ZDNet, PC Magazine, and Discovery Magazine. She joined Techopedia in 2011. Margaret's idea of a fun day is helping IT and business professionals learn to speak each other’s highly specialized languages.