Blockchain technology has changed the world and has helped society enact radical changes, especially when it comes to privacy and identity. Decentralized identity (DID) redefines the way we share, control, and access our personal information. In short, it gives power back to the people when it comes to identity.

In this article, we outline everything you need to know about decentralized identity, and how it could change the future. 

Decentralization and Blockchain

To accurately define decentralized identity, we have to first talk about blockchain. You most likely know of blockchain because of Bitcoin, and a big part of Bitcoin’s popularity and appeal has to do with blockchain technology.

Blockchain technology has several unique characteristics that solve the problem of trust, which make it a great fit for identity solutions. Firstly, a blockchain is unchangeable. Here’s how it works: 

Transactions on a blockchain are processed by a network. Computers work together to confirm a transaction, and every computer in the network must ultimately confirm every transaction in the chain. 

Transactions are processed in blocks (forming the “block” in “blockchain”), and each block is linked to the previous block. This structure makes it impossible to go back and alter a transaction. In addition, a blockchain is transparent. Each computer in the network has a record of every single transaction that has occurred. 

Decentralization is at the heart of blockchain technology. No one controls the data, so no one can override a transaction and the system is unlikely to fail. This is how blockchain builds trust - data cannot be modified, is independently verifiable, and is virtually impossible to hack.

What is decentralized identity?

Imagine that you have moved to a new country and need to register for all kinds of services. You will need to set up a variety of important things such as electricity, bank accounts, Netflix, and maybe even a new driver’s license. You may need to get a new phone and install many apps, all of which you are granting access to your data

Normally, you would have to register and provide proof of identity individually to each service provider, which can be a time-consuming process. Each time you want to access an individual account, you need to prove your identity by providing a password or PIN.

DID radically simplifies and improves this whole process. You prove your identity once to a trusted third party, and said third party handles all requests for identity and access so you don’t have to. Instead of submitting a copy of your passport to five different places, you only do it once on a secure platform.

Currently, third party providers of DID use blockchain technology to protect your information from data breaches and hackers. The only way to access your information is through a wallet (usually in the form of a desktop or mobile app) that requires a unique master password to access. 

It is important to note that while the Bitcoin blockchain is public, meaning everyone can see what is happening on it, DID works slightly differently. The different forms of identification and personal data are not publicly available; they are only accessible by the user.

DID and privacy

The dawn of the internet age has led many people to become more concerned with what data they share and who has access to said data. In the United States, 73% of people said their concerns over personal data privacy have increased over the past few years. In a study by Deloitte in 2018, 81% of US consumers felt like they have lost control over their personal data. 

And the concern is valid. With many massive data breaches happening every year, people are becoming more concerned in regards to who has access to their data, and rightfully so. Trust in massive corporations is falling, and people are starting to take steps to protect their data. 

DID gives people far more control over what data they share, and who they share it with. Instead of trusting a company to store data, anyone using DID can now choose where and how they share their personal data.

Additionally, DID is far safer than other forms of data storage. Traditionally, if someone has knowledge of your personal information, then they can impersonate you and perhaps even steal your identity. However, with a decentralized identity system, a hacker might have access to bits and pieces of personal information but be unable to prove an actual identity. For DID, you must have physical access to a device to validate identity, which is far too tedious and unrewarding for malicious actors to pursue. A hacker would much rather steal from thousands of people instead of just targeting one person, simply because the reward is much higher.

While more laws are coming into effect to help protect consumer privacy and identity management (most recently the GDPR), there is still a long way to go. That being said, governments are taking notice of DID and its potential applications. DID could solve a lot of bureaucratic issues while also ensuring that personal information is truly safe. 

Applications of DID

The ability to prove that you are who you say you are is an integral part of modern society. It’s part of Know Your Customer (KYC), which most companies are legally required to do in order to prevent illegal activities such as money laundering. However, what happens if you don’t have government-issued identification documents?

More than 1.1 billion people on the planet are unable to prove their identity, and as a result, can’t access vital services - like education and healthcare - that many of us take for granted. There have been several international and national initiatives to create some type of identification for those lacking one, however, government bodies are just as vulnerable to data breaches as any company is. Here DID can solve many issues, and it is starting to be considered a strong contender.

Refugees are some of those who regularly suffer from not being able to prove their identity. On the road to asylum, many do not have ID because it was destroyed, stolen, or left behind. A report by the Norwegian Refugee Council found 70% of Syrian refugees lacked basic identification documents. 

DID could offer a potential solution here, and is already starting to be used in Finland. The Finnish Immigration Service has been giving prepaid Mastercard credit cards that are linked to a unique digital identity stored on a blockchain. This has given refugees not only a bank account, but a permanent way to verify their identity.

If we consider a future where all people have a DID, then refugees wouldn’t have to worry about losing identification documents because it would be stored digitally. Even losing your passport wouldn’t be that big of a deal because you would still have a verified copy of it. If governments and companies can figure out a way to create a DID database that is completely secure, then we may be looking at a future that is paperless when it comes to forms of identification.

Interestingly, Microsoft has been a leader in introducing DID to mainstream society. The company has been working with the Decentralized Identity Foundation (DIF), the World Wide Web Consortium (W3C), and the general identity community to develop an open source DID application. 

The project is called ION, which was launched in May of this year and runs on top of the Bitcoin blockchain. The goal is to not only help those without any identification documents, but to also allow more privacy for the average internet user. While the project is still only in its infancy, it certainly has a lot of potential, and it’s nice to see a major corporation embracing a modern digital approach. Allegedly, Facebook was invited to participate in the project but declined, insisting it will follow its (awful) historic approach to user data. 

Conclusion

DID is slowly but surely becoming more mainstream, and is something that has the potential to radically change our future. However, it has raised the question that if DID becomes the new normal, won’t hackers just develop their technologies too? A blockchain can be hacked, however attempts aren’t often successful and for now, cryptocurrencies remain the main target. Given that people’s identities are on the line, any blockchain that works with DID should have extra protection. Blockchain isn’t at fault, rather human error (and criminal ingenuity) prevents anything from being totally secure.

Nevertheless, decentralized identification could possibly be the new normal and create a space where everyone has access to their identification documents, no matter if they are from a first world country or a third world country. This vision may seem slightly utopian, but there is true power behind this technology. 

The best part is that DID is already available to you. Using blockchain technology, the SelfKey Wallet provides an identity platform where you can manage all of your personal information in one place. You’ll be able to choose what information you want to share, who gets access to it, and for how long. Welcome to the future of identity.