Decentralized Identity Using Blockchain

Devices, apps, and services connect practically all of our digital identities today. These digital identities, as well as the data associated with them, are at the jurisdiction of service providers. By allowing users and service providers to have more control over their identity and personal data, decentralized identity solutions open up a new method. How does it work? Let's have a look.
March 24, 2022

Personal data is now being misused and data breaches are affecting users' social, financial, and professional lives.

Furthermore, granting access to several third parties or service providers from various applications makes it more difficult for consumers to maintain their personal data and withdraw access to it. To solve these concerns, users must own and govern their digital identities, preferably from a single source.

User identity data is very vulnerable to cyberattacks and privacy breaches when stored in a centralized system. Decentralized identity solutions, on the other hand, open up new possibilities by giving users and service providers more control over their identities and personal data.

What is Decentralized Identity?

A trust architecture for identity management underpins decentralized identity. It enables users to create and manage their own digital identities without having to rely on a single service provider.

Digital identities, for example, can be approved by various issuers, such as an employer, the government, or a university, and then stored in a digital wallet known as a "identity wallet." The user (i.e., the identity owner) can give proof of their identification to any third party using the identity wallet. The wallet makes it easy for users to grant and cancel access to identification information from a single source.

How it Works with Blockchain?

The following factors are often included in the construction of decentralized identification with blockchain:

  • Identity Wallet:  is a mobile app that allows users to create a decentralized identity and control their service provider access.
  • Identity Owner: A user who uses the identity wallet to construct their decentralized identity.
  • Issuer/verifier:  is known as theThe individual who issues and confirms the identity information. They use their private key to sign the transaction.
  • Service Providers: Applications that support decentralized identity authentication and search the blockchain/distributed ledger for the DID that the user shared.
  • A decentralized and distributed ledger: that provides the mechanism and features for DIDs and their operation.
  • DID (Decentralized Identifier): A unique identifier that includes public key information, verification information, and service endpoints.

An application (an identity wallet) allows users to build their own digital identity in a decentralized type of identity. The respective cryptographic keys (a public and a private key) are generated when an identity is created.

The identity wallet sends a registration payload to the blockchain along with a public key, which creates a unique identifier for your wallet. The user's device/identity wallet retains the private key, which is utilized during authentication.

In a process similar to issuing certificates, issuers such as the government, universities, and financial institutions validate the respective identification information and add it to the digital identity data. Issuers must sign using their private keys in order to validate user identity and provide new credentials, for example.

How to Use Decentralized Identity to Authenticate?

These are the processes for decentralized identity and blockchain authentication.

  • The user's confirmed identification details, such as name, age, address, education, employment details, and financial information, are stored in the identity wallet. This information aids in the establishment of trust and qualifies the user for authentication.
  • The public key linked with the private key is published onto a distributed ledger such as blockchain through the decentralized identity mechanism.
  • The identity wallet receives a decentralized identity from the decentralized system, which supplies the public key to the distributed ledger (DID). A DID is a one-of-a-kind identifier that represents a person across the internet.
  • For authentication, the user gives the service provider this DID.
  • The service provider searches the distributed ledger for the shared DID. If matching data is found, the distributed ledger provides it to the application.
  • To complete the authentication, the user signs this transaction with his or her private key.
  • The authentication success is confirmed by the service provider application, which then allows the user to conduct the tasks.

Advantages of Utilizing Decentralized Identity 

  • Blockchain technology is trustworthy because it uses a consensus approach to ensure data authenticity across several nodes and works as a source of confidence to validate user identity. Each block has a hash in addition to the data, which changes if the data is tempered. These blocks contain a highly encrypted list of transactions or entries that are shared among all nodes in the network.
  • Modification and deletion are not conceivable because the blockchain-based data storage system is immutable and everlasting. This approach is used by decentralized identification systems to ensure that no external party may tamper with or edit the data.
  • Another important reason to use the blockchain in decentralized identification systems is to ensure that they are secure. The blockchain technology has a built-in security feature that keeps data securely secured. To safeguard user identities from breaches and thefts, the blockchain supports digital signatures, consensus techniques, and cryptographic hash functions.
  • From the Privacy side, decentralized identity systems that use blockchain and a pseudo-anonymous identifier (decentralized identifier) can help address identity owners' privacy concerns.
  • Identity issuers take advantage of the simple process of issuing digital identities. Identity verifiers are capable of quickly onboarding new users and doing information verification. Within the identity wallet, identity owners may easily store and manage their identities.
  • It will be easier to integrate the system if you use Decentralized Identity because it only requires the essential changes rather than having to update more difficult components that are spread out over each other. Decentralized Identity is made feasible by blockchain, which allows decentralized IDs to be utilized in serverless apps and other new sorts of architectures, in keeping with the concept of a "trust network."

Microsoft's Strategy for Decentralized Identity

Microsoft has spent the last 18 months developing a set of ideas for using blockchain and other distributed ledger technologies to establish new forms of digital identities built from the ground up to improve user privacy, security, and control. They want DIDs to be treated as first-class citizens in Microsoft's identity stack.

Key understandings from Microsoft.

  • Based on open standards, a user can have one or many DIDs.
  • Digital identifiers (DIDs) can be resolved across chains and ledgers (public, private, and so on).
  • DID permissions are controlled by a set of keys that are exclusively available by the user.
  • Off-chain DIF Identity Hub personal datastores are used to store identity attributes (or claims).
  • Across devices and clouds, users can have one or more Identity Hub instances.
  • Access to attestations/claims requires user consent, with granular access constraints.
  • Claims comply with existing industry standards (OAuth 2.0 / OIDC).

Commitments made by Microsoft to the future digital identity system

They’re also making a series of additional commitments in the process of constructing and running this new system that they believe are critical.

  • Legitimate and legal: This new digital identification system must be both legal and legitimate. They work hard to make sure it doesn't encourage illegal activities, facilitate corruption, or put people in danger or give them unauthorized access. They work to guarantee that technology does not generate or exacerbate inequitable or disparate effects on society's systematically disenfranchised people.
  • Interoperable and accessible: They will work to ensure technological and policy interoperability among domestic and international parties, as well as ease of use, broad inclusion, and access equity. They make sure the system works in a variety of ways, including online, in person, and over the phone. To ensure broad interoperability, they will develop the system on open, non-proprietary, and accessible standards.
  • Safe: In designing their decentralized identification system, they will prioritize user safety and security.

Given the foregoing, it is clear that decentralized identity combined with blockchain has the potential to totally change the digital identity landscape. Because no single institution would be in charge of the user data, digital identity management will become decentralized and frictionless. Users will also be able to simply authenticate themselves without having to share sensitive personal information with third parties.

Adapted from: ​​venturebeat

Written by Denny Fardian
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