Decentralized Identity Management Risks

There are a few decentralized identity management risks that we must consider as the identity management industry is leveraging the blockchain technology to move away from centralized identity management for obvious reasons that we will discuss.

Many people are unaware that they lack dominion over their own identity. Physical IDs, such as a driver’s license, and social security card, come from the government, which maintains the records. If someone loses any of these pieces of ID, they must rely on the government for replacements and verification.

decentralized identity management risks

Many websites verify identity through third-party email providers. These email providers also maintain records and verify identity routinely for security purposes. Third-party organizations hold identity information, control changes, and handle inquiries from other parties without cooperation from the individual.

But what if there was another system that allowed control of identity to shift away from third parties? Wouldn’t it benefit individuals to have control over their own identity? In this article, we will discuss how decentralized identity management works, how decentralized identifiers can be used to improve authentication, decentralized identity management risks, and a few suggestions to improve identity management.

How Decentralized Identity Works

When considering how vital a person’s identity data is to daily life and the identity management risks we face today, decentralized identity has gained popularity. So, let’s examine how decentralized identity works. Everyone’s identity contains identifiers which consist of anything from names to online avatars. Instead of other entities holding and controlling identifiers, public blockchains offer an alternative for people to maintain the data themselves.

A blockchain is a digital ledger that contains evolving records represented by blocks. These blocks are chained together for security and hold transactions, timestamps, and more. Blockchains have become notable in the cryptocurrency market and can be used to buy, sell, and trade digital stocks.

With decentralized identity, a new form of identifiers is possible, and they don’t need any centralized party to issue, verify or hold. For example, an individual could create an account with Ethereum, which doesn’t require third-party permission and stores within blockchains to function as a decentralized identifier. A central third-party hub doesn’t keep this data; instead, a peer-to-peer digital ledger stores it.

Decentralized Identity Management Risks

As freeing as decentralized identity sounds, there are also some risks associated with this approach. While blockchains or digital ledgers are challenging to breach, a cybersecurity incident is still possible. One of the advantages of centralized identity is that it’s up to the third party to research, implement and maintain security.

When a third-party holding an individual’s identifiers suffers a security breach, a few steps take place. First, notifications of the hack are distributed, and then the centralized entity takes action to resolve the situation. With a decentralized identity, a person may be unaware of a security issue for some time and then must handle it themselves.

Another potential issue of decentralized identity is managing which entities have what data. With the option to control identifiers, individuals will still need to decide whether to allow third-party access to data. In some situations, a person may grant access, while consent to data may be revoked in others. Regardless, an active approach to information consent will become a large part of identity self-management.


Decentralized identity offers a way to self-control identifiers and move away from third-party management. While it provides several benefits, there are also some drawbacks to consider. Bear in mind some of these issues may resolve or, at the very least, become streamlined as technology improves. Consider the current disadvantages of decentralized identity management and determine if these present significant obstacles.