In our evolving and interconnected digital economy, distributed digital identity and decentralized identifier are changing the way identities are managed. Distributed Digital Identity (DDI) helps facilitate the verification and authentication of an identity and management of personal information on the blockchain.
The idea behind DDI is very simple, yet very powerful: it removes the need to rely on an external third party for managing your digital identity and eliminates the need for centralized control. Users can create their own digital identity using decentralized identifiers (DIDs), which are stored on a blockchain. They can then use their digital tokens to identify themselves, prove ownership of assets, and selectively share personal data with others for a predetermined period of time with automated smart contracts.
Decentralized Identifier (DID)
DIDs are unique, highly available, and verifiable digital identifiers which can represent any subject such as a person or organization and are part of the core component of a decentralized pubic key infrastructure (DPKI). There are many ways to authenticate an identity some of which may be more private than others such as zero knowledge authentication. One of the most secure and popular options is using a digital token which has unique strings in the realm of distributed digital identity and decentralized identifier. These digital tokens can be used for identification purposes as well as access, transactions, and activity tracking.
With DID, users are able to use their digital tokens as identification tokens for their identities on the blockchain. Users could create distributed IDs that contain all of their personal information (such as name, gender, email address, etc.) and prove their identity with no third-party involvement. In other words, there’s no need for a central authority like a bank or credit card company to create or manage user identities. One of the most popular platforms for DIDs is EOS which lets users on the Ethereum network easily create and manage their own digital tokens. Using this technology, people can easily make transactions and provide proof of identity or ownership of assets, like cars or houses.
Creating a Distributed Digital Identity
In order to manage your digital identity on a blockchain, you’ll need to set up a digital wallet with “smart contract” functionality for your identity. A smart contract is a piece of software program that runs on the network that can be used to create a specific agreement between two parties. After the set up, you can access and manage your digital identity using your own digital identity wallet.
Creating a digital identity on blockchain is simple and requires no expensive tools or software. Here’s how:
• Create a wallet – Download a digital wallet application and create an account. A wallet is a digital space where you can store your personal data, assets, and key information. One of the open-source tools used for storing your identity and managing accounts on the Ethereum blockchain is MyCrypto. The wallet has a built-in browser that allows you to easily sign in with any device, as well as provide additional security features like private keys and fingerprint scanning for extra protection.
• Create your identity on the blockchain – You’ll need to choose which type of personal data you want to add and enter it into the wallet so that your identity can be stored securely on the blockchain.
• Use your new identity – Once your identity has been setup on the platform, you can use it in any way you please. This means that if someone wants to validate your identity, access your information, transact with you, or pay you using bitcoin or another cryptocurrency from an online wallet, they can send it directly to your account without having to worry about being hacked or stolen data.
Digital Identity Authentication
To authenticate using a digital identity, you have to have a private key that matches your public key. Your wallet is your personal information hub. It contains your public address and keystore file. This is where you store your identity on the blockchain. Your private key encrypts personal information. This ensures that no 3rd party or central authority can access it or cause identity theft and unauthorized transactions. When persons try to identify themselves using your public key, the verification process will compare that with the private key. If they’re identical, then they’ll be authenticated! This process ensures that the holder of the private key is the only one who can access the digital ID, which in turn guarantees its authenticity.
When someone requests your credentials for authentication, you can decide whether or not you want to share your info with them. If you choose not to share, the person requesting it will not be able to interact with your account in any way – but if you share your authenticating credentials, they will be granted permission to interact with your account on a limited basis (i.e., view) or on an unlimited basis (i.e., edit).
• Limited (view) offers permissions to authorized parties to view your information. This way, you’re ensuring that no unauthorized parties can access your personal information.
• Unlimited(edit) is when someone can edit or delete your personal information/files as long as they are able to access your decentralized account.
What is Decentralized Identity verification?
Decentralized ID verification allows others to verify an identity while keeping personal information private with a blockchain-based digital ledger. The digital identity or token is verified by others on the blockchain network, so that everyone can trust that you are the rightful owner of your account, identity, or any other important information.
What is identity proofing?
Identity proofing is a process that allows you to prove your identity on the blockchain. Your identity will be stored in a secure data structure called a public ledger. You’ll be able to share your identity publicly without worrying about disclosing sensitive information. Once you create a DDI token on the blockchain, you can verify your identity and showcase proof of your identity and ownership of digital assets. These include photos, receipts, documents and other things that are stored in the digital universe. You can also control access to private information such as who can view it and for how long.
Distributed Digital Identity Applications
In our expanding decentralized world, DDIs is applied for:
• Payments – Payments are a big part of our digital economy and DDI is a way for consumers and businesses to take advantage of blockchain technology to facilitate payments in a private, secure, and fast manner.
• Identity management – Digital identities can be used to seamlessly manage online presence. Users can manage their own identities without giving away privacy, and businesses can manage access and monitor activity on a platform without accessing personal information.
• Business transactions and contracts – If you need to prove that you own a business or a certain asset (such as a car), you can do so by proving your identity and ownership of the asset on the blockchain through DDI.
• Data storage and transfer management – You can use DDI to ensure that your information stays safe, private, and secure.
• Digital asset exchange – You can use DDI to trade products directly on the blockchain without having to go through any third-party intermediaries such as payment gateways or exchanges that control credit card details or other sensitive data.
Distributed Digital Identity Benefits
Some of the benefits of DDIs to an Individual or an organization include:
• Data privacy – One of the primary benefits of using DDI is that your personal data is secure, private, and can’t be accessed by anyone else. If others want to access your data, they will have to get your permission for access. This means that if you’re on vacation or away from your computer, you wouldn’t have to worry about someone hacking into your computer/phone and accessing your personal information. With DDI, everyone has a copy of the same information stored on the blockchain. This means that no one can go into your wallet and steal anything valuable, because everyone’s account is tied together and it takes too much work for anyone to try and hack all of them.
• Security and confidentiality – In an age where identity theft is an increasingly common occurrence, we must be aware of the risks that come with centralized identity management. DDI prevents this risk and ensures safety and security by providing a way to create your own unique digital identity that is discrete from your real-world identity. It also helps you avoid the free “fake” digital IDs available on the market today. These are made up of stolen data and can’t be verified.
• Scalability – Using DDIs, a business doesn’t have to handle data storage and distribution. Instead, the blockchain automatically stores records of who created them, when they were created, and their ownership. This allows for a high degree of scalability.
• Blockchain interoperability – Blockchain technology is becoming more and more popular as a way to secure transactions. The Ethereum blockchain, for example, allows users to create “Turing-Complete” decentralized applications that can be used on other blockchains. This interoperability of the various blockchains makes it easy to integrate with companies and services that use blockchain technology.
• Cost savings and reduced overhead costs – Small businesses don’t need to maintain a corporate database for the company employees thus can save money on personnel and administrative costs. In some cases, the need for credit checks and potential background verification for employees may also disappear.
How to Protect Your Digital Identity
To protect your decentralized identifier you can practice the following digital identity security tips.
- Avoid public Wi-Fi
- Avoid unprotected webpages
- Update your software regularly
- Review permissions
The adoption of distributed or decentralized digital identity is something that is inevitable while the industry works out issues such as blockchain interoperability. Everyone wants to self-manage their own identity details without compromising privacy or security. This means that in a self-sovereign identity scheme, identity owners can authenticate themselves without disclosing personal data, share private information at will and selectively with anyone for a predetermined period of time, prove ownership of assets, and use their portable identity across many devices and platforms. Also, businesses may benefit from lower risk of data breach as they do not maintain a centralized database of employee and customer identities while ensuring stronger authentication, system security, activity tracking, and transparency. Distributed digital identity and decentralized identifier are the future of identity and access management.