What Is a Decentralized Identity on Blockchain?

It’s important for individuals to have more control and ownership over their digital identity and that can be done with decentralized identities.

What is a decentralized identity?

A decentralized identity is a concept where employees or consumers gain control of their digital identity through identity wallets. In this wallet, tokens are stored that verify anything from school records to driver’s license information.

How Does Decentralized Identity Work?

Digital ID, much like what we think of as traditional ID, is built on the notion that users must have an informational or algorithmic representation of themselves in a given digital system. This representation can include nearly any kind of data. A digital ID is typically composed of attributes (like personal information, user or role information, or authentication credentials) and related behavioral data.

Challenges With Digital ID Management

There are several challenges related to digital ID management. Some of these challenges include the following:

  • Security: Centralized identity management databases are prime targets for hackers. You’ve probably heard about at least a dozen different breaches that have stolen thousands, if not millions, of customer records from major retailers.The truth is that this happens more often than is reported, primarily because ID storage solutions attract plenty of unwanted attention. Additionally, security for these solutions is all or nothing: while security measures can make breaking a centralized database difficult, all contained user data is compromised once it is broken.
  • Ownership: When working with a third party that manages user ID, it becomes more challenging, if not impossible, for users to claim ownership of those IDs. That information is stored and managed by others, which can become a problem when those IDs include private information.
  • Federation: The concept of ID federation has been around for a while and is a direct response to a common issue: that users often have dozens of accounts or identities across multiple platforms with little or no overlap.This leaves users with a complex and fragmented experience and can lead to, among other things, poor security habits. Federated ID seeks to centralize ID management across platforms but doesn’t necessarily solve the previous two issues.

Decentralized digital identity addresses these issues by providing a way for digital IDs to be useful across multiple participating platforms without sacrificing security or user experience.

Self Sovereign Identity

Core to the idea of decentralized ID is the notion of “self-sovereign identity” (SSI). In this schema, instead of having a set of identities across multiple platforms or a singular ID managed by a third-party business, a user has a “digital wallet” in which different credentials are stored, accessible through specific applications referred to as “relying parties”.

Depending on the context, this wallet can provide various types of information for various forms of authentication. This solution seeks to reverse the fragmentation of digital identities while giving users more control and ownership over their personal data.

What Are the Benefits of Decentralized Identity?

At the heart of a decentralized ID is blockchain technology. Originating from cryptocurrency platforms, the blockchain has emerged as a secure and flexible ledger that can provide immutable records of a given system without a centralized authority to manage it.

Storing identities on a blockchain supports these digital wallets so that the integrity of the information can be guaranteed while placing ownership of the data in the user’s hands. When implemented properly, blockchain-based identity systems can keep a user’s data safe and secure, even preventing traceability of a user’s unique identifier.

There are significant benefits to this kind of setup:

  1. Fragmentation: Users, faced with the possibility of managing dozens of accounts, tend to reuse passwords or use easy passwords. Of course, this then leads to breaches and the loss of data for thousands of users.
  2. Sovereign Identity: Another benefit is sovereign identity. In many cases, whether through fragmented authentication or federated ID management, a third party manages ID information.The third party mediates a user’s experience with his or her own ID in a way that removes agency—decentralized identity remedies this by placing all information in a secure, user-controlled wallet that is updated as the user needs new or updates existing credentials.
  3. Ease of Use: One of the most problematic security issues with multiple IDs is that users, when having to juggle multiple logins, will reuse passwords or use weak username/password combinations. This provides a major security problem for most organizations, and decentralized identity removes this by centralizing credentials in a wallet without requiring a centralized management organization.
  4. Security: Outside of user behaviors, a decentralized system on a blockchain ledger is inherently secure with advanced encryption and cryptography. Furthermore, while the user’s wallet is a repository for their credentials, there isn’t a way to target a single wallet to expose login data. There isn’t a necessary connection between a user, their wallet, and any given node on a blockchain network.

Examples of Decentralized Identity Technology

Many organizations are taking advantage of the potential for decentralized ID to manage more secure and more flexible authentication management (IM) solutions.

  • In 2019 Verizon deployed a blockchain-based identity system, giving organizations flexibility and security controls and putting their users in charge of the use of their identity information.
  • As of early 2021, Microsoft began developing and previewing “Azure Active Directory verifiable credentials,” a form of decentralized authentication in Azure that supports MFA and ID information for items like professional credentials and transcripts.
  • Mastercard has put forth a potential platform for decentralized ID tied to financial and personal information.
  • The Decentralized ID Foundation (DIF) promotes the discussion and innovation for standards and initiatives in decentralized technology.
  • The World Wide Web Consortium provides standards for identity technologies and interoperability via the W3C-DID and VC projects
  • Hyperledger, a community in the Linux Foundation, is dedicated to developing libraries and tools for decentralized blockchain ledgers backed by the Linux foundation.

These providers are demonstrating the future of decentralized technology as a relevant form of ID in areas like commerce and national identification credentials.

1Kosmos Decentralized Authentication and Identity Management

We believe that secure, private blockchain technology is critical to users’ modern authentication and self-sovereign identities. Our identity management removes the central repositories and databases that attract so many hackers while giving identity control back to the owners of those identities—all without sacrificing usability or effectiveness.

BlockID brings decentralized identity to modern authentication with a core set of features, including the following:

  • Private Blockchain: 1Kosmos protects personally identifiable information (PII) in a private blockchain for a identity management approach and encrypts digital identities in secure enclaves only accessible through advanced biometric verification. Our ledger is immutable, secure, and private, so there are no databases to breach or honeypots for hackers to target.
  • Identity Proofing: BlockID includes Identity Assurance Level 3 (NIST 800-63A IAL3), detects fraudulent or duplicate identities, and establishes or reestablishes credential verification.
  • Integration with Secure MFA: BlockID and its distributed ledger readily integrate with a standard-based API to operating systems, applications, and MFA infrastructure at AAL3. BlockID is also FIDO2 certified, protecting against attacks that attempt to circumvent multi-factor authentication.
  • Streamlined User Experience: The distributed ledger makes it easier for users to onboard digital IDs. It’s as simple as installing the app, providing biometric information and any required proofing documents, and entering any information required under ID creation. The blockchain allows users more control over their digital ID while making authentication more straightforward.

Sign up for the 1Kosmos newsletter to stay up to date on BlockID and other 1Kosmos products. Or, if you want to learn more about how we implement secure blockchain technology as part of our advanced authentication and ID management solution, then watch the webinar Decentralized Identity: Bedrock Business Utility.

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Meet the Author

Mike Engle

Co-Founder and CSO

Mike is a proven information technology executive, company builder, and entrepreneur. He is an expert in information security, business development, authentication, biometric authentication, and product design/development. His career includes the head of information security at Lehman Brothers and co-founder of Bastille Networks.