Decentralized identifiers (DIDs) are a new approach to digital identity that enables verifiable, privacy-preserving identification independent of any centralized authority. DIDs use blockchain and other distributed ledger technologies to give users ownership over their digital identifiers and data.
The concept was developed by the W3C Credentials Community Group and other identity experts starting around 2018 to improve privacy, security and user control compared to traditional centralized identities.
Major tech companies like Microsoft, Accenture and IBM are involved with driving adoption.
Problem With Centralized IDs
Centralized identifiers controlled by corporations like logins and email addresses have major downsides:
- User data monetized without consent.
- Accounts can be revoked or deleted.
- Security vulnerabilities from central points of failure.
- No user ownership over identity.
DIDs help solve these issues.
How Decentralized Identifiers Work
DIDs use public key cryptography to give users ownership over unique identifiers that don’t depend on any third party. Some key mechanisms include:
Each DID points to a DID Document containing verification methods, cryptographic material for authentication, authorization services, and other relevant metadata.
Data for the DID Document is stored on decentralized blockchains or distributed ledgers to eliminate centralized points of failure. Popular options include Bitcoin, Ethereum, IPFS, and Sovrin.
Resolver services help retrieve the DID Document for a specific DID from the associated distributed ledger to validate identity ownership and data.
DIDs can be cryptographically authenticated by proving control of the private key associated with the public key listed in the DID Document. This allows identity to be verified in a verifiable yet pseudonymous way.
The W3C has published proposed specifications and standards around DIDs to drive interoperability between solutions. Frameworks like Hyperledger Indy are also advancing DID development.
Use Cases and Adoption
DIDs are starting to see increasing real-world adoption including:
- Self-Sovereign Digital Identity. Any end user can create their own DID to independently own and control their digital identity without intermediaries. This allows interacting online through a verified pseudonymous identifier.
- Decentralized Finance. In the DeFi space, DIDs can help with privacy, compliance, and anti-money laundering verification requirements for crypto exchanges, lending protocols, and blockchains.
- Supply Chain. DIDs enable physical products, supply chain actors, and documents like bills of lading to be verifiably identified on the blockchain across supply chains.
- Identity Federations. Groups of organizations can establish identity federations built on shared trust in DIDs. This allows portable trust and permissions across domains.
- Credential Issuance. Governments, universities, employers, and other institutions can issue tamper-proof digital credentials that users own and control with DIDs.
Examples of Real-World Applications
The Ontology blockchain uses ONT ID, a decentralized identity protocol built on W3C DID standards. Ontology ID has been integrated into various applications including a «Credential Manifesto» initiative in Brazil.
Verifiable Credentials by Microsoft
Microsoft has built an identity solution using the Bitcoin blockchain as a root of trust for decentralized identifiers. It allows creating tamper-proof digital credentials that can be independently verified.
The Sovrin Foundation operates a dedicated blockchain network for self-sovereign identity using DIDs. Sovrin is used by banks like CULedger and government entities including the state of Utah.
In Spain, multiple public and private organizations have adopted Alastria ID, a national blockchain identity system built on verifiable credentials and DIDs compliant with W3C standards.
Blockchains like Ethereum, Tezos and Cosmos use DIDs and decentralized metadata catalogs to identify validator nodes in a permissionless and verifiable manner.
Tokens Powered by DIDs
- SelfKey — SelfKey lets users create DIDs backed by the KEY ERC-20 token to securely share certified identity attributes and documents through their wallet.
- Metadium — The META token powers the Metadium identity blockchain which lets users store identity information as DID Documents. Partner dApps can verify users through Metadium login.
- Essentia — Essentia utilizes the ESS utility token to facilitate identity and credential management services powered by DIDs on their blockchain.
- Ontology — The ONT token secures the Ontology network which provides verifiable decentralized identity through ONT ID. ONT is used to pay for identity verification and attestation.
- VeriMe — VeriMe partners with different projects to integrate its user-controlled DID platform. It uses the VME token to incentivize identity verifications when third-party credential checks are needed.
Benefits of Decentralized Identifiers
Compared to regular logins and identifiers, DIDs provide major advantages:
- Privacy and User Control. Users have agency over what identity data is shared and who with rather than it being monetized without consent.
- Less Dependence on Passwords. DIDs rely on cryptographic proofs like digital signatures instead of easily hacked passwords for more secure authentication.
- Censorship Resistance. No central authority can revoke or block access to a DID since it is stored and resolved from a decentralized network.
- Portability Across Domains. DIDs work across all contexts rather than being tied to a specific domain or provider like a Facebook login.
- Cost Savings. DIDs avoid expensive identity verification fees charged by centralized intermediaries.
Decentralized identifiers represent an important evolution in digital identity — enabling user control, privacy and ownership through verifiable identifiers stored on decentralized networks.
DIDs are starting to gain adoption for blockchain identity, decentralized finance, supply chains, digital credentials and more. As managing our identities and data becomes increasingly challenging, DIDs could emerge as a crucial building block for empowering consumers and organizations alike in the digital economy.