What does decentralized identity mean?
Decentralized identity is an approach to identity and access management (IAM) that seeks ways to allow individuals to manage their own personally identifiable information (PII) instead of using a central authority.
An important goal of decentralized identity is to create standards that will allow internet users to control which applications and services can access specific types of PII.
In one proposed scenario, for example, individuals would collect information about themselves from a certified data source such as the Department of Motor Vehicles (DMV) and store their personal information in an identity wallet based on a distributed database.
In a very fundamental sense, interest in decentralized identity grew out of blockchain and the broader interest in how to secure cryptocurrency transactions. In this use case, however, the originating person controls what information can be shared, not the distributed database application.
Techopedia Explains Decentralized Identity
To easily think about decentralized credentials, consider the threat of data breaches that haunt virtually every business in the world. Data breaches are invasive and costly. For businesses, they entail all sorts of liabilities and costs. Individual users, on the other hand, also see their private data leaked across the web by hackers and malicious parties.
The idea that users can themselves bring credentials to a company’s environment is a win-win situation. It also reflects the idea of keeping an individual’s cryptocurrency in an offline cold wallet or some type of non-custodial environment. Either way, it’s about moving from a company having your data to yourself having your own data, with obvious benefits.
How Decentralized Identity Works
Decentralized Identity works on the principle of offering a way to create a more anonymous ID for a user. One of the most basic ways that many experts explain is that instead of a traditional username, where the user is tabbed and tracked based on an entry in a vendor’s database , the user submits autonomous credentials that are decentralized and more anonymous than it would otherwise be.
Others describe decentralized identity as a “trust framework” enabled by blockchain, where decentralized credentials can be used in serverless applications and other new types of architectures.
When a customer ID is owned by the individual user in a wallet, instead of being stored in a provider database, it is less vulnerable to theft because the wallet’s distributed architecture has no single point of failure unique.
Decentralized credentials play an important role in the concept of creating finer attack surfaces. Decentralized IDs also have the potential to make some of the struggles with GDPR and other privacy laws obsolete.
Benefits of Decentralized Identity
In general, companies are working on implementing decentralized identities that will comply with “know your customer” and anti-money laundering regulations.
So, in that sense, decentralized credentials are the right answer, at the right time. They solve fundamental problems that the tech media has been reporting on for years. They unlock potential that is in some ways almost limitless, and they serve that same idea of online self-service that drives more successful business-to-consumer platforms in healthcare and beyond.
For example, decentralized financial assets and cryptocurrencies are often viewed as serving the unbanked or underbanked, people who have not fared well with traditional centralized banking systems and maintaining checking and debt accounts. traditional savings.
Along the same lines, decentralized IDs will help people who have suffered a data breach and who have fallen victim to the negligence of a third party. They will be able to protect their personal data not only from hackers, but also from illegitimate advertisers and third-party data buyers. All of this will tend to make the idea of decentralized identity very attractive to people and businesses in the future. Expect this technology to become an integral part of our world in the future.