Decentralized identity using blockchain | VentureBeat

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This article was contributed by Deepak Gupta, co-founder of LoginRadius, tech strategist, cybersecurity innovator and author.

Today, almost all of our digital identities are connected by devices, applications and services. Service providers control this digital identity and their respective digital identity data.

As a result, users are now experiencing personal data misuse and data breaches that affect their social, financial and business lives.

In addition, granting access to multiple third parties or service providers from different applications makes it difficult for users to manage their personal data and revoke access to their information. To address these concerns users need to own and control their digital identity, preferably from a single source.

Centralized systems make user identity data extremely vulnerable to cyber attacks and privacy breaches. But decentralized identity solutions offer a new horizon by enabling users and service providers to gain better control over their identity and personal data.

This article addresses the following:

  • What is decentralized identity?
  • How decentralized identification works with blockchain
  • How to do authentication using decentralized identification
  • What happens when we fully adopt a decentralized identification process?
  • Advantages of using blockchain with decentralized identification

What is decentralized identity?

Decentralized identity is based on the trust framework for identity management. It allows users to create and control their own digital identity without relying on a specific service provider.

For example, digital identities can be approved by multiple issuers, such as employers, governments, or universities, which are stored in a digital wallet known as an “identity wallet.” Using the Identity Wallet, the user (i.e., the identity owner) can present proof of their identity to any third party. Wallet helps users to identify and delete identity information from a single source, making it easy.

According to Forrester, “Decentralized digital identity (DDID) is not just a technology buzzword: it currently promises a complete restructuring of the centralized physical and digital identity ecosystem into a decentralized and democratized architecture.”

How decentralized identification works with blockchain

Decentralized identity setups with blockchain typically include the following components:

  • Identity Wallet: An application that allows users to create their decentralized identity and manage their access to service providers.
  • Identity owner: A user who creates their decentralized identity using an identity wallet.
  • Issuer / Verifier: The person who issues the identification information and verifies it. They sign the transaction with their private key.
  • Servants: Applications that accept authentication using decentralized identification and access blockchain / distributed ledgers to view user-shared DIDs.
  • Blockchain / Distributed Ledger: Decentralized and distributed ledger that provides mechanisms and facilities for DIDs and operations.
  • DID (decentralized identifier): A unique identifier that includes details such as public key, verification information, service endpoints.

In the decentralized form of identity, the application (a Identity wallet) Allow users to create their own digital identity. After identification, the corresponding cryptographic key (public and private key) is generated.

Identity Wallet submits a registration payload with a public key in the blockchain, which generates a unique identifier against your wallet. The private key resides in the user’s device / identity wallet and is used during authentication.

Similarly, the issuers Such as government, universities and financial institutions verify the relevant identity information and add to the digital identity data in the process of issuing certificates. Processes, for example, to verify a user’s identity and issue new credentials, issuers are required to sign using their private key.

How to do authentication using decentralized identification

These are decentralized identification and authentication measures using blockchain.

  • The identity wallet contains the user’s verified identity details such as name, age, address, education, employment details and financial information. This information helps establish trust and qualifies the user for authentication.
  • The decentralized identification system takes the public key associated with the private key and publishes it on a distributed ledger such as a blockchain.
  • Since the decentralized system provides a public key to the distributed ledger, the identity wallet receives a decentralized identifier (DID). DID is a unique identifier representing the user across the Internet.
  • The user shares this DID with the service provider for authentication.
  • The service provider finds the shared DID in the distributed ledger. If found, the distributed ledger sends matching data to the application.
  • The user signs the transaction with a private key to complete the authentication.
  • The service provider confirms the success of the application authentication and allows the user to perform actions.

What happens when we fully adopt a decentralized identification process?

Let’s assume an online shopping scenario where the required data will pass through a wallet associated with decentralized identification. This view contains the verified identity, address and financial data in the wallet.

Users share identity data to log in to the website by submitting the required information from the identity wallet. They are certified with the website without sharing actual data. The same scenario applies to the checkout process; The user can place an order in his / her identity wallet with the address already verified and the source of payment.

As a result, the user can go through a simple and secure online shopping experience without having to share the address or financial data with the ecommerce website owner.

5 benefits of taking advantage of blockchain

  • Reliable: Blockchain technology uses a consensus approach to verify the authenticity of data across different nodes and acts as a source of trust to verify user identity. Along with the data, each block also has a hash that changes if someone tampers with the data. These blocks are highly-encrypted lists of shared transactions or entries across all nodes distributed across the network.
  • Data integrity: The blockchain-based data storage mechanism is unchanging and permanent, and therefore, modification and deletion is not possible. Decentralized identification systems use this mechanism so that no external entity can tamper with or alter the data.
  • Security: Another crucial reason to take advantage of blockchain in decentralized identification systems is to provide strong security. The blockchain system features interior design while retaining data in a highly encrypted fashion. Blockchain also provides digital signatures, consensus algorithms, and cryptographic hash functions to protect user identities from breaches and thefts.
  • Privacy: Decentralized identification systems using blockchain with a pseudo-anonymous identifier (decentralized identifier) ​​can help reduce identity owners’ privacy concerns.
  • Ease: Identity presenters take advantage of the seamless process of issuing digital identities. Identity verifiers can effectively onboard new users and carry out the data verification process. Identity owners can easily store and manage their identities in an identity wallet.


From all of the above facts, it is clear that decentralized identification with blockchain can completely change the landscape of digital identity. It will make digital identity management decentralized and seamless, since no specific organization will manage user data.

More importantly, users will be able to easily authenticate themselves without sharing their sensitive personal information with third parties.

Deepak Gupta is a co-founder, tech strategist, cybersecurity innovator and author at LoginRadius.


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