Decentralized Identity Using Blockchain | VentureBeat


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

Today, almost all of our digital identities are linked through devices, apps, and services. Service providers manage these digital identities and their respective digital identity data.

As a result, users are now experiencing misuse of personal data and data breaches affecting their social, financial and professional lives.

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

A centralized system makes user identity information extremely susceptible to cyber-attacks and privacy violations. But decentralized identity solutions open up new horizons by empowering users and service providers to take greater control over their identities and personal data.

This article discusses the following:

What is a decentralized identity? How a decentralized identity works with blockchainHow to authenticate using a decentralized identityWhat happens if we fully adopt a decentralized identity procedure? Benefits of using blockchain with decentralized identity

What is a decentralized identity?

Decentralized identity is based on an identity management trust framework. It allows users to generate and manage their own digital identity without depending on a specific service provider.

For example, digital identities can be approved by multiple publishers, such as an employer, government, or university, which are kept in a digital wallet called an “identity wallet.” The identity wallet allows the user (ie the identity owner) to submit proof of his identity to a third party. The wallet helps users grant and revoke access to identity information from a single source, making it easier.

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

How decentralized identity works with blockchain

The set-up of a decentralized identity with blockchain usually consists of the following elements:

Identity Wallet: An app 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 the identity wallet.
Publisher/Verifier: The person who issues and verifies the identity information. They sign the transaction with their private key.
Service providers: Applications that accept the authentication using the decentralized identity and access blockchain/distributed ledger to search for the DID the user has shared.
Blockchain/Distributed Ledger: A decentralized and distributed ledger that provides the mechanism and functions for DIDs and functioning.
DID (Decentralized Identifier): A unique identifier that contains details such as the public key, authentication information, service endpoints.

In a decentralized form of identity, an application (an identity wallet) allows users to create their own digital identity. When creating the identity, the respective cryptographic keys (a public and a private key) are generated.

The identity wallet sends a registration payload with a public key to the blockchain, which generates a unique identifier for your wallet. The private key remains with the user’s device/identity wallet and is used during authentication.

Similarly, issuers such as government, universities and financial institutions verify the respective identity information and add it to the digital identity data in a process similar to issuing certificates. The processes, for example verifying user identity and issuing new credentials, require publishers to sign with their private keys.

How to authenticate using decentralized identity

These are the steps of authentication using decentralized identity and blockchain.

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

What happens if we completely take over the decentralized identity procedure?

Let’s assume an online shopping scenario where the required data is sent from the wallet associated with the decentralized identity. The wallet in this scenario contains the verified identity, address, and financial information.

The users share identity information to login to the website by submitting the required information from the identity wallet. They are authenticated with the website without sharing the actual data. The same scenario applies to the checkout process; a user can place an order with the address and payment source already verified in their identity wallet.

As a result, a user can have a smooth and secure online shopping experience without sharing an address or financial details with an e-commerce website owner.

5 benefits of using blockchain

Trustworthy: Blockchain technology uses a consensus approach to prove the data authenticity across different nodes and acts as the source of trust to verify user identity. In addition to the data, each block also contains a hash that changes if someone tempers the data. These blocks are a highly encrypted list of transactions or entries shared by all the nodes scattered across the network. Data Integrity: The blockchain-based data storage mechanism is immutable and permanent, and therefore cannot be modified and deleted. The decentralized identity systems use this mechanism so that no outside entity can manipulate or alter the data.
Security: Another critical reason to use the blockchain in decentralized identity systems is to provide robust security. The blockchain system has an inherent design by maintaining data in a highly encrypted manner. The blockchain also accommodates digital signatures, consensus algorithms, and cryptographic hash functions to protect user identities from breaches and theft. Privacy: Decentralized identity systems using blockchain with a pseudo-anonymous identifier (decentralized identifier) ​​can help reduce the privacy concerns of identity owners. Simplicity: Identity publishers leverage the seamless process of issuing digital identities. Identity verifiers can efficiently hire new users and carry out the information verification process. Identity owners can effortlessly store and manage their identity within the identity wallet.


All the above facts show that decentralized identity with blockchain can completely transform the digital identity landscape. It makes digital identity management decentralized and seamless, as no specific organization will manage user data.

More importantly, users can easily authenticate themselves without sharing their sensitive personal information with third parties.

Deepak Gupta is LoginRadius co-founder, technical strategist, cybersecurity innovator and author.

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