The lines between physical and digital life are blurred with every passing day, resulting in an ever-evolving complex online identity. However, as the importance and application of digital identity are increasing, so are the risks and vulnerabilities of the data breach; therefore, the need for decentralized identity has never been felt this stronger. This writing highlights decentralized identity, its benefits, and how it is achieved through blockchain technology.
What is decentralized identity?
Everything we do and say online is part of our digital identity; this includes our social media interactions, purchases, and financial details; the total of all these constitutes our digital identity. Decentralized identity means deciding whom to share our content with, and what information must be visible to others, and we can stop sharing whenever we want to. In a nutshell, the conventional identity is linked to a central organization, which is government; hence, they can use the identity to track individuals. However, decentralized identity empowers individuals and gives them complete control over their identity.
Moreover, decentralized identity helps businesses provide customized services to their clients and customers. Currently, each person making an online purchase has to provide credentials each time. This is a redundant task; it can be overcome through decentralized identities. Each individual will have a unique identifier associated with them, and they can use it in both the real and digital world.
How decentralized identity works
To create and use a decentralized identity, the user must use an application which is referred to as the ‘wallet.’ It stores all sorts of personal information such as names, financial credentials, social media profiles, and physical addresses; however, it must be noted that it does not have a password instead un-fishable cryptographic keys are used which can be authenticated through blockchain.
It is to be noted that the blockchain serves as the foundation for decentralized identity as all information is secured on it, and decentralized identity verification is also confirmed through it.
How blockchain helps with decentralized identity
Blockchain technology has helped realize the dream of a decentralized identity, where earlier all information was stored with a central authority; now, due to blockchain identity verification, users are in complete control of their identities. A blockchain-based distributed ledger acts as the source of truth. The information is not stored on the ledger but in the wallet of the user; however, to transact or confirm a transaction, a blockchain-distributed ledger is used.
Uses of decentralized identity
There are both individual and business benefits of decentralized identity. The first is that the businesses no longer have to store user information on their servers, which would help them save viable amounts of money as they no longer need to secure their servers. Moreover, it would also help them reduce the number of fake orders and visitors on the website, thus ensuring increased efficiency.
Moreover, a decentralized identity also minimizes the risk of fraud as no one with your information can impersonate you as it is possible in the current time. Since the wallet would be used to authenticate the user, the chances of impersonated identity would be eliminated. Users would no longer have to worry about storing their data and protecting it.
Decentralized identity coupled with DeFi ensures that all transactions are set in stone. This was not possible earlier, as each transaction is recorded on a separate server. Hence, no record of all transactions initiated by one single party could be extracted on demand. However, with the implementation of decentralized identities, this could be possible, as each transaction is recorded on the ledger. Hence, transaction data cannot be tampered with once it is recorded on the ledger; therefore, all transactional data is saved and secured for eternity.
Decentralized identity will make the shopping experience seamless and easier than ever, as the users would no longer be required to enter their personal details on the website. Each time a user wants to authenticate themselves, they can use their wallet. The shopping experience could become more convenient. Moreover, users also don’t need to memorize passwords and security questions for multiple websites and platforms, as one single identity would help them unlock all services available on the internet. Moreover, with decentralized identities, the chances and cases of data theft would also drastically decrease as information is not stored on the website servers but is with the users themselves. It will further ensure that the customers and clients of the business are real people and not imposters. The data analytics would improve considerably as the bots could not be used for likes and increasing page views once the decentralized identity is completely implemented.
In recent years, the applications of decentralized identity verification have increased considerably, and if you want to deploy these for your business, please drop a message. Someone from our team will get in touch with you shortly.