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The Concept of Decentralized Identity (DID)

Understanding Decentralized Identity

Decentralized Identifiers (DIDs) are digital identifiers that are created and managed independently by the entities involved (individuals, organizations, or devices). Unlike traditional identity systems that rely on centralized authorities, DIDs give full control to the identity owner to determine how, when, and to whom their identity information is shared.

According to the official specifications from the W3C DID Core, DIDs:

  • Are Persistent: Designed to be usable in the long term and not dependent on a single platform or provider.
  • Operate Without Central Authority: DIDs do not require registration or approval from third parties to be created, thus reducing reliance on identity management institutions.
  • Are Resolvable: Each DID can be "resolved" into a DID Document that contains technical metadata, cryptographic keys, and related services. This resolution process follows W3C standards to ensure interoperability between systems.

Key Characteristics of Decentralized Identity

  1. Data Sovereignty (Self-Sovereign Identity, SSI)
    DDIDs enable a Self-Sovereign Identity model, where individuals have full power over their data. This means users can:
    • Create their own digital identities without needing permission from traditional identity providers.
    • Determine which identity attributes will be shared with a party.
    • Revoke or change data access authorization at any time.
  2. Security and Privacy
    With DIDs, control over data is shared through strong cryptographic mechanisms. Public and private keys are associated with the DID to secure identity transactions. Verification data can be stored in a distributed ledger system (e.g., blockchain) or other decentralized networks that are resistant to disruption.
    • Security: The elimination of single points of failure reduces the risk of attacks that could compromise millions of identities at once.
    • Privacy: Users can practice selective disclosure using Verifiable Credentials. This means users can prove certain attributes (such as age or membership status) without revealing their complete identity.
  3. Interoperability
    The W3C DID specifications are designed so that DIDs can be used across platforms, protocols, and technology ecosystems. This is realized through standards such as:
    • Standard URL/URI schemes for DIDs (did:<method>:<identifier>), ensuring that each DID has a consistent format.
    • DID Methods that can be tailored to various types of decentralized ledgers or databases, allowing integration with different blockchain technologies (Ethereum, Hyperledger, etc.) or even other non-blockchain systems.
    • Consistency in the format of DID Documents, including public keys, service endpoints, and verification mechanisms that can be read and interpreted by various systems.

How is a DID Structured?

Each DID refers to a DID Document. A DID Document is a structured data document (typically based on JSON or JSON-LD) that contains the following information, according to W3C specifications:

  • Verification Methods:
    A set of public keys and other verification methods that can be used to sign messages or verify digital signatures. This allows ownership of the DID to be cryptographically proven by the holder of the associated private key.
  • Service Endpoints:
    This entry indicates where and how the entity represented by the DID can be contacted or interact online. For example, a service endpoint may refer to a URL for encrypted message exchange, a decentralized communication platform, or an API for credential verification.
  • Other Metadata Information:
    This may include details about the implementation of the DID Method, versioning, access control, and other relevant information.

How Does a DID Work?

  1. Creation of DID:
    The identity owner creates a pair of cryptographic keys (private key and public key), then composes the DID Document and publishes it to a decentralized storage system (e.g., blockchain). The result is a DID that references that DID Document.

    A DID is a URI that refers to the DID Document. The basic format of a DID is:
    did:<method>:<specific-identifier>

    Example:
    did:uid:4pqtbNkWCi73kThaxZxTsm3KFaFkcDa3PSVNYpKeh19SowwL

    • did: indicates that the URI is a Decentralized Identifier.
    • uid: indicates the method or scheme of the DID being used.
    • 4pqtbNk...: is a unique identifier for the DID subject.

  2. DID Resolution:
    DID Resolution: Parties wishing to verify the identity of the DID owner can perform DID resolution, which involves retrieving the DID Document from the network to obtain the public key and service information. The DID Document is a JSON-LD formatted document that stores metadata related to the DID, such as:

    • Cryptographic Keys: For authentication and encryption.
    • Verification Methods: CWays for entities to prove their identity authenticity.
    • Related Services: Additional information such as API endpoints or relationships with other systems.

  3. Identity Verification:
    With the public key from the DID Document, the verifier can check the digital signature or Verifiable Credentials presented by the DID owner. This process ensures that only the owner of the corresponding private key can prove control over the DID.

    • DIDs allow the verification process without revealing the user's original data. For example, a user can prove they are over 18 years old without disclosing their birth date.
    • Selective Disclosure: Users can limit what information is disclosed to the verifier, maintaining the privacy of irrelevant data.

  4. Storage and Management
    DIDs and related metadata are stored on the blockchain or other decentralized systems. This guarantees:

    • Data Integrity: Data cannot be altered by other parties.
    • Transparency: Records of every change are available to all authorized parties.

    Example:
    Instead of providing an ID number and photocopying physical documents, a user with a DID can issue a Verifiable Credential proving that they are over 18 years old. The bank or service provider simply verifies the credential (without viewing any other personal data) by checking the digital signature and public key in the DID Document.

Comparison with Traditional Identity Systems

Aspect Traditional Identity System Decentralized Identifier (DID)
Data Control Controlled by institutions or organizations Controlled by individuals.
Security Vulnerable to centralized hacking. Security based on Blockchain.
Interoperability Limited to a single system. Can be used across various platforms.
Privacy Personal information is often exposed. Proves claims without disclosing personal data.

Case Study Comparison

  1. Use of Traditional Identity Systems:
    When registering for financial services, customers are asked to photocopy their ID cards, wait for manual validation, and submit sensitive information that is not always relevant. This process is slow, costly, and increases the risk of data.
  2. Use of DID:
    With DID, customers can provide Verifiable Credentials issued by trusted entities (such as decentralized identity authorities or recognized institutions). Banks can simply verify the validity of these credentials digitally through the public key in the DID Document. The process becomes fast, secure, and does not expose any unnecessary information.

Importance of DID in the Digital World

In the digital era, identity challenges are not only about managing personal information but also about trust, security, and fair access. DIDs, as suggested by W3C, introduce a new paradigm that addresses the weaknesses of traditional identity systems.

Challenges of Traditional Identity

  1. Identity Theft:
    Centralized data storage on a single server becomes a prime target for cybercriminals. Massive data breaches can affect millions of users.
  2. Dependence on Third Parties:
    If the central identity authority fails, users' digital identities can become unreliable or even lost.
  3. Lack of Privacy:
    Traditional systems force users to disclose more data than necessary, increasing the risk of exploitation and harmful profiling.

Key Benefit of DID

  1. Increased Trust and Transparency
    Increased Trust and Transparency With a foundation of distributed ledgers or decentralized storage mechanisms that are resistant to censorship, DID provides a higher level of transparency and auditability. Verification can be done without involving unnecessary third parties.
  2. Better Privacy (Selective Disclosure):
    Better Privacy (Selective Disclosure): Users can prove specific facts (such as citizenship, employment status, or age) without revealing their complete identity. This reduces the exposure of user data.
  3. Operational Efficiency and Scalability
    Fast and automated verification reduces reliance on slow and costly manual processes. By using DIDs, businesses can streamline customer onboarding workflows, while users enjoy a more efficient experience.
  4. Global Interoperability with W3C Standards:
    Thanks to global W3C standards, DIDs can be used across various jurisdictions, industries, and technologies. A single digital identity can be utilized for multiple services, ranging from finance, government, healthcare, to education, without being trapped in a closed ecosystem.

Example of DID Applications

  • Financial Services:
    Identity verification for customers becomes instant. Banks can validate customer credentials from the DID digital wallet without needing physical copies of documents.
  • Digital Election Systems:
    Voters with DIDs can prove their voting rights and cast their votes securely, anonymously, and without having to disclose any other personal information. Election integrity is enhanced as manipulation becomes more difficult.
  • Healthcare:
    Doctors or medical personnel can access patients' medical histories based on DID with verified permissions. This eliminates the need for third parties to manage data and minimizes the risk of leaking sensitive medical information.