In today’s digitized landscape, personal identity extends beyond mere physical forms of identification like passports and social security numbers. Decentralized Identity (DID) is emerging as a globally unique identifier that allows individuals to have full control over their identity credentials through cryptographic methods like digital signatures. According to a report by MarketsandMarkets, the global decentralized identity market is projected to reach USD 6.8 billion by 2027, growing at a Compound Annual Growth Rate (CAGR) of 88.7%.
According to the World Wide Web Consortium’s (W3C) definition, a DID can refer to any subject, such as a person, organization, thing, data model, or abstract entity. This article specifically focuses on the use of DIDs as an individual identifier that connects Web2 and Web3.
The Key to Web3
As we anticipate a future where private IT systems and blockchain-based public IT systems (or multi-party systems) co-exist, so will Web2 and Web3. Instead of replacing it, Web3 complements Web2, solving efficiency issues in certain respects and creating new application scenarios. Government institutions in North America, Europe, and Asia are actively exploring the possibilities of leveraging DIDs to offer privacy-centric digital identity solutions. Simultaneously, Twitter now allows users to link NFTs to their accounts as a Web3 profile.
DIDs will be pivotal in shaping our interaction with the digital ecosystem, linking us to a multitude of decentralized applications. Leveraging the inherent features of blockchain technology — immutability, decentralization, and transparency — a DID system offers several advantages over current internet identities like Apple ID or Twitter accounts:
- Self-Sovereign Identity (SSI): Individuals have full ownership and control over their digital identities.
- Decentralization: DIDs are not centrally issued; no third party holds or manages user data.
- Global Uniqueness: DIDs are globally resolvable and portable across different service providers.
Bridging Web2 and Web3
Identity is pivotal in defining how we interact with the digital world. With the advent of blockchain and Web3 technologies, the paradigm is shifting toward decentralized models, offering users unparalleled control and ownership of their identities and credentials. The core of a DID system is two-pronged: identity ownership and credential verification.
A New Digital Accounts Management Paradigm
In a Web3 ecosystem, identity and credential ownership transcend the username-password paradigm in Web2. By leveraging decentralized identity (DID) protocols, users have the flexibility to associate their identities, whether real-name or anonymous, with various digital services. This shift not only simplifies user experience by removing the hassle of remembering multiple usernames and passwords but also improves security by eliminating single points of failure. In contrast to the Web2 era, where user identity data is highly centralized within the private databases of business platforms and susceptible to data breaches, Web3 offers a more secure framework that minimizes the risk of personal information being disclosed without authorization and reduces the likelihood of identity theft.
The experience becomes as simple as a QR scan or a biometric confirmation on your device. Unlike the current federated identity systems, such as using a Google account to sign up, in a DID system, your personal data is stored locally on your device, giving you complete control and ownership over the data.
Transforming Credentials Verification
Blockchain’s immutability shifts how we think about verification. In the Web2 world, verifying an individual’s credentials typically involves checking with a centralized entity or database. However, when binding certificates to DIDs and mapping them onto a blockchain, the holder can authorize a verifier with a cryptographic proof, by which the verifier can verify the certificate’s authenticity on the blockchain.
For example, consider a college graduate who wants to prove their academic credentials to a potential employer. Traditional verification methods would require the employer to directly contact the educational institution, adding time and complexity to the process. In contrast, within a DID framework, the graduate’s credentials are cryptographically signed by the issuing college and subsequently recorded on a blockchain. The employer can swiftly and securely validate these credentials by cross-referencing the cryptographic signature with the public blockchain record. This streamlined approach expedites the verification process and substantially reduces the potential for fraud or human error.
Data Privacy and Selective Disclosure
The most compelling aspect of DID is how it empowers individuals to truly “own” their identities, offering them granular control over personal information. With DID, users can selectively disclose the necessary data required in interactions with verifiers and revoke these permissions at will. This heightened data ownership naturally incentivizes individuals to take more proactive measures in privacy protection and data security control.
In the real world, a person’s identity encompasses a variety of attributes such as name, birth date, educational background, family connections, address, and identification numbers. Traditional verification often risks overexposure of these sensitive details, leading to vulnerabilities, including identity fraud. For example, when one needs to confirm their age for purchasing age-restricted items like alcohol, DID allows for the disclosure of only the pertinent information — in this case, merely ensuring that the individual is over a certain age (a “Yes”), without revealing any additional personal data like a full ID card.
Such selective revelation of personal information offers a robust safeguard against the risks of data breaches, unauthorized data usage, and identity theft, effectively elevating the current paradigm of data privacy management.
Looking Into the Future
DID + Zero-Knowledge Proof (ZKP) = Private Identity Verification
The integration of Decentralized Identifiers (DIDs) and Zero-Knowledge Proofs (ZKPs) presents a transformative approach to identity management — enabling secure, private verification without disclosing any extraneous information. In essence, Zero-knowledge proofs allow one entity to prove a fact to another without revealing the data. When combined with DIDs, the implications for enhancing user privacy could be truly groundbreaking.
Adding an extra layer of encryption on DID documents, DID holders can retain their personal data on local devices while uploading the ZKP generated from this data to the blockchain. Consequently, verifiers need only validate the ZKPs, which are cryptographic hash strings, rather than the full DID documents.
This confluence of DID and ZKP technologies empowers individuals with unparalleled ownership and control over their own data, effectively addressing existing privacy concerns and ensuring data correctness in a decentralized, secure framework.
DID + DNS = Human-Friendly Identifiers
While DIDs ensure global uniqueness without the need for central registries, they come at the cost of human-readability. This issue is a corner of Zooko’s Triangle, which posits that identifiers can’t simultaneously be secure, decentralized, and human-meaningful. However, solutions such as DNS-DID have the potential to break this triangle.
By integrating DIDs with the distributed Domain Name System (DNS), these cryptic identifiers can be replaced by easily recognizable, user-friendly names without sacrificing security. This advancement may give rise to the next wave of digital transformation, comparable to the revolutionary shifts brought about by the introduction of email and the World Wide Web over the past few decades.
Conclusion
Decentralized Identities are not just a technological innovation, but a fundamental paradigm shift in how we perceive and manage identity in the digital realm. As a bridge between the existing Web2 infrastructure and the emerging Web3 technologies, DIDs promise a more secure, user-centric, and efficient digital experience. With potential use cases ranging from secure logins and transparent credential verification to asset protection, the future of decentralized identities moves beyond a mere promise to become an indispensable element in the rapidly evolving digital frontier.
