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The Guide to Decentralized Identity in 2023

The guide to decentralized identity in 2023

A few years back, the internet left us with no other data storage means, so centralization has been the sole of the storage business. Despite the technology and its success, cybercrime hasn’t left the picture to this day.

That’s precisely why data breaches have led to a lot of crises, such as stolen identities being used for fake registrations, stolen credit cards being sold in the black market, etc. This has shown a lapse when it comes to centralization and identity storage.

So in this ultimate guide, we’ll be answering different questions that surround decentralized identity:

What is Decentralized Identity?

A decentralized identity, or self-sovereign identity, is an approach to how internet users can engage and manage their data. It’s a manner through which data or credentials that verify a user are controlled by the user. To put it simply, a decentralized identity gives users a democratic concept to use and manage their data.

The data that defines each user’s identity is referred to as personally identifiable information (PII). This set of data, when decentralized, cuts out the time-consuming process of authentication between various organizations.

For example, a decentralized driver’s license can be verified to be genuine on the blockchain without going through the issuer. Blockchain technology ensures trust and transparency in its operation, so records of the issuer and the date issued can be publicly tracked by anyone from any computer. 

Why Do We Need a Decentralized Identity?

The internet has been the bridge between humans and digital services. To enjoy these services, users are left with no choice but to submit the required personally identifiable information (PII). That said, the question narrows down to why we need a decentralized identity in the first place. 

How Does Decentralized Identity Work?

It is crucial to understand what surrounds decentralized identities and how they operate. DIDs wouldn’t exist without some vital elements. We’ve listed them down below. 

Decentralized identifiers use two key concepts, which are the private key and the public key:

1. The private key, as the name implies, is personalized to each user and is used to sign or seal a transaction. The private key can be strings of various words or number codes that are managed by each user to protect their data. 

2. The public key is a mixture of alphanumeric characters that can be publicly viewed by anyone with whom they are shared. Instead of the usernames that represent users on social media, public keys are utilized to bound credentials to each user.

The usage of digital identity revolves around three entities which are:

Limitations of Decentralized Identity

Though highly beneficial, there is still a lot to be conquered through decentralized identity. Decentralization is a concept that is yet to be widely accepted in all industries.

Human data is being used to study our internet behaviors, which is how web2 could understand what would trap attention and accept clickbait. 

There’s a good number of internet users who are still far from the whole web3 concept. Some countries are raising compliance regulations against the use of this modern technology due to the surrounding economic landscape. That’s why intense awareness should be spread around a larger demographic regarding the benefits of the blockchain and what it brings.

Future of Decentralized Identity

Decentralized identity will gradually change how digital identity or credential is managed and issued. A report from Grand View Research shows that the global decentralized identity market size was valued at USD 379.66 million in 2021. Currently, it’s expected to expand at a compound annual growth rate (CAGR) of 88.2% until 2030. 

There’s no doubt that decentralized identity plays a major role in eliminating identity theft and fraudulent credential approval. All parties, which are the verifiers and the issuers, can get accurate and genuine data from holders who have been made custodians of their data.

In a few years to come, decentralized identity will be well-recognized and widely used, and it will indirectly enhance the interoperability of the internet. The immersive internet or the metaverse will derive many benefits from this growing technology.

Why is Identity Verification Necessary?

Identity theft is a major fraudulent act in today’s digital space. It is more than a trap that ensnares end users. It has become a ditch for digital brands, even the so-called blockchain products.

Identity theft can be used to any length for illicit activities such as human trafficking, fake logins, money laundering, financial scams,  drug trafficking, and digital exploitation. Of course, all these negative effects have strong implications. 

While decentralized identity is still an emerging web3 concept, many industries prefer to protect data using Know Your Customer (KYC) methods. Throughout the years, digital identity verification methods have proven to be the most efficient and effective way to prove that there’s a real person behind the screen. 

And What About Us? 

We’ve collected our fair share of knowledge in automated compliance and fraud prevention tools. Our AI-powered identity verification solution is user-friendly, easily integrated, and can be customized to match any brand. 

We dive deep into the specifics and technical challenges of industries, whether it’s cryptocurrency or fintech. Our customers appreciate it by making us a leader in identity verification in 2022!

We target fraud prevention by building identity verification systems that would prevent the use of fake pictures of faces, 3D masks, and other renderings in the identity verification process. See it for yourself – book a free demo today.

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