Decentralized identity is a concept that puts individuals in control of their personal information, who it is shared with and who can access it.
Decentralized identity marks a radical shift in how identity is managed. Traditionally, a service provider — say a bank or an online retailer — maintains control of identity through traditional means such as usernames and passwords. In a decentralized system, those service providers just need to be capable of integrating with whichever decentralized identity system an individual uses.
Standards for approaching decentralized identity are beginning to emerge, which will ease the path to wider adoption.
What is it?
For identity to be decentralized, the consumer uses an identity ‘wallet’ in which they collect verified information about themselves from certified issuers such as a government, bank, or for some services where limited personal or financial data is involved a social media site could be used.
By monitoring what information is exchanged from the identity wallet to third-party applicants, the customer can adequately maintain their online identities and preserve their privacy. An example might be showing only evidence that they are over a certain age without disclosing their exact birth date.
What’s in for you?
With growing consumer awareness of data privacy, decentralized identity offers a way to authenticate individuals that puts them in control of what information they share. That means they could use a single decentralized identity system to authenticate themselves when interacting with utility companies, banks, passport agencies and hospitals — while only sharing the specific information those organizations each need.
By supporting decentralized identity, you can reduce risks to your own organization, as you’ll not be storing unnecessary personal data. And because the individual controls how long they share their information with you, you need not be storing personal data for any longer than needed. And by supporting an authentication system that puts users in control, you may enhance your reputation for taking data privacy seriously.
What are the trade offs?
Decentralized identity is a relatively new concept and there are a number of competing approaches for how it is done.
It also represents a very different way to treat authentication. You may need to consider how legacy systems might support it.