Decentralized identity using blockchain | VentureBeat

Decentralized identity using blockchain |  VentureBeat

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This article was written by Deepak Gupta, LoginRadius co-founder, technology strategist, cybersecurity innovator, and author.

Today, almost all of our digital identities are linked by devices, applications and services. Service providers control these digital identities and their respective digital identity data.

As a result, users now face misuse of their personal data and data breaches that affect their social, financial and professional lives.

Additionally, providing access to multiple third parties or service providers from different applications makes it more difficult for users to manage their personal data and revoke access to their information. Users should own and control their digital identities to address these concerns, preferably from a single source.

A centralized system makes user identity data extremely prone to cyberattacks and privacy breaches. But decentralized identity solutions offer a new horizon by allowing users and service providers to have greater authority over their identity and personal data.

This article covers the following points:

  • What is a decentralized identity?
  • How Decentralized Identity Works With Blockchain
  • How to authenticate using a decentralized identity
  • What happens when we fully embrace a decentralized identity procedure?
  • Benefits of Using Blockchain with Decentralized Identity

What is a decentralized identity?

Decentralized identity is based on a trust framework for identity management. It allows users to generate and control their own digital identity without depending on a specific service provider.

For example, digital identities can obtain approval from multiple issuers such as an employer, government or university which remains stored in a digital wallet called an “identity wallet”. By using the identity wallet, the user (i.e. the owner of the identity) can present proof of their identity to any third party. The wallet helps users give and revoke access to identity information from a single source, making it easier.

According to Forest“Decentralized digital identity (DDID) is not just a technology buzzword: it promises a complete restructuring of the currently centralized physical and digital identity ecosystem into a decentralized and democratized architecture.”

How Decentralized Identity Works With Blockchain

The decentralized identity setup with blockchain usually consists of the following:

  • Identity Wallet: An application that allows users to create their decentralized identity and manage their access to service providers.
  • Identity owner: A user who creates their decentralized identity using the identity wallet.
  • Issuer/Verifier: The person who issues and verifies identity information. They sign the transaction with their private key.
  • Service providers: Applications that accept authentication using decentralized identity and access the blockchain/distributed ledger to look up the DID that the user has shared.
  • Blockchain/Distributed Ledger: A decentralized and distributed ledger that provides the mechanism and functionality for DIDs and operation.
  • DID (Decentralized Identifier): A unique identifier that contains details such as public key, verification information, service endpoints.

In a form of decentralized identity, an application (a identity wallet) allows users to create their own digital identity. When creating the identity, the respective cryptographic keys (a public key and a private key) are generated.

The identity wallet submits a registration payload with a public key to the blockchain, which generates a unique ID on your wallet. The private key stays with the user’s device/identity wallet and is used during authentication.

Likewise, transmitters such as government, universities and financial institutes verify the respective identity information and add to the digital identity data in a process akin to issuing certificates. Processes such as verifying user identity and issuing new credentials require issuers to sign using their private keys.

How to authenticate using a decentralized identity

These are the steps of authentication using decentralized identity and blockchain.

  • The identity wallet contains verified identity details of the user such as name, age, address, education, employment details and financial information. This information helps establish trust and allows the user to perform authentication.
  • The decentralized identity mechanism takes the public key associated with the private key and publishes it to a distributed ledger such as the blockchain.
  • As the decentralized system provides the public key of the distributed ledger, the identity wallet receives a decentralized identifier (DID). DID is a unique identifier representing the user on the Internet.
  • The user shares this DID with the service provider for authentication.
  • The service provider looks up the shared DID in the distributed ledger. If found, the distributed ledger sends the corresponding data to the application.
  • The user signs this transaction with the private key to complete the authentication.
  • The service provider application confirms successful authentication and allows the user to perform the actions.

What happens when we fully embrace the decentralized identity process?

Assume an online shopping scenario where the required data will flow from the wallet associated with the decentralized identity. The wallet in this scenario contains verified identity, address, and financial data.

Users share identity data to log in to the website by submitting the required information from the identity wallet. They are authenticated with the website without sharing the actual data. The same scenario applies to the checkout process; a user can place an order with the address and payment source already verified in their identity wallet.

Therefore, a user can have a smooth and secure online shopping experience without sharing any address or financial data with an e-commerce site owner.

5 Benefits of Leveraging Blockchain

  • Reliable: Blockchain technology uses a consensus approach to prove the authenticity of data across different nodes and acts as a trusted source to verify user identity. In addition to data, each block also contains a hash that changes if someone modifies the data. These blocks are a highly encrypted list of transactions or inputs shared across all nodes distributed across the network.
  • Data integrity: The blockchain-based data storage mechanism is immutable and permanent, and therefore modification and deletion are not possible. Decentralized identity systems use this mechanism so that no external entity can tamper with or modify the data.
  • Security: Another crucial reason for leveraging blockchain in decentralized identity systems is to provide robust security. The blockchain system features an inherent design by holding data in a highly encrypted manner. The blockchain also supports digital signatures, consensus algorithms, and cryptographic hash functions to protect user identities from breaches and thefts.
  • Private life: Decentralized identity systems leveraging the blockchain with a pseudo-anonymous identifier (decentralized identifier) ​​can help alleviate privacy concerns among identity owners.
  • Simplicity: Identity issuers take advantage of the transparent process of issuing digital identities. Identity verifiers can effectively onboard new users and lead the information verification process. Identity owners can easily store and manage their identities in the Identity Wallet.


From all the facts above, it is evident that decentralized identity with blockchain can completely transform the digital identity landscape. This will make digital identity management decentralized and transparent, as no particular organization will govern user data.

More importantly, users will be able to easily authenticate without sharing their sensitive personal information with third parties.

Deepak Gupta is LoginRadius co-founder, technology strategist, cybersecurity innovator, and author.


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