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Decentralized Identity | The Future of Web 3.0

Parveen Bhandari | 14 Feb 2023

Decentralized Identity | The Future of Web 3.0

Introduction to Decentralized Identity

Web 3.0 came with many technological advancements, one of which was related to the identity factor. Organizations wanted to know with who they were interacting and when. They wanted to set up login credentials for the users to keep track of their activities and identify the users with the credentials, i.e., Username and Password.

The main challenges arise when people have to manage a lot of IDs to get access to the content they want to see. So, one account for all places emerged, where a single service provider manages a single identity of a user and allows the user to get access with the same credentials at any particular place or website.

This was a centralized way to handle issues, and people were concerned about data privacy. That's why introducing and presenting data and information between different domains and organizations in a decentralized manner was believed to revolutionize the digital identity system for users. Also, providing them with their own credential was both manageable and easy to use on their own end.

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What is Decentralized Identity?

A decentralized Identity is a self-owned, independent identity that enables trusted data exchange. This allows people to control their own identity without depending on a particular service provider.

A digital identity can be anything or any information about an individual or organization in the form of personal IDs, proof of address, or a certificate that exists online.

As decentralized identity is going to be a trend with Web 3.0, people are ready to take data privacy to the next level. Decentralized identity is based on the framework of identity management, which enables the user to take total control over the digital identity they possess to access a particular set of services or resources.

Decentralized Identity and Self-Sovereign Identity: The Difference

Both Decentralized Identity and Self-Sovereign Identity are based on the concept of digital identities and a decentralized approach to digital identities. The basic difference between Decentralized Identity and Self-Sovereign Identity is in terms of data usage.

Self-Sovereign identity lets the users showcase their data to the other individual or verifiers without any intervention of a centralized service or intermediary, whereas Decentralized identity allows the user to get verified without actually showcasing their identity data to the other individual.

How does Decentralized Identity Work?

A decentralized Identity framework has some key components that work in sync to provide a seamless and enhanced user experience with optimal data privacy and security. The Elements of Value are:-


A Decentralized Database that saves information or data over various networks makes the data to be immutable and nearly impossible to hack and cheat.

Decentralized Identity Wallet

A digital wallet that lets the user create their decentralized identifiers and manage their access or verifiable credentials.

Decentralized Identifiers(DIDs)

A unique identifier for a specific individual provides a unique identity and consists of information such as a public key, verification information, and service endpoints that are in the form of some numerals and alphabets.

Verifiable Credentials(VC)

A digitally secured version of the credentials, such as employee information, invoices, or personal IDs, to showcase an organization for getting verification.

The Basic Functionality of the Decentralized Identity model can be explained in three steps:-

The First Step is in the Blockchain, where the Decentralized Identifiers are stored. These DIDs then move towards and get classified with the type of usage they should have.

These Decentralized Identifiers can be used by an individual or by any organization or in a professional sense. They possess some verifiable credentials respected by the group that will use the DIDs.

Further, moving forward, the specific Verifiable Credentials help to get access from another individual.

Identity and Access Management (IAM) is a combination of processes and policies to manage the identity of individuals or groups and access to the resources within an organization. Click to explore our, Identity and Access Management

What are the Benefits of Decentralized Identity?

Decentralized identity has various benefits for different groups of people, such as Organizations and individuals. Let's review some of them:-


The factor for adoption is speeding the processes with effective fraud detection. The wase of verifying the identity quickly and going on with the process seems to be a lot beneficial and time-saving for organizations. Some key points are:-

  • Reduced Cyberattacks
  • Ensure Data Privacy
  • Reduced operational cost
  • Fast verification process


The Individual aspect arrives with a different concept, i.e., control over the identity is a must. Some points to review can be:-

  • Preventing Data Tracking
  • Authority to share information on will
  • Control over data
  • The choice to reveal only required information
  • Easy management and creation of decentralized identity

How is Decentralized Identity the Future of Web 3.0?

Web 3.0 and Decentralized Identity have the same objective to enable secrecy, ensure data privacy and security, and have total control over self-information and data. As Decentralized identity helps individuals to allow personalized use of the data without worrying about any intermediary, here are some ways It can be the future of Web 3.0:-

Universal Identity

The centralized service provider or ID issuers have control over your login credentials. There is one service used to access all the different content internet, which leads to targeted ads without the interest of the user.

Decentralized identity lets users create and manage their own digital identity to access resources without relying on a particular service provider, like social media or connection services.

Ownership of Data

Blockchain and Decentralization remove the possibility of any indulgence of a third-party entity to alter or remove the data the user originally possessed. Also, in the case of digital identity, the ownership entirely resides in the user.

Blockchain stores the data on the decentralized network, and the user can access or share the data with a private associated with them.

Consent of Data

Basically, verifying the identity without revealing an individual's exact identity or data. This is possible with Zero Knowledge Proof, i.e., Satisfying a condition with information without actually showcasing the exact details.

Resistance to Bots

Many social media platforms incorporate bots to automate the posting and activities on their behalf. This naturally disrupts the experience of the application.

Decentralized identity enables a factor of trust in the user that a particular individual is a human and the content or information is trustworthy as well. Ultimately, It reduces the chances of bots taking over the internet and allows real users to operate the internet as a community.

Which Industries should adopt the Decentralized Identity approach?

Blockchain and Decentralization will be seen in every sector, but the industries that will have the most impact are:

  • Finance and Banking
  • Insurance
  • Retail
  • Transport and Logistics
  • Marketing and Advertising
  • Healthcare
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Decentralized identity will help remediate the concern of data privacy and optimize access solutions for all individuals and organizations as well. As it is associated with Blockchain and Decentralization, it will share the same value as Web 3.0.

Still, Decentralized identity will allow the users to have control over their data and the ability to create and manage their own digital identities without relying on a service provider or a third-party entity.