How Decentralized Identity is Reshaping the Future of Digital Identities?

However, for using any online services or apps, consumers need to provide accurate authorization and personal identity.

Currently, users are providing basic level of authentications such as email addresses, contact numbers, and their names. However, several online services ask for a more high-level identification such as driving licenses, pan cards, and more.

The worrying part in this is that the current identity authorization systems used by such service providers is full of flaws putting all the consumer data at high risk of getting into the wrong hands.

To overcome such issues, a decentralized identity system is one of the emerging solutions. Adoption of this identity system will allow users to have better control over the data being shared by them and choose what needs to be shared and what not.

As per the BIS Research study, the global decentralized identity market is in a nascent stage and would require more time for the users to completely shift from the federated and centralized identity system to decentralized identity.

To have a better understanding, this article analyses the decentralized identity system in-depth and why the demand for this identity system is constantly increasing.

So, without wasting much time, let’s dive in!

Decentralized Identity- The Advanced Form of Identity Authentication

In a decentralized identity management system users store personal information and credentials in a digital wallet. This wallet is like real-life wallets and holds all the user identifiers such as ID cards and licenses.

Decentralized identity system provides individuals with the option to have control over their data- and hence decentralized identity is also called self-sovereign identity (SSI).

Since the decentralized identifiers store users’ data using blockchains and distributed ledgers, they become more secure, tamper-proof, and instantly checkable by anyone.

The use of decentralized identity blockchain leads to a reduction in the need of storing user identity data on servers. Further, this system makes it much simpler for users to access services seamlessly.

Main Stakeholders in the Decentralized Digital Identity System (DDIS)

The key players involved in the entire DDIS include:

  • Users

Users are those individuals owning and using different pieces of their identity data. The users have the option of keeping their various identifiers stored in the digital wallet and using them as per the need.

  • Issuers

Issuers are institutions and organizations, such as academic institutes, local tax offices, or any other entity using the user’s credentials to provide the required services.

Decentralized Digital Identity System (DDIS)
  • Verifiers

Verifiers are the third-party operators requiring users’ data to establish trust and allow them to access different services.

For example, different online shops require different identity proofs for allowing users to purchase items. The identity proofs stored in the digital wallet by the users are verified by the verifiers and hence allowing them to purchase certain products.

Why There is a Need for a Decentralized Identity?

Decentralized identity has several promising benefits to altering the way users share their data for getting the required online services or using apps.

Following are some benefits of getting a decentralized identity system in place:

  • Easier Authentication

Adoption of decentralized identity can help to eliminate the tiring process of multi-level authentication protocols, such as passwords, mobile number, on-time security code, etc.

With a reduced authentication process, using the various online services becomes simpler and faster.

Organizations can directly verify user identities without any requirements of the KYC process or any similar options.

Services such as government registration, loan applications, website sign-ups and many more would become fast as service providers can verify the user identity through the third parties’ utilities.

  • Better User Data Safety

As explained earlier in the article, several organizations require users to provide their identity information. User data at the company place remains at a high risk of getting hacked.

However, the decentralized system eliminates the necessity for centralized storage of users’ data and provides users with better control over their data.

  • Reduce Data Management Costs

Globally businesses spend nearly 4–7% of their total revenue on getting the user data managed and secured.

Decentralized identity can let users have the option of storing their data in a secured environment on their own and reduce the burden and expenses from the organizations.

With reduced data centers to control and manage user information, the service providers can reduce the user data managing cost and invest the same fund into enhancing the service being offered by them.

Final Thoughts

Are you interested to know more about the developing technologies in your industry vertical? Get the latest market studies and insights from BIS Research. Connect with us at to learn and understand more.



Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store