What is a Decentralised Identity?

The usage of the word digital identity has soared after the advent of the internet. In the web2 era, a person’s digital identity literally formed the basis of their existence online. But this identity was often dictated and constrained by the platforms it existed on, and their rules. Now, with time, digital identities are evolving into another concept - decentralised identity. 

The latter term is synonymous with the world of web3, where decentralisation forms the basis of all digital services. A decentralised identity puts the user at the core ownership of their own data while removing the need for centralised entities that controlled the same earlier. Read ahead as we navigate through this fascinating theme in web3!

Evolution of the digital identity

The origin of digital identities dates back to email addresses, which was one of the first ways one could furnish an identity online. As social media platforms came into being, usernames on these prominent sites, along with detailed personal information like pictures and videos, became the digital representation of a person. 

Meanwhile, progress in technology stacks has enabled countries like India to also set up an extensive digital ID infrastructure called Aadhar, which rolls out unique digital identities for all its citizens. However, amidst this ongoing revolution in digital identities lasting for years, concerns about privacy and the uncontrolled power of centralised institutions holding our data have surfaced.

The web3 age has come up with solutions to the above issues, offering one an exclusive decentralised identity, made possible due to blockchain networks and their underlying distributed ledger technology.

How does a decentralised identity work?

In social media, government, or other platforms, personal data is usually hosted on centralised servers, which could be subject to hacks or non-consensual sharing. On the other hand, distributed ledger technology (DLT) enables the formation of immutable databases, which can only be accessed through keys or cryptographic signatures. Blockchains are decentralised ledgers created using this same technology. 

Moreover, blockchains are also governed by consensus mechanisms among all their stakeholders, and no one can suddenly choose to close them down. DLT enables these blockchain networks to store data, with owners having full control of it. With this key feature, blockchains have led to the use case of a decentralised identity for their users.

A decentralised identity holds mainly three characteristics:

• The issuance of the decentralised identity should not lie with a single person.
• Once issued, the identity must be able to maintain anonymity and transparency.
• It should be provable without revealing the entire identity.

Here are three instances of decentralised identity protocols developed on blockchains:

Polygon ID with Zero-Knowledge Proofs

Blockchain firm Polygon Labs has created a decentralised identity platform on the Polygon blockchain called Polygon ID (now called Privado ID), which is mainly powered by zero-knowledge (ZK) proofs to maintain privacy and security for its users. ZK proofs are a solution empowered by cryptography that allows a user to prove their knowledge of a particular piece of information without revealing the information itself. 

Let's suppose someone over the legal drinking age of 21 wants to enter a club. ZK proofs enable them to reveal only the particular bit of information to the club that they are above 21, without sharing any other details like name, address, or even the exact age.

Conceptually, ZK proofs work with a verifier asking a prover to perform some actions, which can only be done if the prover has knowledge about the information.

In Polygon ID’s case, ZK proofs have enabled it to be a scalable, decentralised, and private identity system with on-chain verification protocols.

As a result, Polygon IDs fulfil all three characteristics of a decentralised identity which we mentioned earlier.

Worldcoin

Founded in 2019, Worldcoin is a digital identity project that generates unique digital identities for its users, which are verified using iris scan verification tools. Each iris scan activates an identification code for a user that is further stored in blockchains. The project leverages the Ethereum blockchain to create and distribute WLD as utility and governance tokens within the Worldcoin ecosystem.

Worldcoin has also developed a decentralised identity solution called World ID using cryptography and zero-knowledge proofs. Users possessing a World ID can prove their identity in any compatible cloud network or or-chain applications.

EthereumNameService

EthereumNameService (ENS) is a human-readable address system for the Ethereum blockchain. One can compare it to the domain name system on the internet. EthereumNameService makes it possible to convert complex ETH addresses to the format of ‘yourname.eth,’ using smart contracts and resolvers that map and resolve domain names to their respective ETH addresses.

For example, Vitalik Buterin, the founder of Ethereum’s ETH address is vitalik.eth, which links to the address 0xd8dA6BF26964aF9D7eEd9e03E53415D37aA96045.

ENS is also built on the Ethereum blockchain, ensuring an immutable and decentralised identity for all its users.

How is a decentralised identity beneficial?

A decentralised identity has a host of benefits over a centralised digital identity. Let us understand this with an example.

Suppose one compares Polygon ID with a prominent digital identity system in India, such as DigiLocker. The latter is a centralised digital locker system developed by the Government of India for their citizens to store essential documents. 

While the government controls DigiLocker, Polygon IDs lie in the sole control of their corresponding users. A centralised system like DigiLocker also makes it susceptible to cyber-attacks or hacks and also prone to internal corruption, while ZK proofs make the data in Polygon IDs completely private.

Moreover, DigiLocker solely aims for paperless governance in India, and can only be used to store documents in preset formats, while Polygon IDs can have multidimensional use cases, from storing information to using the IDs in dApps.

Decentralised identities are also helpful for developers to build applications using a universal login system without relying on insecure passwords. Eventually, decentralised identities could likely aid in other usages such as web3-era social media, supply chains, online authentication, or others, with a single-point, secure, bot-free, user-controlled identity.

The road to a world of decentralised identities

Although advantageous over legacy systems, decentralised identities have a few challenges to overcome in the future for wider adoption. These barriers include matters like interoperability, governance, and regulations, which could hinder such systems from gaining better acceptability across borders. At the same time, the potential for decentralised identities to solve the current issues in centralised identity systems worldwide cannot be ignored.

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