Decentralized Identity Systems (DIDs) are increasingly growing in relevance due to how they’ve redefined users’ privacy and data protection in the digital space. The reliance on centralized entities like technology companies, banks, government agencies, and many others has exposed users to many risks.
Without a doubt, data is highly valuable which makes it very important for businesses in the digital space. Meta for instance generates huge revenue from users’ data across its various social media platforms.
The firm made more than $100 billion in the last four years by using users’ data to sell ads. More so, the company also decides which advertisement or content users receive using their data.
Much to users’ detriment, tech companies with this system, have full control over the data on their platform. However, this rich database has become attractive to bad actors who need pivotal information about individuals to carry out their illicit activities.
The increasing cyber breach has raised questions about conventional passwords, pins, social logins, biometrics, and other centralized data protection mechanisms. To an extent, the control over users’ data and the vulnerability of centralized systems databases to attacks have led to the popularity of DIDs.
Nevertheless, decentralized identity systems have some shortcomings too but their good sides contributed to the increasing demand for them. This article aims to dissect whether DIDs can ever become important in this digital age or if they are too risky to trust.
What are Decentralized Identity Systems (DIDs)?
A decentralized identity system is a security-rigid setup that gives individuals in the digital space full autonomy over their data. This framework reduces exposure to third parties and allows users to manage their digital identities.
Like conventional identity, digital data contains key information like users’ names, date of birth, payment details, qualifications, browsing history, passwords, pictures, and many others. Meanwhile, instead of committing these vital details to a sole database under the control of tech companies, the data are distributed and protected with the aid of cryptography.
With the support of blockchain technology and other distributed networks, individuals in the digital space now have control over who can access their data. This system hasn’t only enhanced users’ privacy but also bolstered the security mechanism of protecting their information.
By keeping these details on the blockchain, DIDs empower people to secure their identity with a private key and allow others to verify these details without entrusting them to a third party through a public key. Integral to this framework is a digital wallet that enables individuals to store their DID and private key.
Major setbacks
Despite offering various upsides, DIDs are not entirely safe and there are a host of factors that still make it a risky concept. One major downside of decentralized identity systems is their security vulnerability, while they offer advanced data protection compared to their centralized counterparts, DIDs’ private keys are hackable.
The core background of DID—blockchain and cryptography are a relatively new phenomenon as they are yet to gain global adoption. As a result, decentralized identity systems are struggling to gain the trust of individuals who still entrust their data to centralized infrastructures.
Likewise, the recovery process for private keys is extremely difficult which puts users at risk of losing their details if they misplace their key. More so, the innovation currently operates outside proper regulatory framework as it lacks uniform global standards and oversight.
By that, DIDs can be used for illegal activities like money laundering and identity fraud. Various organizations are working independently to design their digital identity systems causing the concept to lack universal interoperability.
Consequently, by relying on different networks to develop DIDs, their usability on the global scene has suffered significant setbacks. These factors have contributed to the lack of trust in DIDs.
Conclusion
The advancement of web3 and blockchain technology has reduced reliance on central systems. DIDs are still in their renaissance stage with more room for improvement.
Without any doubt, it is only a matter of time before decentralized identity systems enjoy mainstream adoption. However, despite having their downsides, the risks attached to these systems are nothing compared to centralized structures.
Attesting to the growing relevance of DIDs is the adoption of projects like World (formerly Worldcoin), Microsoft ION, Veramo, Sovrin, and many others.
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