Our identity is who we are and the only way we can be classified into any group in society. Your identity goes beyond your name as a person as it includes many things like biometrics, citizenship, address, and many other means of identification.

A man with no form of identity is likened to a ghost, therefore every human on earth has one or more means of identification.

The importance of identity cuts across almost every aspect of our lives like using the internet, voting during elections, creating bank accounts, registering in admitted institutions and securing employment which requires some proof of identity.

However, our identifiers have long been linked to traditional identity management systems which are held and controlled by centralized intermediaries like registries, and identity providers. This centralized system implies that we don’t have control over the accessibility of our personally identifiable information (PII) or identity-related information.

To eradicate this challenge and give decentralized power to users over their identities, the concept of a decentralized identity system was created on the blockchain.

Decentralized identity was built on a trust framework for identity management and allows people to generate identifiers and manage their personally identifiable information (PII) without the intervention of any central authority.

What Is A Decentralized Identity?

A decentralised identity is a developing Web 3 project built on a framework for identity management.

The decentralized identity management system allows people to generate, alter, and control their personally identifiable information(PII) in isolation of a central intermediary like government, registry and certification authority.

Personally identifiable information (PII) is considered to be very personal and confidential data which directly or indirectly identifies an individual. Examples of such PII can be name, age, biometrics, citizenship etc.

Using a decentralized identity, people can easily control who has access and how their data is being accessed. They can only give out the required information or data for verification when required.

Other crucial information that can be part of a decentralized identity includes some internet data like passwords, usernames, search history and store purchase history.

In the concept of decentralized identity management, users, organisations and institutions can interact securely in an identity trust framework.

Importance Of Decentralized Identity

According to the world bank, about 1 billion people on earth do not have verifiable proof of identity. How can people who do not have proof of identity have access to essential services like security, healthcare, education and many others?

A large number of people are in a state of quagmire where they can’t afford to exercise their franchise, get a job or buy properties because they have no means of identification which invariably limits their freedom.

The other fraction of the populace who have proof of identity stored in the traditional centralised system is not excluded from the risks and insecurity of the centralized identity databases.

Occasionally, there have been cases of attacks on the traditional centralized identity systems of different retailers whereby millions of customer data are stolen.

Aside from the risk of data theft by hackers, there is a problem of ownership in the traditional identity system. Users do not have complete ownership of their identity and are completely oblivious of how their data is being managed. The personally identifiable information (PII) in a traditional digital identity system is controlled and managed by the central intermediary, hence, users cannot claim ownership of their identities.

However, the decentralized identity system is a solution to the issues hampering the traditional identity system as it provides a way in which digital identities can be accessed, used and controlled across various platforms in a decentralized way without any security risks.

The blockchain verifies the existence and legitimacy of identity in a decentralized identity system. The blockchain also enables the secure management and storage of personally identifiable information (PII) by providing a legitimate, consistent and interoperable architecture which has some significant benefits to users, institutions and developers.

How Decentralized Identity Works

The fundamental aspect of decentralized identity management is the use of decentralized identity blockchain wallets. The decentralized identity wallets allow users to customize their identifiers and store personally identifiable information on a decentralised platform rather than on centralized platforms controlled by third parties.

The decentralized identity wallets are encrypted by passwords which are rather non-perishable cryptographic keys immune to any form of a security breach.

A public key and private key are generated by the decentralized wallet. While the private key is needed for authentication, the public key discerns a concrete wallet.

The decentralized identity wallets authenticate users transparently, secure and protect users’ data.

Verified identity details which can be used to prove eligibility or complete a transaction, personally identifiable information (PII), are all stored in Decentralized apps (DApps). 

Additionally, users can give or revoke access to identity information from a single source using these wallets.

To prove the accuracy of the information given in the wallet, it is signed by different trusted partners. 

Pros And Cons Of Decentralized Identity 

There are some advantages and also a few disadvantages of the decentralized Identity system which we would discuss here.

1. Control:

The first advantage of decentralized identity is “control”. Every user wants to have control over their identities and data. By having control over their identifiers, they can decide what or what not to reveal.

2. Privacy: 

Using the principle of least privilege(PoLP), entities establish small or selective access for identity credentials. This gives the users some advantage of creating and managing their identities privately.

3. Security:

Given that the blockchain is a highly secure and impregnable decentralized platform, there’s little or no chance of hackers gaining access to the system to steal user data.

A major drawback of the decentralized identity system is ” adoption”. Even though you are reading about this phenomenon today, a lot of people, especially non-tech users have never heard of decentralized identity management systems. That being said, governments and various organisations are still looking for a way to adopt the technology on a large scale.

Other disadvantages can include the duplication and inaccuracy of recorded information in the decentralized identity management system.


The decentralized identity management system is still in its developing stage, therefore much impact has not been made in terms of decentralizing data. However, as the Web 3 concept continues to gain traction in the world and many people seek ways to have control of their data, blockchain technology has the prospect of creating a more decentralized, secure and seamless identity system.