What Is a Decentralized Identity?

2 min read
DeFi Guides

A decentralized identity allows users to generate, own and control their digital personas independently and without relying on a third party. It builds upon the concept of the Web2 identity to provide a much broader and transferable identity management mechanism that is self-sovereign by design.

Setting up a decentralized identity requires a digital wallet (also known as an “identity wallet”). The digital wallet is an app allowing you to create a decentralized identity and manage its access through public and private keys. It enables users to collect verified information and easily disclose it to third parties. That way, users can ensure they are only presenting proof to whoever they agree to and whenever they need it.

Decentralized identity (also known as “Self-Sovereign Identity”) promises to disrupt the established centralized physical and digital identity models by turning them into more secure decentralized, and democratized ecosystems.

Why Is There a Need for Decentralized Identities?

Digital identities are the foundation of all online activities and transactions. They are equivalent to a collection of personal information about an individual or organization that exists online and can be traced back to its owner.

Some key digital identifiers include personal details (names, date of birth, etc.), an email address, social interactions and assets on Twitter, Facebook, Instagram, etc., log-in data, online search activities, and more. Тhe mainstream adoption of digital identities highlighted their shortcomings with two critical areas of concern – data privacy and security.


Web2 identities aren’t self-sovereign. The ones in control of our sensitive information are the service providers or other third parties like their clients, partners, etc. Often, we might not even know who has access to our data. Besides, personal information can often be shared without the user’s explicit consent or stored in locations they are unaware of.


Digital identity data is primarily stored in centralized systems. Often, especially in the case of governmental institutions, the infrastructure is obsolete and vulnerable to cyberattacks and data breaches. This makes it appealing for cybercriminals since exploiting them can give access to large amounts of confidential information.

How Are Decentralized Identities Solving Key Problems?

The dominating digital identity verification models have left individuals with no choice but to surrender their privacy if they want to use mainstream platforms or services.

Decentralized identities promise to eliminate the need to choose one thing or the other. Instead, they aim to ensure full ownership and control of personal information and credentials.

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