What is Decentralized Identity Management?

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What does decentralized identity management mean?

Decentralized Identity Management (DIM) is an approach to Identity and Access Management (IAM) that enables individuals and Internet of Things (IoT) computing devices to manage their own personally identifiable information (PII).

In a decentralized identity framework, the distributed database is used to validate the existence of a legitimate identity identifier – the identifiers themselves are stored in an entity-controlled digital wallet application whose identity is sought.

Benefits of decentralized identity management include:

  • Control – gives humans and digital devices power over their digital credentials.
  • Security – reduces attack surfaces by storing personally identifiable information such as credit card numbers only once.
  • Privacy – allows entities to use the Principle of Least Privilege (PoLP) to designate minimal or selective access to credentials.

The concept of using distributed databases to manage PII is also known as self-sovereign identity (SSI). Interest in a distributed approach to identity credential management has grown in recent years as distributed blockchain ledgers have gained wide acceptance.

Techopedia Explains Decentralized Identity Management

Decentralized identity management is often described as a “trust framework” made possible by blockchain.

How Decentralized Identity Works

Instead of storing identity credentials across multiple vendor sites, identity credentials are stored in the user’s digital wallet. Since the wallet uses encryption as well as a distributed architecture, it does not present a single point of failure in the event of a hack.

Essentially, decentralized identity allows a user to create a “new” digital identity by consolidating all of their identity credentials into a digital wallet application that generates public and private cryptographic keys.

The public key is used to identify a specific wallet. The private key, which is stored in the user’s wallet, is used during the authentication process.

Future of Decentralized Identity

Decentralized identity management should play an important role in:

  • Web3
  • Decentralized Finance (DeFi) Operations
  • Zero Trust Network Access Automation (ZTNA)
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