Table of Contents
- 1 Key Takeaways:
- 2 What Is Web3 Identity?
- 3 Understanding Web3
- 4 Decentralization in Web3
- 5 What Is Centralized Identity Management (CIM)
- 6 What Is Federated Identity Management (FIM)?
- 7 The Disadvantages of Centralized (CIM) and Federated (FIM) Identity Management
- 8 What Is Decentralized Identity Management (DIM)
- 9 What Are The Benefits of Decentralized Identity Management (DIM)?
- 10 Why Web3 Identity Matters
- 11 Components of Web3 Identity
- 12 1. Decentralized Identifiers (DIDs)
- 13 2. Verifiable Credentials (VCs)
- 14 3. Blockchain
- 15 Blockchain’s Impact on Web3 Identity
- 16 Conclusion
- 17 Identity.com
Key Takeaways:
- Web3 identity provides a decentralized way to manage digital identities using blockchain technology, which enhances user control over personal data. This method significantly improves privacy and security by empowering individuals to directly oversee and determine who can access their information and how it is utilized.
- Web3 identity moves away from centralized data storage, reducing the risk of data breaches. You can manage your data directly or leverage decentralized storage.
- Web3 identities are interoperable, meaning they can work across different platforms and applications. This interoperability eliminates the need for multiple accounts and simplifies online interactions.
The internet is on the cusp of a significant transformation with the arrival of Web3, the first decentralized iteration built on blockchain technology. This transition promises to be far more impactful than the shift from Web 1.0 to 2.0. Web3 encompasses not just mobile devices and desktops, but the entire Internet of Things (IoT) and every internet-enabled device, leading to a massive reconfiguration of the web’s architecture. This evolution extends beyond infrastructure, with a fundamental change in how we manage our identities online. Web3 introduces an era of decentralized identity management, shifting control from centralized and federated systems to individual users. Our digital identity, a complex representation of who we are in the online world, will be owned, hosted, and managed by us, fundamentally impacting how we interact with the internet.
What Is Web3 Identity?
Web3 identity represents a decentralized approach to managing digital identities. Unlike traditional Web 1.0 and Web 2.0 models where platforms control user data, Web3 empowers individuals to act as the custodians of their own information, including names, emails, usernames, and other sensitive data.
This shift offers several key benefits:
- Decentralization: Web3 removes control from central authorities, placing it directly in the hands of users.
- User-Centric: Users have full control over their data, deciding what information to share and with whom.
- Interoperability: A single set of verifiable credentials can be used across various platforms, eliminating the need for separate accounts and logins.
Understanding Web3
Web3 leverages blockchain technology to liberate user data from centralized control by governments and corporations. Data will no longer be confined to isolated databases; instead, it will be distributed across a global network of users’ devices. This core principle of decentralization extends beyond data storage. Web3’s vision also encompasses operational transparency, a stark contrast to the opacity of traditional systems. Blockchain’s inherent transparency is a cornerstone of Web3, underpinning its architecture and characteristics like permissionless access, trustless operation, and cryptographic security.
What Is Centralized Identity Management (CIM)
Every technological advancement, regardless of its potential loopholes or disadvantages, carries certain benefits. Centralized identity management is no exception. It played a pivotal role in making Web 2.0 more interactive by facilitating the collection of user information, which led to a more personalized web experience. This system allowed users to access websites and apps using their emails, usernames, and passwords.
The web’s enhanced ability to gather user information cleared the path for platforms like Facebook, Twitter, and YouTube, encouraging content creation. However, this also allowed tech giants to collect more detailed user data, resulting in privacy infringements. Centralized identity management plays a critical role in the web’s evolution. However, it has also facilitated data breaches and, in some instances, enabled data theft for malicious purposes. The dual nature of centralized identity management emphasizes the need for better privacy measures in the digital world.
What Is Federated Identity Management (FIM)?
A Federated Identity Management System retrieves users’ data or login credentials from a central database, which serves as a centralized identity management system. The system involves collaboration with reputable partners (such as Facebook, Google, Microsoft, etc.) that use their established databases to verify users’ identities.
This process allows users to access multiple platforms using their existing credentials, without the need for fresh registrations. The partners involved in this relationship refer to themselves as trust domains. Single Sign-On (SSO) also operates under this identity management system.
The Disadvantages of Centralized (CIM) and Federated (FIM) Identity Management
- Centralized Identity Management (CIM) stores users’ login details, so each website, app, and platform requires its own login credentials, creating a point of vulnerability for bad actors.
- Despite how little time is spent logging into different websites, it reduces productivity and serves as a distraction. Federated Identity Management (FIM) promised to remove this distraction that reduces workplace efficiency. It has successfully achieved that with its architecture, but FIM comes with its limitations and security risks. An example of FIM becoming a weak point is when a user has a weak password, which can compromise multiple accounts or allow unauthorized access to the database. If a bad actor gains access to the FIM database used for multiple platforms, a single data breach can lead to multiple breaches.
- Some companies lack federated identity management plans, which ensure security and data safety across the board. The lack of this opens up the FIM system to more security risks and easy data breaches.
- The federated system shares users’ data from the trust domain to other sub-platforms (partners). Unfortunately, users are often unaware of the criticality of data sharing and storage for their privacy and safety.
- Although there are security measures in place to ensure user safety and privacy, only some providers that run a FIM system are committed to implementing these safety practices.
- Centralized databases commonly experience insider threats and security theft, which remain a concern. Federated identity management, despite its introduction, has not addressed or eliminated these issues
- Joining multiple FIM partnerships becomes complex and demanding for companies, which increases the risk of data breaches. As a result, users feel the burn of these actions.
What Is Decentralized Identity Management (DIM)
Decentralized Identity Management is a strategy within “Identity and Access Management (IAM)” that allows individuals to store and control their identities independently, without the oversight of central authorities. Despite this, it still allows features similar to single sign-on (SSO) or federated identity, enabling users to access various platforms and apps from a single data source. Consequently, this approach overcomes the challenges associated with previous identity management systems.
Digital identity has been an excellent alternative to physical proof of identity, but it comes with risks and privacy breaches. People have made several attempts to solve this challenge, but none have been successful. Decentralized Identity Management systems through blockchain, decentralized identifiers (DIDs), and self-sovereign identity (SSI) have provided a lasting solution to these identity management crises.
Users have their heir credentials stored in digital wallets. These credentials serve as a powerful tool for registering or logging into different platforms, acting as passcodes or access keys. Users’ personal identifiable information (PII), i.e., the users’ data, are under the control of the users via decentralized databases. The decentralized nature of Web3’s advanced technology makes this identity management solution suitable for handling the unique challenges of the new phase of the web.
What Are The Benefits of Decentralized Identity Management (DIM)?
Decentralized identity management (DIM) in Web 3.0 addresses limitations of earlier Web 2.0 and 1.0 systems. A decentralized approach to identity has the following benefits:
- Control: DIM empowers users to break free from tech giants exploiting their data. It enables personal storage of data and digital identifiers linked to one’s digital footprint.
- Security: Addressing vulnerabilities of centralized databases, DIM protects personal information, from emails to credit card details, on highly secure decentralized platforms.
- Privacy: DIM uses zero-proof confirmation, limiting platforms’ access to user information. For services requiring age verification, users provide only the necessary digital credentials, not detailed personal data.
- Interoperability: Users benefit from the ease of accessing Web3 applications and submitting credentials via digital wallets, which serve as secure custodians, all with a simple click
Why Web3 Identity Matters
Web3 identity goes beyond just a digital footprint; it empowers users in the online world. Here’s how:
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Unlocking Web3 Features: A secure and verifiable Web3 identity is the foundation for accessing the full potential of Web3. It grants entry to the metaverse, allowing you to interact and own virtual assets. You can also use your Web3 identity to participate in Decentralized Autonomous Organizations (DAOs), shaping the governance of these online communities.
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Empowering Users: Web3 identity shifts control from platforms to users. Unlike Web 2.0, where data collection fuels targeted advertising, Web3 prioritizes user ownership. You control your personal information, deciding what to share and with whom. This transparency and control free you from platforms that rely solely on data for revenue.
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Enhanced Privacy: Web3 identity moves away from centralized databases, reducing the risk of data breaches. You can manage your data directly or leverage smaller, decentralized storage solutions. Regulations like GDPR and CPRA offer some protection in Web 2.0, but Web3 offers a fundamentally different approach, prioritizing user privacy by design.
Components of Web3 Identity
The three key components that make up a Web3 identity are:
1. Decentralized Identifiers (DIDs)
DIDs are a type of globally unique Uniform Resource Identifier (URI) built on decentralized databases. While third-party identifiers rely on centralized databases, DIDs utilize the decentralized framework of blockchain. This technology allows for the identification and verification of individuals with DIDs. DIDs are based on encryption and decryption, ensuring cryptographic verifiability without containing personally identifiable information (PII). Users have full ownership and control over DIDs, making them independent of any organization.
2. Verifiable Credentials (VCs)
Verifiable Credentials go beyond traditional KYC processes, providing secure, tamper-evident digital credentials through cryptographic signatures. Unlike mere scanned documents, VCs enable digital capabilities and are impossible to fake or forge without evidence of tampering. Organizations or verifiers can present these credentials, verifying their validity and authenticity directly from the issuer within seconds. The “trust triangle of verifiable credentials” ecosystem manages the issuance, validity, and authenticity of verifiable credentials, involving the holder, issuer, and verifier.
3. Blockchain
Blockchain serves as the link between verifiable credentials and decentralized identifiers, bringing the architecture of digital identity to life with robust security measures. It functions as a decentralized database or ledger shared across numerous computers globally, forming a blockchain network. As a distributed ledger technology (DLT), blockchain records information in a distributed manner across an actively networked group of computers. Due to its design, altering data stored on a blockchain is exceedingly difficult, providing an extremely secure barrier. Even the most powerful supercomputer cannot hack or cheat the system, as it would require compromising all connected nodes across thousands of computers globally.
Blockchain’s Impact on Web3 Identity
Leveraging its strong security and decentralized structure, blockchain is fundamentally transforming digital identity in the Web3 era. It goes beyond simply acting as a protective barrier; blockchain forms the foundation for a paradigm shift in identity management. By enabling self-sovereign identity (granting users complete control over their data), blockchain empowers individuals in a way never possible before.
Furthermore, blockchain facilitates the creation of interoperable IDs, enabling seamless interactions across various platforms. It also supports the generation of verifiable credentials, adding an extra layer of security to digital transactions. Ultimately, blockchain is not just a component of Web3 infrastructure; it’s a crucial force reshaping the very nature of digital identity.
Conclusion
Users’ identities revolve around every technology, regardless of the type of identity and access management system adopted by such technology or platform. This further proves that humans created technology to serve them, rather than the other way around.
The ultimate question will remain: How can these pieces of technology serve the end users without putting their sensitive data at risk?
The digital identity architecture of Web3 promises a solution of bringing data to the total control of end users. This is why digital identity matters in Web3.
Identity.com
We are pursuing a user-centric internet where users have control over their data. Interestingly, Web3 and digital identity seem to be excelling in these areas. More reason why Identity.com doesn’t take the back seat in contributing to this future via identity management systems and protocols. We also belong to the World Wide Web Consortium (W3C), the standards body for the World Wide Web.
The work of Identity.com as a future-oriented company is helping many businesses by giving their customers a hassle-free identity verification process. Identity.com is an open-source ecosystem providing access to on-chain and secure identity verification. Our solutions improve the user experience and reduce onboarding friction through reusable and interoperable Gateway Passes. Please refer to our docs for more info about how we can help you with identity verification and general KYC processes.