Table of Contents
- 1 Key Takeaways:
- 2 Identity in the Digital World
- 3 What Is Digital Identity?
- 4 What Is Web3 Identity?
- 5 Understanding Web3
- 6 Decentralization in Web3
- 7 What Is Centralized Identity Management (CIM)
- 8 What Is Federated Identity Management (FIM)?
- 9 The Disadvantages of Centralized (CIM) and Federated (FIM) Identity Management
- 10 What Is Decentralized Identity Management (DIM)
- 11 What Are The Benefits of Decentralized Identity Management (DIM)?
- 12 Why Digital Identity Matters in Web3
- 13 Components of Digital Identity in Web3
- 14 Decentralized Identifiers (DIDs)
- 15 Verifiable Credentials (VCs)
- 16 Blockchain
- 17 Blockchain’s Impact on Digital Identity in Web3
- 18 Conclusion
- 19 Identity.com
Key Takeaways:
- Web3 identity is a decentralized approach to digital identity management, providing users with full control over their personal data.
- In Web3, digital identity evolves from centralized control to a decentralized model, ensuring user autonomy and enhanced privacy.
- Built on decentralized frameworks like blockchain technology, Web3 enables a trustless, permissionless, and decentralized internet, distinct from centralized frameworks.
Web3, the first decentralized internet built on blockchain technology, is the future. The transition is currently underway, and structures are being built to accommodate the migration of most internet users to this new world soon. The transition from Web 1.0 to 2.0 will not be comparable to what is about to come, since Web3 includes more than just mobile devices and desktops, but the Internet of Things (IoT) and every internet-enabled device. This massive reconfiguration of the web architecture will affect all surrounding technology.
The next phase of the web consists of different layers, one of which is identity management. With Web3, identity management will shift away from centralized and federated systems to a decentralized system, owned, hosted, and managed by individual users. What impact will this have on the internet’s operation?
Identity in the Digital World
Identity goes beyond mere identification; it represents who we truly are. It captures our beliefs, political views, relationships, and our interactions with the world. It goes beyond credentials like proof of name, address, and nationality. Our identities are shaped by various experiences and activities that mold us into the individuals we are today. The digital counterpart of this complex concept is referred to as digital identity — a representation of our individuality in the digital realm.
What Is Digital Identity?
Our digital identity is essentially a trail of digital footprints we leave on the internet. This includes elements such as names, emails, browsing history, online transactions, and even internet-based relationships. In the era of Web 2.0, which relies on centralized and federated databases, tech giants have leveraged these pieces of our digital footprints for financial gain. However, Web 3.0 promises to bring decentralized databases and blockchain-based identity to life.
What Is Web3 Identity?
In contrast to Web 2.0 & 1.0, Web3 revolutionizes the way identities are stored and accessed across applications, platforms, and for users themselves. An individual’s identity, comprising personal data such as names, email addresses, usernames, passwords, and other sensitive information, is central to their digital presence.
Web3 identity shifts away from traditional centralized data storage, empowering users with direct control over their personal information. This decentralized approach not only establishes users as the custodians of their data but also enhances interoperability, enabling a single set of identities and credentials to be universally accepted across diverse platforms. At its core, Web3 identity embodies a decentralized, user-centric, and interoperable system for managing digital identities.
Understanding Web3
We are currently witnessing a significant transition in the internet landscape, moving into its next phase known as Web3. This evolution marks a notable departure from the operational models of Web 1.0 and 2.0. Unlike these predecessors, Web3 introduces a distinctive model of user engagement. Users are not only encouraged to consume information and socialize as before but also to actively participate. This engagement extends beyond content creation to include involvement in the operation of the platform itself.
Utilizing blockchain technology, Web3 liberates user data from the constraints of government and corporate oversight. In Web3, data will no longer be centralized in isolated databases. Instead, it will be distributed across a global network of users’ devices, a process known as decentralization. However, Web3’s ambition extends beyond decentralizing data storage; it also aims to ensure operational transparency, a clear departure from the opacity of centralized databases and federated identity management systems. The inherent transparency of blockchain technology is a cornerstone of Web3, embodying its architecture and characteristics, including decentralization, permissionlessness, trustlessness, 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 Digital Identity Matters in Web3
The foundation laid up to this point has made digital identity a crucial element in Web3 architecture. Digital identity enables advancements like access to the metaverse, NFT ownership, and participation in DAO governance.
The Web 2.0 model thrived on collecting and making money from user data, leading to questionable practices and the rise of addictive social media platforms. These platforms often kept users engaged primarily to gather valuable data for targeted advertising.
Unlike Web 2.0, Web3 doesn’t mainly depend on sharing, selling, or marketing data for money. Instead, Web3 aims to free users from platforms that use their data only for advertising.
Furthermore, Web3 promises better user privacy. Regulations such as CPRA and GDPR are in place to watch how companies access user data and to limit how much control they have over this data within their centralized identity management systems. With Web3, the approach moves away from a single centralized database. Instead, users will either manage their own data or rely on smaller storage devices. This decentralized approach reduces the risk of data breaches common in centralized systems.
Components of Digital Identity in Web3
Any data or internet footprint traceable to an individual or entity is referred to as digital identity. Centralized identity management makes data vulnerable to tampering, but users can reduce this risk by taking control of their digital identity. Below are the three components of Web3:
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.
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.
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.
Blockchain’s Impact on Digital Identity in Web3
Drawing upon its strong security and decentralized structure, blockchain significantly influences digital identity in the Web3 era. Far from just acting as a protective barrier, blockchain forms the basis for a fresh approach to identity management. It enables the concept of self-sovereign identity, granting individuals unprecedented control over their personal data—a notable departure from traditional centralized models.
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.