A digital identity arises organically from the use of personal information on the web and from the shadow data created by the individual’s actions online. A digital identity may be a pseudonymous profile linked to the device’s IP address, for example, a randomly-generated unique ID. Data points that can help form a digital identity include usernames and passwords, drivers license number, online purchasing history, date of birth, online search activities, medical history, etc. Biometrics, Behavioral, Biographic are the modals that make up a person’s identity.

n one example, users sign up to a self-sovereign identity and data platform to create and register a DID. During this process, the user creates a pair of private and public keys. Public keys associated to a DID can be stored on-chain in case keys are compromised or are rotated for security reasons. Additional data associated with a DID such as attestations can be anchored on-chain, but the full data itself should not be stored on-chain to maintain scalability and compliance with privacy regulations.

Regulations such as the EU General Data Protection Regulation (EU GDPR) strengthen identity standards that require modern identity solutions. Governments look towards distributed ledger technology to bestow identities to the unidentified and to protect citizen’s personally identifiable information. Blockchain technology offers the following benefits: Decentralized Public Key Infrastructure (DPKI)Decentralized Storage Manageability and Control.

Self-sovereign identity (SSI) is the concept that people and businesses can store their own identity data on their own devices; choosing which pieces of information to share to validators without relying on a central repository of identity data. These identities could be created independent of nation-states, corporations, or global organizations.

Digital ID is expected to contribute greatly to economic growth worldwide over the next 10 years, and it is considered inclusive since it benefits individuals largely while stimulating economic activity for the global market. For example, a McKinsey study reveals that reaching the unbanked population in ASEAN could increase the economic contribution of the region from $17 billion to $52 billion by 2030. Additionally, the reported value attributed to digital identities is estimated to expand by 22% yearly, with economic benefits of close to €330 billion for European businesses and governments by 2020, and nearly twice as much value for consumers – €670 billion. Decentralized identity models give users the chance to unlock this value, which will, in turn, grow the global economy. 

A key element of securing decentralized identities is cryptography. In cryptography, private keys are known only to the owner, while public keys are disseminated widely. This pairing accomplishes two functions. The first is authentication, where the public key verifies that a holder of the paired private key sent the message. The second is encryption, where only the paired private key holder can decrypt the message encrypted with the public key.

Once paired with a decentralized identity, users can present the verified identifier in the form of a QR code to prove their identity and access certain services. The service provider verifies the identity by verifying the proof of control or ownership of the presented attestation — the attestation had been associated with a DID and the user signs the presentation with the private key belonging to that DID. If they match, access is granted.

Blockchain technology allows for users to create and manage digital identities through the combination of the following components: Decentralized identifier, Identity management, Embedded encryption.