Decentralized Identification (DID): What It Is and How to Keep Your Digital Identity Safe and Private

Every day, we leave behind countless digital footprints — signing up for websites, verifying our identities with banks, and sharing personal data with dozens of online services. But where does all that information go? Our passport details, biometrics, and financial records are stored on centralized servers owned by corporations that are constantly targeted by hackers. Data breaches are no longer breaking news — they’ve become an everyday reality. Centralized databases have turned into gold mines for cybercriminals, while we’ve lost control over who uses our personal information and how. Sound familiar? It’s time to discover a technology that flips the entire concept of digital identification on its head.

In this article, we’ll explore how Decentralized Identification (DID) tackles the growing issue of personal data leaks — and why major industries, from finance to healthcare, are already adopting it.

We’ll break down how decentralized identity works, review real-world projects that empower millions of users to take back control of their personal data, and explore the core technology behind it — from verifiable credentials to distributed ledgers. You’ll also see practical case studies showing how DID is already transforming banking, e-commerce, and healthcare.

By the end of this guide, you’ll understand why DID isn’t just another crypto buzzword — it’s a fundamental shift in how we manage and protect our digital selves. No fluff, no jargon — just clear explanations, real solutions, and actionable insights.

Ready to take back control of your data? Let’s dive in!

What’s Wrong With Personal Data Today?

Let’s be honest — the current system of managing digital identities is a complete mess. Every time you register for a new service, open a bank account, or verify your identity on a crypto exchange, your personal information gets copied and stored on someone else’s servers. Passport details, selfies with documents, home addresses, bank account numbers — all of it is kept in centralized databases accessible to dozens or even hundreds of company employees.

1. Data Breaches. The number one problem is data leaks. Over the past five years, thousands of incidents have occurred where hackers broke into the databases of major corporations. Facebook, Equifax, Marriott, LinkedIn — the list of victims reads like the Fortune 500. In 2024 alone, official reports revealed that the data of more than 2 billion users worldwide had been compromised.
   Imagine this: your passport, phone number, purchase history, and even medical records could end up in open access or on the dark web, sold for just a few dollars.
2. Lack of Control. The second major issue is the lack of control over your personal data. Once you share your information with a company — what happens next? Who can guarantee that it won’t be sold to third parties, used for targeted advertising, or handed over to authorities without your knowledge?
   Most users don’t even bother to read the 50-page user agreements written in fine print, where every possible use of your data is spelled out. In reality, we live in a world where our digital identity doesn’t belong to us, but to dozens of corporations.
3. Redundant Verification. The third issue is redundant verification. Want to open a bank account? Prepare your ID, tax number, and proof of income. Signing up on an exchange? Once again — ID, selfie, proof of address. Buying crypto? Another KYC process.
   Each time, you have to prove who you are all over again, sending copies of the same documents to different organizations. This isn’t just inconvenient — it’s dangerous. The more copies of your data scattered across the internet, the higher the chance of a breach.
4. Centralized Points of Failure. Centralized identity systems create single points of failure. If a company’s server crashes or becomes the target of a DDoS attack, you instantly lose access to your account. If a database is hacked, millions of users suffer at once.
   It’s like putting all your eggs in one basket — drop it once, and everything breaks.
5. Discrimination and Censorship. Finally, there’s the issue of discrimination and censorship. Centralized platforms can suspend or block your account without explanation. Banks may refuse to serve clients from certain countries. Governments can demand that companies hand over user data.
   In this kind of system, your digital identity becomes a hostage to intermediaries who decide who gets access to services — and who doesn’t.

And the final nail in the coffin of traditional identity systems is fragmentation. Each of us has hundreds of digital identities — a Google account, a Facebook profile, a bank login, an exchange ID. All of them are separate, disconnected from one another, and each requires a password (or worse — the same one reused everywhere). There’s no unified way to manage your digital identity, verify it where needed, or revoke access when necessary.

It’s these very problems — data breaches, lack of control, redundant verification, single points of failure, censorship, and fragmentation — that led to the emergence of the concept of decentralized identification. DID flips the traditional model on its head, giving users full control over their digital identity and eliminating the need for intermediaries. But how does it actually work? Let’s find out.

What Is DID

Decentralized Identification (DID) is a revolutionary approach to managing digital identity that puts the user at the center of the system. Simply put, DID allows you to create a digital identity that belongs entirely to you — not to Facebook, a bank, or the government. You decide what data to share, with whom, and for how long — all without intermediaries or centralized databases.

Imagine a digital passport stored securely on your smartphone — not on a company’s servers. You can prove your age without revealing your date of birth. Demonstrate your financial reliability without exposing your account balance. Verify your education without sending a copy of your diploma. Sounds like science fiction? It’s already real, and it’s called decentralized identity.

At the core of DID lies the concept of Self-Sovereign Identity (SSI) — meaning you are the sole owner of your personal data. No one can revoke your identity, block it, or use it without your consent. You’re not dependent on corporations or governments — your digital identity exists independently and remains under your full control.

Technically, decentralized identification is built on three key components.

1. The first is the DID identifier — a unique string of characters that looks something like this: did:example:123456789abcdefghi. This identifier is tied to you but contains no personal information. Think of it as a digital fingerprint that proves your uniqueness without revealing your identity.
2. The second component is the DID document. It contains public encryption keys, authentication methods, and communication endpoints. This document is stored on a distributed ledger (most often a blockchain), allowing anyone to verify its authenticity. Importantly, the DID document contains no personal data — only cryptographic keys and technical parameters.
3. The third component is Verifiable Credentials (VCs) — digital proofs of specific facts about you, such as your age, education, employment history, or credit score. These credentials are issued and cryptographically signed by trusted organizations (universities, banks, employers) and stored in your digital wallet. When you need to prove something, you can present only the necessary credentials — without disclosing your entire personal dataset.

To better understand the difference between traditional and decentralized identification, let’s compare them:

The key feature of DID is Zero-Knowledge Proofs (ZKPs) — a cryptographic technology that allows you to prove a fact without revealing the underlying data. For example, you can confirm that you’re over 18 without showing your date of birth, or prove that your account balance exceeds $10,000 without disclosing the exact amount. It’s the magic of cryptography in action.

Decentralized identity operates on the principle of “don’t trust — verify.” Every verifiable credential is digitally signed by the issuing organization, and anyone can confirm the authenticity of that signature through the blockchain — without contacting the issuer directly. It’s like having a notarized document, but in digital form and without the paperwork.

It’s important to understand that DID isn’t just a technology for crypto enthusiasts. It’s an international standard developed by the World Wide Web Consortium (W3C) — the same organization that created the standards for HTML and CSS. In 2022, the DID specification became an official W3C recommendation, meaning it’s now recognized as part of the global IT standards framework.

Decentralized identification addresses one of the fundamental problems of the internet: there’s no built-in way to verify identity without intermediaries. When the internet was created, no one thought about authentication — protocols like TCP/IP were designed simply to transmit data packets. All authentication systems were added later, and they were built around centralized models. DID finally provides the internet with something it has been missing from the very beginning — a decentralized layer of identity.

Another crucial aspect is portability. Your decentralized identity isn’t tied to a specific platform or service. You can use it anywhere — in financial apps, healthcare systems, marketplaces, or social networks. Once you create a DID, it works across the entire ecosystem of compatible services. It’s like having one SIM card that works in every country — except it’s for your digital identity.

DID also solves the problem of account recovery. In centralized systems, if you forget your password, you must contact customer support and go through verification steps. With decentralized identification, you use cryptographic keys and can set up recovery mechanisms through trusted contacts or backup keys. No bureaucracy, no waiting for support — just secure, user-controlled access restoration.

Note! It’s important to understand that decentralized identification doesn’t mean complete anonymity or a “do whatever you want” approach. It’s about control and selective data disclosure. If regulations require KYC (Know Your Customer), you’ll still need to complete verification — but your data will be stored with you, not on an exchange’s servers. You’ll present verifiable credentials confirming that you’ve passed the check, without actually sharing the underlying documents.

How Decentralized Identification (DID) Works

Now the interesting part — how this decentralized identity magic works in practice. Let’s break down the mechanics step by step, without boredom but with a full understanding of the processes. Spoiler: it’s simpler than it looks and much more convenient than carrying a folder of documents.

Creating a DID

It all starts with generating your decentralized identifier. You download a wallet app (for example, from Sovrin, Civic, or another DID provider) that acts as a digital safe for your identity. On first run, the app generates a pair of cryptographic keys: a private key and a public key. The private key is your secret code, stored only on your device and never transmitted anywhere. It’s like the master password to your entire digital life. The public key is the open part — it’s written to the blockchain and used to verify your signature. Think of the private key as the pen you sign documents with, and the public key as your signature that anyone can see and verify.

After the keys are generated, a unique DID identifier is created. It looks like this: did:sov:2wJPyULfLLnYTEFYzByfUR or did:ethr:0x3b0BC51Ab9De1e5B7B6E34E5b960285805C41736. The first segment (did:) indicates a decentralized identifier, the second (sov or ethr) specifies the underlying network (Sovrin or Ethereum), and the third segment is your unique identifier on that network.

The next step is creating the DID document. This JSON file contains technical information: public keys for encryption and authentication, communication endpoints, and recovery methods. The document is recorded on the blockchain, becoming publicly accessible but anonymous — it contains no personal data, only cryptographic and technical parameters.

The entire DID creation process takes literally a minute. No forms to fill, no documents to scan, no approvals to wait for. You simply generate the keys, and your decentralized identity is ready to use.

Obtaining Verifiable Credentials

Now you have a DID, but it’s empty — like a passport with no stamps. To make it useful, you need to obtain verifiable credentials (VCs) from trusted organizations. These can include banks, universities, employers, or government institutions — any entity capable of confirming facts about you.

For example, let’s say you want to receive a digital diploma from your university. You contact the registrar’s office, which already supports the DID system, and present your identifier. The university verifies your records in its database, confirms that you’ve completed your studies, and issues a verifiable credential — a digital certificate cryptographically signed by the university.

This certificate contains:

• Information about the issuing organization (the university)
• Data about the holder (your DID, but no personal details)
• Claims (for instance, that you earned a bachelor’s degree in Information Technology)
• The issuance date and validity period
• The university’s digital signature

A key point: verifiable credentials are stored in your digital wallet, not in the university’s database. It’s as if you were given a notarized document on paper that you keep with you — only now it’s digital and cryptographically protected.

Similarly, you can obtain credentials from a bank (creditworthiness confirmation), an employer (proof of work experience), a medical clinic (vaccination record), or government agencies (digital passport). All these credentials accumulate in your DID wallet, forming a complete decentralized digital identity.

Presenting Credentials

Now comes the coolest part — how you actually use your decentralized identity. Imagine you’re registering on a crypto exchange that requires identity verification. Instead of going through a traditional KYC process (uploading a passport, taking a selfie with it, waiting for approval), you simply present your verifiable credentials.

The exchange sends you a request through a special protocol: “Please confirm that you’re over 18, not on a sanctions list, and have passed basic identity verification.” You open your DID wallet, see the request, and choose which credentials to share.

Here’s where the magic of selective disclosure happens. Instead of handing over your entire passport, you create a Verifiable Presentation — a special package containing only the requested information. Using Zero-Knowledge Proofs, you prove that you’re over 18 without revealing your exact date of birth. You confirm your citizenship without showing your full address. You demonstrate that you’ve already passed KYC at a bank, without sharing any actual documents.

The exchange receives your presentation and verifies its authenticity. It checks the digital signature of the bank that issued the credential, compares it with the bank’s public key stored on the blockchain, and confirms that the data hasn’t been tampered with. The whole process takes seconds — and no one ever gets access to your original documents.

Technical details of how DID works

Under the hood, decentralized identification relies on several key technologies.

The first is distributed ledgers, most commonly blockchains. They are used to store DID documents and the public keys of issuing organizations. The blockchain guarantees immutability: once a university issues you a diploma and records it on the blockchain, no one can change or delete that record later.

The second is public-key cryptography. Every action within a DID system is signed with a private key. When you present credentials, you sign the presentation with your private key, proving that you are the legitimate owner of that DID. When a university issues a diploma, it signs it with its own key, confirming its authenticity.

The third is the DID protocol itself — an open W3C standard that defines how identifiers and DID documents should look and how participants interact. Because of this standardization, different DID systems can work together. For example, an identifier created on Sovrin can be recognized by an application running on Ethereum.

The fourth is hashing. Personal data in verifiable credentials is often stored not in plain text but as cryptographic hashes. A hash is a one-way function: it’s easy to generate a hash from data, but impossible to reconstruct the original data from it. This adds another layer of privacy protection.

Interaction protocol

When communication takes place between the DID holder (you), the issuer (the organization issuing the credentials), and the verifier (the service that checks the data), a special message exchange protocol is used. Most often, this is DIDComm — a secure communication protocol based on DIDs.

Here’s how it works in practice: you apply for a loan at a bank. The bank sends you an encrypted message requesting proof of income and credit history. The message is encrypted with your public key, so only you can read it. You open the request in your wallet, select the necessary credentials (for example, an income statement from your employer and a credit score from a credit bureau), and send a presentation back to the bank, encrypted with its public key. The bank decrypts the presentation, verifies the signatures of your employer and the credit bureau through the blockchain, confirms the authenticity of the data, and makes its lending decision.

All communication happens directly, peer-to-peer, without intermediaries. The data is transferred in encrypted form and never stored on any intermediate servers.

Revocation of credentials

What happens if your credentials become invalid? For example, you leave your job, and your employment verification is no longer relevant. Or, hypothetically, a university revokes your diploma for plagiarism (hopefully not). For such cases, there is a revocation mechanism. When an organization issues verifiable credentials, it also creates a record in a revocation registry on the blockchain. This registry contains a list of identifiers for all issued credentials and their current status — valid or revoked. When a service verifies your credentials, it checks not only the issuer’s signature but also the revocation registry to see if the credential has been invalidated.

Note! Even if your credentials are revoked, they remain stored in your wallet. It’s just that when verified, services will see they’re no longer valid. It’s similar to having a canceled passport — physically, you still possess it, but you can’t use it for travel.

Recovery of access

One of the biggest challenges in cryptographic systems is that if you lose your private key, you lose everything. Decentralized identification solves this through social recovery and backup keys. When creating your DID, you can assign trusted contacts (friends or family members) who can help restore access. Each of them receives a fragment of a special recovery key. If you lose your private key, you’ll need to gather a required number of fragments (for example, 3 out of 5) from your trusted contacts to regain access to your DID.

An alternative method involves backup keys, which you store separately — for instance, on a hardware wallet or in an encrypted cloud vault. The golden rule: never keep all keys in one place.

Decentralized identification changes the entire logic of how we handle data. Instead of the traditional “give your data and trust the company” model, it introduces a new paradigm — “keep your data and prove only what’s necessary.” This isn’t just a technological improvement; it’s a fundamental shift in how we think about digital privacy and control over personal information.

Advantages of Decentralized Identifiers

Now let’s break down why decentralized identification is not just another crypto hype, but a real solution to concrete problems. The advantages of DIDs are so significant that major corporations and governments are already adopting this technology. Here’s what you gain when you switch to decentralized identity.

1. Full control over your data. This is the main reason it all began. With a DID, you become the sole owner of your digital identity. No company can block your account, sell your data to advertisers, or share it with third parties without your consent. You decide what information to disclose, when, and to whom. Want to show only your age without revealing your birth date? You can. Need to prove your education but hide your grades? No problem. Decentralized identification gives you back the control over personal data that was lost with the rise of the internet.
2. Protection from leaks and hacks. In traditional identity systems, a single server breach can compromise millions of accounts. With DIDs, this scenario is impossible. Your data isn’t stored on centralized servers — it lives on your device. Even if hackers manage to compromise a blockchain network (which is extremely difficult), they would only obtain public keys and DID documents, which are useless without your private keys. Personal information, verifiable credentials, and interaction history are all stored locally and protected by cryptography.
3. Selective disclosure of information. This is the killer feature of decentralized identity. Instead of sending your full data set to every service, you share only the minimum required information. Want to buy alcohol online? You can prove you’re over 18 without revealing your exact age, address, or passport number. Applying for a loan? Prove financial solvency without showing your full bank statement. This concept is known as data minimization, and DIDs make it possible through Zero-Knowledge Proofs.
4. No single points of failure. Centralized systems are fragile: if Facebook’s servers go down, billions lose access to their accounts. With decentralized identification, this can’t happen. Your DID doesn’t depend on any particular server or company. It’s recorded on a blockchain operating across thousands of nodes worldwide. Even if half the nodes fail, your identity remains available. This is critical for financial systems, medical services, and other areas where 24/7 availability can be a matter of life and death.
5. Universality and portability. One decentralized identity works everywhere. No more creating separate accounts for each service, remembering dozens of passwords, or repeating KYC for every exchange. You use one DID for banking, online shopping, interactions with government institutions, and access to healthcare. It’s like having a universal passport recognized in all countries — only for the digital world.
6. Cost reduction for businesses. Companies spend millions maintaining infrastructure to store and protect personal data — servers, security systems, cybersecurity teams, data breach insurance. With DIDs, businesses no longer need to store customers’ personal data. They simply verify the verifiable credentials users present. This drastically reduces infrastructure costs and minimizes liability for data leaks.
7. Resistance to censorship. Your decentralized identity cannot be revoked or blocked by a centralized authority. Even if a government bans a particular service, your DID remains yours. Even if a company deletes your account, your digital identity persists. This is crucial for people in authoritarian regimes, where cutting off access to financial or social services is used as a means of control.
8. Compliance with privacy regulations. Regulations like the EU’s GDPR or California’s CCPA require companies to ensure users’ rights to delete, transfer, and control their data. Decentralized identification inherently complies with these requirements. Users control their data, can move it anywhere, and revoke access at any time. For businesses, this means less compliance overhead and lower risks of fines.
9. Simplified KYC/AML procedures. For the crypto industry, this is a game-changer. Instead of undergoing verification on every exchange and uploading the same documents repeatedly, you complete KYC once with an authorized provider. They issue you a verifiable credential confirming verification. Then, you simply present this credential to any service requiring KYC. The exchange checks the provider’s signature and grants access instantly — saving enormous amounts of time.
10. Cross-border interoperability. Decentralized identity works globally. A DID created in Russia is recognized in the US, Europe, or Asia — anywhere compatible standards are used. This solves document recognition issues faced by migrants, travelers, and international workers. A digital diploma issued by a Russian university can be instantly verified by an employer in Germany via blockchain.
11. Transparent interaction history. Every use of your DID and verifiable credentials is recorded on the blockchain (without revealing data contents). You can always see who requested access, when, and what information was shared, as well as which organizations issued credentials to you. This creates complete transparency and auditability, absent in traditional systems. If someone misuses your data, you have cryptographic proof.
12. Durability of digital identity. Your Facebook account exists only as long as Facebook does. Your banking ID works only while the bank operates. A decentralized identity outlives any company or platform. It’s recorded on a blockchain supported by a distributed network and will function as long as the internet exists. This is vital for preserving reputation and interaction history — your achievements, certificates, and reviews stay tied to your DID forever.
13. Automation through smart contracts. DIDs integrate seamlessly with smart contracts. You can automate actions based on verifiable credentials — for example, access an exclusive NFT drop by automatically proving membership in a specific community, or instantly obtain a loan if your credit score exceeds a threshold. The smart contract verifies your data and executes the action without human intervention.

On the basis of DIDs, decentralized reputation systems can be built. Your purchase history, reviews, ratings, and achievements are all linked to your identifier and can be transferred between platforms. Have you accumulated a 5-star rating as a seller on one marketplace? This reputation can be carried over to another platform without starting from scratch. For freelancers, sellers, and service providers, this is a huge advantage. Here are the specific advantages of decentralized identification in a structured form.

For users:

• Full control over personal data and digital identity
• Protection against data leaks thanks to the absence of centralized storage
• Ability for selective disclosure of information through Zero-Knowledge Proofs
• A single identity for all services instead of dozens of separate accounts
• Data portability and independence from specific platforms
• Resistance to censorship and immunity from external blocking
• Transparent data usage history with auditability
• Reduced risks of identity theft and fraud

For businesses:

• Radical reduction in costs for storing and protecting personal data
• Simplified KYC and client verification procedures
• Automatic compliance with GDPR, CCPA, and other regulations
• Reduced legal risks associated with data breaches
• Increased customer trust through transparency
• Opportunities to create new business models based on DID

For society:

• Digital inclusion for people without traditional documents
• Reduced bureaucracy and faster government services
• Combating corruption through transparency and immutability of records
• Protection of human rights in countries with authoritarian regimes
• Global compatibility of documents and credentials
• Resource savings through reduced paper-based document flow
• Creation of fairer and more transparent systems of trust

Decentralized identity is not a replacement for traditional identification systems but rather their evolution. It preserves all the advantages of digital verification while eliminating the main drawbacks: centralization, vulnerability to data breaches, and lack of user control. This technology makes the internet what it was originally meant to be — decentralized, open, and owned by people, not corporations.

Major Players in Digital Identity Projects

Decentralized identification has long moved beyond theoretical concepts and enthusiast experiments. Today, tech giants, major corporations, governments, and international organizations are investing heavily in the development of DID. Let’s take a look at who is shaping the future of digital identity and which projects are already transforming the industry.

Sovrin Foundation

Sovrin is a non-profit organization and one of the most mature ecosystems in decentralized identification. Launched in 2016, the project has since become the de facto standard for enterprise-level DID implementations. Sovrin operates on its own distributed ledger, optimized specifically for digital identity use cases.

What makes Sovrin special?
First, it’s a public blockchain with permissioned write access. Anyone can read data from the network and verify credentials, but only authorized nodes can write new DID documents. This approach maintains a balance between decentralization and quality control—ensuring there’s no spam or irrelevant data in the network.

Second, Sovrin uses Hyperledger Indy, a blockchain framework developed by the Linux Foundation specifically for decentralized identity. Indy provides all the essential features: DID creation, issuance of verifiable credentials, Zero-Knowledge Proofs, revocation registries, and more. It’s a ready-to-use solution that can be seamlessly integrated into enterprise systems.

Sovrin is already being used in real-world projects across the globe. The Government of Canada is testing DID for citizens’ digital documents. The UK’s National Health Service (NHS) is experimenting with verifiable credentials for healthcare workers. Major banks are deploying Sovrin to simplify KYC procedures. The ecosystem includes over 100 major participants, including IBM, Cisco, and T-Mobile.

Microsoft and ION

When Microsoft steps into the game, it’s a clear sign that the technology is moving from the experimental stage to the mainstream. In 2020, Microsoft launched ION (Identity Overlay Network) — a layer-two decentralized identity network built on top of the Bitcoin blockchain.

The choice of Bitcoin as the base layer is no coincidence. It remains the most secure and decentralized blockchain network in the world. ION uses Bitcoin to anchor DID operations, but the data itself is processed on a second layer through the Sidetree protocol. This architecture allows the network to handle tens of thousands of operations per second — something that would be impossible on a standard blockchain.

Microsoft has already integrated DID technology into its product ecosystem. Azure Active Directory now supports verifiable credentials, enabling companies to issue digital IDs to employees that work not only within internal corporate systems but also across any external services compatible with W3C DID standards.

For Microsoft, decentralized identity represents a strategic move toward the future of cloud services. Instead of storing billions of accounts on centralized servers — and bearing the associated data breach risks — the company shifts control to users. This approach reduces liability and aligns with the global privacy-first movement.

Civic

Civic is one of the pioneers of consumer-focused DID solutions in the crypto industry. The project was launched in 2017 through an ICO and was immediately positioned as “your identity in your pocket.” Unlike enterprise-focused systems like Sovrin, Civic targets the mass market and emphasizes integration with cryptocurrency services.

The main product, Civic Wallet, functions as a digital passport. You complete KYC once by uploading your documents and passing biometric verification. Civic verifies the information and issues verifiable credentials. After that, you can use them to register on crypto exchanges, DeFi platforms, NFT marketplaces, and other blockchain-based services — without repeating the verification process each time.

Civic actively collaborates with crypto exchanges and Web3 projects. Platforms like Binance, Coinbase, Uniswap, and dozens of others have integrated Civic Pass — a DID-based verification system. Instead of going through traditional KYC, users simply connect their Civic Wallet, share the required credentials, and gain access to the service within seconds.

A key feature of Civic is the tokenization of the verification process. The platform uses its native CVC token to pay for verification services. Validators who review user documents are rewarded in CVC, creating a decentralized identification economy where participants are financially motivated to perform high-quality verification.

Evernym and Connect.Me

Evernym is a commercial company behind many of Sovrin’s core technologies. They developed Connect.Me, a flagship application for managing decentralized identities. Connect.Me functions as a digital wallet for verifiable credentials, supporting the full range of DID features.

Evernym focuses on the corporate sector and government projects. Its solutions are used in healthcare for managing medical data, in education for digital diplomas, and in finance to simplify customer onboarding. The company also provides consulting services, helping organizations integrate decentralized identity into existing workflows.

An interesting Evernym case is the OrgBook project launched with the Government of British Columbia (Canada). It’s a public registry of verifiable credentials for businesses. Any company can obtain a digital certificate of registration, licenses, or permits, which other organizations can instantly verify through the blockchain. This has dramatically simplified business-to-government and business-to-business interactions.

uPort and Ethereum-based DID

uPort was one of the first decentralized identity projects built on Ethereum. Although active development stopped in 2020, it laid the groundwork for an entire ecosystem of Ethereum-based DID solutions. Today, the ERC-725 (Ethereum Identity Standard) is widely adopted across many projects.

Ethereum is an attractive platform for DID because of its mature smart contract ecosystem. Decentralized identity on Ethereum can directly interact with DeFi protocols, NFT marketplaces, DAOs, and other Web3 applications. Your DID becomes a universal key to the entire decentralized application world. Projects such as 3Box (now Ceramic Network) and Veramo have taken uPort’s place, advancing the concept of decentralized identifiers by integrating with IPFS for data storage and creating more flexible solutions for Web3.

IBM and Trusted Identity

IBM, one of the leading players in the enterprise blockchain space, is actively investing in decentralized identity. The company is one of the founding members of the Sovrin Foundation and has developed its own solutions based on Hyperledger Fabric.

IBM Digital Health Pass is a vivid example of DID being applied in real-world scenarios. This platform for managing medical credentials gained wide adoption during the COVID-19 pandemic. Users could store test results, vaccination certificates, and other medical data in digital form, presenting them to employers, airlines, and government agencies without revealing their full medical history.

IBM is also working on implementing DID in logistics and supply chain management. Its solutions allow companies to verify counterparties, validate quality certificates, and track product origins using verifiable credentials.

European Blockchain Services Infrastructure (EBSI)

The European Union has launched the ambitious EBSI initiative — a pan-European blockchain infrastructure, one of whose key components is decentralized identity. EBSI is developing standards for digital IDs of EU citizens that will function across all member states. The project includes several pilot programs: the European Self-Sovereign Identity Framework (ESSIF) for digital passports, European blockchain-based certificates for education (the EU’s analogue of diplomas), and systems for business verification. The goal is to create a unified European digital identity space by 2026.

EBSI is an example of how governments are beginning to view decentralized identification not as an alternative, but as a complement to traditional systems. DID-based digital passports will operate alongside physical documents, giving citizens more control over their personal data.

World Wide Web Consortium (W3C)

W3C is not a company or a project but an organization that develops standards for the internet. HTML, CSS, and XML—all these technologies are standardized by W3C. In 2019, the consortium began working on the Decentralized Identifiers specification, which became an official recommendation in 2022.

W3C standardization is critically important for the widespread adoption of decentralized identification. It ensures that different DID systems are compatible with each other, allowing users to transfer their identifiers across platforms and enabling developers to build applications that work with any DID implementation.

The W3C DID working group includes Microsoft, IBM, ConsenSys, the Sovrin Foundation, government agencies, and dozens of other participants. It’s a collective effort to build the foundation for the future of the internet — one with a built-in layer of decentralized identity.

Additionally, several other notable projects deserve mention:

1. Ontology — a blockchain platform focused on digital identity, particularly popular in the Asia-Pacific region. Ontology ID (ONT ID) is used in China for corporate verification and in educational programs for issuing digital certificates.
2. SelfKey — a project specializing in KYC-as-a-service for the crypto industry. Users complete verification once and can then use their SelfKey ID to access financial services, open bank accounts, and register companies.
3. Bloom — a platform for credit scoring based on decentralized identity. Bloom allows people without a traditional credit history to build a reputation through blockchain and gain access to financial services.
4. Dock — a project focused on verifiable credentials for education and professional certifications. Universities and training centers use Dock to issue diplomas that employers can instantly verify.

Take note! All these participants form an exponentially growing ecosystem of decentralized identity. Each contributes its own expertise: some focus on technological infrastructure, others on user applications, and still others on corporate implementations or government projects. Together, they are building a new paradigm of digital identity — one where the user controls their own data, and trust is ensured by cryptography rather than the authority of centralized institutions.

DID and Blockchain

Blockchain and decentralized identity are a match made in heaven — a perfect combination of technologies where the strengths of one compensate for the weaknesses of the other. Without blockchain, DID would remain just an elegant theory, while without practical use in identity systems, blockchain would still be a technology searching for a real use case. Let’s explore why these technologies work so well together and how exactly blockchain enables decentralized identity to function.

The main goal of any digital identity system is to create trust without a central authority. Traditionally, trust has been provided by governments (passports) or large corporations (Google, Facebook accounts). But what if you want to prove your identity independently of these structures? You need a system that everyone can trust but that no one controls. Blockchain solves this problem through three fundamental properties.

The first is immutability. Once a record is written to the blockchain, it’s practically impossible to alter or delete it. If a university issues you a digital diploma and records it on the blockchain, that record will exist forever. The university cannot revoke the diploma retroactively without your knowledge, and you cannot falsify the data.

The second property is decentralization. Blockchain operates on thousands of independent nodes across the world. There is no single server to hack or shut down, and no company can block your access. Your decentralized identity exists within a distributed network — as long as the internet runs, it remains accessible.

The third property is transparency and verifiability. Anyone can verify the authenticity of information stored on the blockchain. When an employer receives your digital diploma, they can independently confirm that it was genuinely issued by the university by checking the cryptographic signature on the blockchain. There’s no need to call the registrar, send requests, or wait for confirmations.

How Blockchain Stores DIDs

It’s important to understand that blockchain does not store your personal data — this is a common misconception. Only DID identifiers, public keys, and data hashes are recorded on the blockchain. Think of the blockchain as a public bulletin board where anyone can post their business card with contact details, but not their personal diary full of private information.

When you create a DID, a DID document is recorded on the blockchain — a JSON file containing your unique identifier and public keys for cryptographic operations. It looks something like this:

text

{

  "@context": "https://www.w3.org/ns/did/v1",

  "id": "did:example:123456789abcdefghi",

  "authentication": [{

    "id": "did:example:123456789abcdefghi#keys-1",

    "type": "Ed25519VerificationKey2020",

    "controller": "did:example:123456789abcdefghi",

    "publicKeyMultibase": "zH3C2AVvLMv6gmMNam3uVAjZpfkcJCwDwnZn6z3wXmqPV"

  }]

}

No names, addresses, birth dates, or photos are stored. Only technical parameters for cryptographic operations are included. Your personal data is kept on your device in encrypted form, and only you decide when and to whom to share it.

Decentralized identifiers are not tied to a single blockchain. There are multiple implementations across different platforms, each with its own advantages.

1. Bitcoin is used by Microsoft’s ION project. Why Bitcoin? Because it is the most secure and decentralized network. Attacking Bitcoin is economically unfeasible—the cost exceeds any potential gain. For critical identifiers that must last decades, Bitcoin is ideal. However, Bitcoin is slow and expensive, so ION operates as a second layer, processing thousands of DID operations and recording only the final hashes on Bitcoin.
2. Ethereum is popular due to smart contracts and a mature ecosystem. Decentralized identity on Ethereum can directly interact with DeFi protocols, NFT marketplaces, and DAOs. The ERC-725 standard defines how identifiers should operate on Ethereum. The downside is high fees during network congestion, although Ethereum 2.0 and layer-two solutions (Polygon, Optimism) mitigate this.
3. Hyperledger Indy is a blockchain specifically designed for decentralized identity. It is used by Sovrin and many corporate projects. Indy is optimized for DID operations, supporting built-in features for verifiable credentials, Zero-Knowledge Proofs, and revocation registries. It’s like using a specialized tool instead of a general-purpose one—everything works faster and more efficiently.
4. Cardano positions itself as a third-generation blockchain and actively develops digital identity solutions. The Atala PRISM project provides infrastructure for creating DIDs on Cardano. Advantages include a scientific approach to development, formal code verification, and energy efficiency thanks to the Proof-of-Stake consensus algorithm.
5. Polkadot and other cross-chain platforms solve fragmentation issues. Your DID can be created on one blockchain, while verifiable credentials are issued on another. Cross-chain technologies enable compatibility, allowing different blockchains to exchange digital identity information.

Blockchain provides decentralized identity not only with immutability and decentralization but also programmability through smart contracts. This opens entirely new possibilities for automating processes that require identity verification.

Imagine lending without a bank. You submit a loan application on a DeFi platform, which automatically checks your verifiable credentials: credit score, proof of income, repayment history. A smart contract analyzes this data according to a programmed algorithm and instantly decides whether to approve or deny the loan. No managers, calls, or multi-day checks. Full automation while preserving privacy—the smart contract only sees what you allow it to reveal through Zero-Knowledge Proofs.

Or consider voting in a DAO (decentralized autonomous organization). To participate, you must confirm your membership but remain anonymous so your vote cannot be traced. The smart contract verifies your membership credentials without revealing your digital identity. You vote anonymously, yet the system ensures each member votes only once.

Another example is automatic access to content or services. An NFT marketplace can grant exclusive drops only to users with verified reputations. The smart contract checks your purchase history, seller reviews, and account age (all stored in verifiable credentials) and automatically grants access to the limited collection.

Scalability and Cost

The main problem with public blockchains is limited throughput. Bitcoin processes about 7 transactions per second, Ethereum around 15–30. If decentralized identity becomes widespread and billions of people start creating DIDs and updating their data, first-layer blockchains won’t keep up. The solution is Layer 2 technologies. Instead of recording every DID operation on the main blockchain, the system handles thousands of operations off-chain and periodically writes only final hashes or proofs to the blockchain. It’s like batch processing: instead of sending a thousand letters individually, you pack them into a single container.

Microsoft’s ION handles up to 10,000 DID operations per second, recording only periodic state snapshots on Bitcoin. Polygon and other Ethereum sidechains offer near-instant transactions for a fraction of the cost. Zero-Knowledge Rollup solutions (zkSync, StarkNet) promise even greater scalability while maintaining the security of the main blockchain.

Paradox: the blockchain is public and transparent, but decentralized identity must remain private. How to reconcile this? Through cryptographic techniques that allow verification without disclosure.

Zero-Knowledge Proofs are the magic tool. You can mathematically prove a fact without revealing the underlying data. For example, prove you are over 21 without showing your birthdate, or confirm your income exceeds a threshold without disclosing the exact amount. The blockchain records only the cryptographic proof, which anyone can verify, but from which the original data cannot be extracted.

Blind signatures allow an organization to sign a document without seeing its contents. For example, a bank can confirm your creditworthiness by signing the relevant credentials without knowing your exact account balance. You provide the bank with encrypted data, the bank blindly signs it, and then you use that signature to prove your creditworthiness.

Hashing personal data means that the blockchain stores not the data itself, but its cryptographic fingerprint. An employer can verify the authenticity of your diploma by comparing the document’s hash with the hash on the blockchain, while the actual diploma remains stored locally on your device.

Interoperability of Blockchains for DID

One of the coolest features of modern blockchain infrastructure is cross-chain interaction for decentralized identity. Your DID could be created on Sovrin, have verifiable credentials issued by an organization on Ethereum, and be verified by a service on Polkadot. Protocols like Cosmos IBC (Inter-Blockchain Communication) or Polkadot XCMP (Cross-Chain Message Passing) allow different blockchains to exchange information securely. Decentralized identity thus becomes truly universal — not tied to any single blockchain network.

Note! W3C DID standards play a key role here. They define a unified format for identifiers and DID documents that works on any blockchain. A DID looks like did:method:identifier, where the method indicates a specific blockchain or system: did:btc: for Bitcoin, did:ethr: for Ethereum, did:sov: for Sovrin. All of them follow the same standard and can be verified in a unified way.

Conclusion

Decentralized identification is not just another technological innovation; it represents a fundamental shift in how we think about digital identity, privacy, and data control. We live in an era where personal information is the most valuable resource, yet paradoxically, we do not truly own it. Our data is scattered across thousands of servers, constantly leaking, being sold, and used without our knowledge. DID flips this model upside down.

Decentralized identity technology solves real-world problems. No more remembering hundreds of passwords or completing KYC on every platform. No more worrying that the next data breach will turn your life into a nightmare. No more relying on corporations to store what is most valuable—your digital self. With DID, you control your data, decide what to share and with whom, and can revoke access at any time.

We are already witnessing widespread adoption: Microsoft integrates DID into Azure, the European Union is building a pan-European digital passport system, banks are simplifying client onboarding, and crypto exchanges are eliminating bureaucratic verification procedures. Sovrin, Civic, IBM, and dozens of other companies and projects are creating the infrastructure for a future where decentralized identity becomes as natural as email is today.

Blockchain has proven to be the perfect technological foundation for DID, providing immutability, decentralization, and global availability without single points of failure. Cryptography ensures privacy on a public ledger through Zero-Knowledge Proofs and other techniques. W3C standardization guarantees interoperability between different systems. All the pieces of the puzzle are in place.

Of course, the technology is not yet perfect. User experience remains a challenge—few people are ready to manage private keys and cryptographic wallets. Further work is needed on intuitive interfaces to make DID accessible to the general public. More educational content is required so that people understand the value of controlling their data. Regulatory challenges also remain. Governments are accustomed to centralized control over identity and are not always ready to hand that control over to users. But the trend is changing—more countries are experimenting with DID for public services, recognizing benefits such as reduced bureaucracy, fraud protection, and increased efficiency.

For the crypto industry, decentralized identity is a breakthrough. It resolves the core conflict between privacy and compliance. Now, it is possible to meet KYC/AML regulations without sacrificing anonymity or creating centralized databases. DeFi protocols gain a tool to combat fraud while preserving decentralization. NFT marketplaces can verify users without collecting personal data. For businesses, DID means lower security infrastructure costs, reduced legal risks, and improved user experience. For individuals, it restores control over digital life and protection against growing cybercrime threats. For society, it promises a fairer, more transparent, and inclusive digital economy.

We stand on the threshold of a new era of the internet—an internet where identity is built-in at a fundamental level, where users own their data, and where trust is ensured by mathematics rather than corporate reputation. This is the internet as it was originally envisioned: decentralized, open, and owned by the people. Decentralized identity is a key element of this future.

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