What Is Digital Identity and Why It Matters

Learn the potential of decentralized technologies, blockchain and beyond, in revolutionizing digital identity and why it matters in today's interconnected world.

Digital Identity and Why It MattersDigital identity has become a crucial part of our everyday lives, shaping how we interact and navigate today’s digital landscape. But what exactly is digital identity?

Led by Kaitie Zhee, founder and CEO, Web3 Cloud X, a panel of experts at CompTIA ChannelCon 2023 discussed the latest developments and real-world applications of digital identity solutions as well as how they can transform the way we manage and protect our digital selves.

What Is Digital Identity?

Simply put, digital identity encompasses “all aspects of who you are as a person encapsulated in digital twins of those paper documents,” said Elena Dumitrascu, CTO, Credivera.

Your digital identity includes your personal identification numbers, digital signatures, biometric data, login credentials and more. You most likely use your digital identity for daily tasks like shopping online, booking travel, engaging on social media, banking, working with government services – and anything else that requires you to authenticate your identity electronically.

According to the Decentralized Digital Identity and Self-Sovereignty whitepaper, “In all of these cases, our data goes through a proxy before it ends up in our wallets, also known as an identity federation service. The big change happening is putting the user in control, removing the proxy and facilitating trust directly from the issuer to the user and the places where these IDs are presented, also called self-sovereign identity management.”

Download: Decentralized Digital Identity and Self-Sovereignty

Understanding the Shift to Decentralized Digital Identity

Centralized systems are systems where control is exerted by a single, central authority. For example, the government manages your citizenship status, social media platforms manage your profile and your bank manages your financial transactions. Because a single authority has complete access to all data, centralized systems are highly vulnerable to security risks.

“This is where I believe blockchain solutions will play a significant role in the future of digital identity protection,” said Dumitrascu.

In a nutshell, blockchain is a database.

“Whether we're using software applications, leveraging compute power or storing data, it all involves databases,” said Wes Jensen, board member, 21Packets.

Decentralized systems, like blockchain, provides another level of security and data sovereignty:

  • Data is distributed across a network, making it harder for cyber attackers to gain access to all of your information.
  • You have control over your own data. You can choose what information to share and with whom, rather than having a central authority make those decisions. This can help protect your privacy and prevent misuse of your data.
  • Advanced security measures like cryptographic keys are harder to crack than traditional passwords.
  • Decentralized systems allow for trustless verification, which means that your identity can be verified by the network rather than trusting a central authority to do so, reducing the risk of fraud or impersonation.

For managed services providers (MSPs), this offers an opportunity to enhance their services' security and potentially provide a new service offering. By integrating digital identity solutions, MSPs can offer customers more secure access to resources.

Related Content: What MSPs Should Know About Web3 and Blockchain Evolution

Exploring the Significance of Decentralized Identity

Decentralized digital identity plays a crucial role in today's interconnected world for several reasons, including security, privacy, convenience, compliance and personalization.

  1. Security: Ninety percent of breaches result from stolen credentials, resulting in financial loss, damage to reputation, loss of privacy, emotional distress and even legal consequences. Digital identity protects sensitive data and provides a secure way to authenticate and authorize individuals in a digital environment, fostering trust and accountability online by allowing actions to be traced back to an individual.
  2. Privacy: With digital identity, individuals can control what information they share and with whom, helping to protect their privacy online.
  3. Convenience: Digital identity simplifies the process of accessing online services. It eliminates the need for multiple login credentials or physical ID cards, making it easier for users to access the services they need. Background checks and verifying identities can also take months to complete, hindering employees from starting work and potentially down business operations. Decentralized identifiers, a publicly available unique identifier not containing any personally identifiable information, enable employers to issue and revoke access quicker and in real time, eliminating the need for communication between HR and IT.
  4. Compliance: Many industries have regulations requiring the verification of identities for certain transactions.
  5. Personalization: Digital identity allows businesses to provide personalized experiences to their customers. By knowing who the user is, businesses can tailor their services to meet individual needs and preferences.

As the use of digital technologies continues to rise, so does the need for individuals and organizations to understand the importance of digital identity and the steps necessary to protect it.

Navigating the Future with Decentralized Digital Identities

“Technology has made it easy for us to exchange information, but it has also made it difficult to know who is sending you that information,” Dumitrascu said. Luckily, there's a new set of technologies that are being put in place to ensure the sender’s identity.

Although your identities are linked with decentralized identity, what's linking them are tokens. Tokens are essentially digital codes or electronic keys that prove the identity of a user or a device. This makes it nearly impossible for cyber attackers to trace back the linkage since there’s isn’t any constant communication between identities.

According to the Decentralized Digital Identity and Self-Sovereignty whitepaper, new web standards are being rolled out to support decentralized identity. The World Wide Web Consortium (W3C) and Decentralized Identity Foundation (DIF) are two major global standards bodies that are focused on developing new methods that transform how we digitally share our identities.

“We are in the midst of evolution in this space and what you're going to see is adoption of digital identity on a per company, per application use space,” said Jensen. “And then there’s going to be a convergence of all that, a cross platform type functionality. We're not there yet.”

As we navigate this evolving landscape, it's clear that enhanced cybersecurity lies in the adoption and convergence of decentralized digital identity technologies. While we may not be there just yet, the journey toward a safer digital world is well underway.

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