5 ways decentralized identity will impact the internet and our privacy

Identity is a basic human right that empowers us to participate in society. With the internet in place, our contribution has gotten even better. However, with such power in an age of data centralization and commodification, the need for an elaborate identity system cannot be emphasized enough.

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Fortunately, the next generation of the internet is based on blockchain technology, the building block of decentralized identity. Projects based on this concept are already underway and could impact how we use the internet.

1. Universal identity

We all manage our digital identities via email addresses and passwords on multiple websites. We had to remember passwords for every website we created an account for and made password mistakes that compromised our accounts.

Blockchain technology introduces the concept of universal identity, where websites on the internet can be easily accessed with one click, eliminating the need for repetitive login credentials.

Your identity is linked to a public and private key pair; a public key through which a user is recognized on digital platforms and a private key stored in a blockchain wallet. This system allows for seamless authentication on blockchain-enabled platforms.

The innovation will have significant implications for social networks, considering that it can allow entire social graphics to be transferred between websites, fostering a more interconnected digital experience.

For example, Sovrin, an open source decentralized network, was created to offer individuals and organizations self-sovereign digital identities that give them complete control over their data. It uses a combination of cryptographic principles to enable universal identity across different platforms.

Other projects actively building infrastructure for universal identity solutions include Civic and SelfKey. Identity management platforms will enable people to achieve greater data privacy.

2. On-chain reputation

Fake news is just one of the many challenges of Web 2.0. Managing information online is challenging when anyone can create an account that doesn’t align with their identity and post whatever they want without repercussions. Some even generate parody accounts of influential personalities and pretend to be them.

Fortunately, decentralized identity systems will allow reputation data to be integrated directly into the blockchain. Anchoring reputation data to the blockchain will make it harder for bad actors to manipulate or spoof your reputation.

On-chain reputation will ensure transparency and immutability in tracking and verifying the reputation of individuals online. This will foster trust in online interaction, as users will be fully responsible for their own reputation score. It will also enable people to make informed decisions based on trusted reputation data.

A good example is Drep, a decentralized identification system and reputation protocol that seeks to enable reliable reputation management in marketplaces. Verify user identity, tokenize user reputation, and facilitate reputation mechanisms such as upvoting and downvoting. Other similar projects include Fantom and Ontology, which offer robust collaboration platforms.

Decentralized reputation systems will impact our core online platforms as the need for trust grows in society. The immutability of these blockchain-enabled systems will discourage people from malicious activities, as bad behavior will have consequences.

3. Ownership of personal data

If you could compile all the data Google, Facebook, and Amazon have about you, you’d be amazed. Yet these are just some of the many companies that have been collecting your data for years. In their terms of service, they state that they own your content, which ensures they can use it however they want.

Of course, GDPR data privacy regulations are implemented by governments around the world, but they can only do so much to protect citizens’ data; however, with the integration of blockchain technology, an internet where data privacy is taken more seriously is imminent.

Illustration of how decentralized identity works
Illustration by Dock.io

Decentralized identities will give people effective ownership of their data. Personal devices and digital applications will store and encrypt data locally with a private key. This prevents encoded identity information from being stored on centralized servers subject to public exposure or institutional commodification without the user’s permission.

Several projects are already working to return ownership of data to consumers. For example, Blockstack integrates a decentralized DNS system into a browser add-on to allow consumers to control their transactional data online.

Internet users want control over their personal data, and decentralized digital identity is the most practical way to regain control. It will also allow them to start monetizing and benefiting from personal data.

4. Zero-knowledge evidence

Today, if you want to prove anything about yourself, you have to expose sensitive information. For example, to get a bank loan, you must disclose your net worth or income. Similarly, in order to vote in a democratic process, your identity must be known.

Zero-knowledge proof technology will change that. When enforced, individuals can prove the validity of information without disclosing the data itself. Therefore, the privacy of sensitive data remains intact.

When applying for a loan, people can demonstrate that they meet specific financial criteria without disclosing their income or net worth. This will improve privacy and security in your online interactions by ensuring that personal information is only shared on a need-to-know basis.

Zcash is a great example of a real-world application of zero-knowledge proofing. It is a digital currency designed to keep your daily transactions and savings private. It uses zero-knowledge proofs to verify a user’s wallet balance and transactions are accurate prior to a transaction without disclosing information.

In Web 3, zero-knowledge evidence will be critical to verifying and authenticating people’s identities or claims online without exposing actual identity data. This will keep personal data under the individual’s control and reduce the risk of unauthorized access.

5. Sybil attacks the resistance

A Sybil attack occurs when an attacker creates many pseudonymous identities in a computer network service and uses them to gain influence. Sybil attacks have been a pervasive challenge in Web 2.0. But that will change with the implementation of decentralized identities.

Online platforms will require trusted issuers to verify and issue digital identities for their users to establish their authenticity. This verification process makes it difficult for attackers to create fake accounts and bots that they can use to influence the network or people’s perception of reality.

An important building block for establishing a decentralized digital identity is the personality proofing mechanism. The first generation of these mechanisms was the CAPTCHA test, mainly used to combat DDoS attacks. But the flaw of the solution is that it is algorithmically generated and can therefore be solved algorithmically, especially with AI.

The next generation of Proof of Personhood will employ human skills that AI cannot easily replicate, such as common sense reasoning and cooperative play.

For example, Idena, a Proof of Person blockchain, requires users to solve the FLIP test (a CAPTCHA-like test that requires a semantic interpretation of how two objects are related) in authentication ceremonies and rewards them with tokens to demonstrate their humanity.

Is decentralized identity necessary?

It’s easy to dismiss a transparent and authoritative identity system if you still face the challenges of lack thereof. Stolen identities, hacking and doxing are some problems that internet users face with the current internet infrastructure. Don’t forget that Internet companies with people’s data can use it to their advantage.

Wouldn’t it be better if we were in complete control of our data and weren’t subject to identity crime? Decentralized identity offers solutions for most of these problems. This innovation is, therefore, crucial if we want a world where the identity and privacy of users are respected.

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