June 3, 2024
5 min read

Understanding the Fundamentals of Decentralized Identifiers (DID)

The Importance of Decentralized Identifiers

In the digital world, identity is a crucial factor. Traditionally, we have relied on centralized identifiers such as emails, usernames, and passwords to prove our digital identities. However, these centralized systems have limitations, like; privacy concerns, susceptibility to data breaches, and lack of user control over personal data. This is where Decentralized Identifiers (DIDs) come into play.

DIDs are a form of digital identity that are created and controlled by the user, independent of any central authority. They are globally unique identifiers that act like an identifying address on a blockchain, a type of decentralized database. Unlike traditional identifiers, DIDs do not contain any personal data or wallet information, making them a secure and privacy-preserving form of digital identity.

The significance of DIDs lies in their ability to address many of the issues associated with centralized identifiers. For individuals, DIDs offer full ownership and control of data. This means that users can manage their digital identities without having to rely on a specific service provider. This level of control also prevents data tracking, enhancing user privacy.

For organizations, DIDs provide a means to issue and verify credentials efficiently and instantly. This is a significant improvement over traditional systems, which often involve lengthy and resource-intensive verification processes. Furthermore, because DIDs are based on blockchain technology, they are inherently secure, reducing the risk of data breaches.

For developers, DIDs offer a more efficient way to authenticate users. Traditional sign-in processes can be cumbersome and often rely on third-party authentication platforms. With DIDs, developers can request data directly from users, eliminating the need for these third-party platforms and enhancing the user experience.

The Role of DIDs in Self-Sovereign Identity

DIDs are a fundamental component of Self-Sovereign Identity (SSI), a model that gives individuals and organizations full ownership and control of their digital identities. SSI is built on three pillars: blockchain, Verifiable Credentials, and DIDs.

Blockchain is a decentralized database that records information in a way that makes it difficult to change, hack, or cheat the system. this provides a secure foundation for digital identities.

Verifiable Credentials are digital, cryptographically secure versions of paper and digital credentials. They can be issued, held, and presented by users, providing a secure and efficient  way to verify identity.

DIDs, as we have discussed, are unique identifiers that allow users to establish and manage their digital identities independently. Together, these three pillars form the basis of SSI, providing a secure, efficient, and user-controlled approach to digital identity.

While the concept of DIDs is relatively straightforward, the technical aspects can be more complex. DIDs and DID documents can be adapted to any modern blockchain, distributed ledger, or other decentralized network capable of resolving a unique key into a unique value. The specifics of how a DID and DID document are created, resolved, and managed on a specific blockchain or "target system" are defined by a DID method specification.

DID method specifications typically define at least the following operations for a particular target system:

  1. Create: Some DID methods generate a DID directly from a cryptographic key pair, while others may use the address of a transaction or a smart contract on the blockchain itself.
  2. Read: Some DID methods store DID documents directly on the blockchain, while others construct them dynamically based on attributes of a blockchain record. Some methods store a pointer on the blockchain to a DID document stored on other decentralized storage networks.
  3. Update: The update operation is critical from a security standpoint because control of a DID document represents control of the public keys necessary to authenticate an entity. The DID method specification must define precisely how authentication and authorization are performed for any update operation.
  4. Delete: While DID entries on a blockchain are by definition immutable, they can be revoked in the cryptographic sense. A DID method specification must define how this termination is performed, for example, by writing a null DID document.
The Role of DIDs in Decentralized KYC

In the context of Know Your Customer (KYC) processes, DIDs can play a significant role. Traditional KYC processes often involve collecting and verifying a large  amount of personal data. This can be a time-consuming and resource-intensive process, both for the organization conducting the KYC and for the individual or organization being verified.

DIDs offer a more efficient and secure alternative.Organizations can verify identity without storing personal data, reducing KYC burden and enhancing privacy/security.

In this digital landscape, Togggle has emerged as a leading decentralized KYC solution. By leveraging the power of blockchain technology and DIDs, Togggle provides a secure and efficient platform for verifying the identity of customers. This is particularly beneficial for organizations who need to comply with stringent KYC and Anti-Money Laundering (AML) requirements.

Togggle's decentralized KYC solution ensures that customer data is securely stored and easily accessible, making the KYC process faster and more efficient. This not only reduces the administrative burden on organizations but also enhances the customer experience by making the verification process seamless and hassle-free.

The Future of DIDs

As we move towards a more digital world, the importance of secure and user-controlled digital identities will continue to grow. DIDs represent a significant step forward in this regard. They offer a new way to establish and manage digital identities, providing users with greater control, enhancing security, and improving efficiency.

Like with any new technology, there are some limitations that we need to overcome for DIDs to become widely used. One of the main limitations is that people need to know  more about the technology and what it can offer. Moreover, we need a strong infrastructure to support the use of DIDs, which includes developing DID method specifications and integrating them into existing systems. by addressing these challenges, we can make the adoption of DIDs more accessible and convenient, and realize all the benefits that come with them.

Despite these challenges, the potential of DIDs is immense. Distributed Identifiers (DIDs) have the power to transform the way we engage with digital services, ranging from social media platforms to online banking. With the ability to deliver a secure, privacy-focused, and user-managed form of digital identity, DIDs are leading the path towards a safer and more user-oriented digital world.

Decentralized Identifiers (DIDs) represent a significant advancement in digital identity management. Understanding the basics of DIDs is crucial if you want to navigate the future of digital identity. As we continue to move towards a more digital world, DIDs will play a critical role in how we establish and manage our digital identities. With the world embracing decentralization, solutions like Togggle's decentralized KYC can ensure the security and efficiency of digital transactions. So, it's essential to keep up with the latest trends and technologies to ensure that we stay safe in this digital age.

Share this post
Book a Demo

Contact us now to schedule a personalized demo and see how Togggle AML's platform can help your institution stay compliant, efficient, and secure.

Get Started Today!

Start securely onboarding new clients with our automated KYC verification. Get in touch with us today for a free demo.

Book a Demo