Discover how decentralised identity is revolutionising digital authentication. Learn about the benefits, challenges, and how organisations can prepare for this shift.
Organisations continue to expand their online services to meet customer demand for "anywhere, anytime" convenience. This digital paradigm shift offers opportunities for growth and high consumer satisfaction but also presents significant cybersecurity challenges.
Internet access to data and services must be protected against the increasing volume and severity of cyberattacks. Digital identity is paramount in this regard. With 86% of data breaches involving stolen credentials, ensuring the right people have access to information and systems at the right time is crucial.
While many businesses are working to secure their current digital accounts and application logins, another paradigm shift is gaining momentum—decentralised identities that place control of identity data in the hands of the user. Organisations that fail to prepare for this development in digital identity and customer authentication may struggle to keep up. Understanding the ongoing changes and taking proactive steps to accommodate them is essential.
Organisations Control Digital Identities Today
In most cases, digital identities are stored, managed, and controlled by organisations that require user verification for account logins. Users must create a digital identity for each account and application they access, with businesses responsible for holding and protecting that information. The organisation also facilitates a secure identity authentication process involving passwords, passkeys, biometric identification, or multifactor authentication.
The current state of digital identity results in individuals having large volumes of duplicate identity information scattered across different organisations. Users provide varying levels of information, from email addresses to PII-like government-issued ID numbers, with no control over how it's managed or shared.
This creates a digital identity dilemma where sensitive information must be relayed back and forth between verification entities. More information may be shared than necessary for an application or transaction, exposing data to theft and misuse.
Decentralised Identities Are Emerging
Decentralised identity technologies are emerging as a solution to the digital identity dilemma. Decentralised identity empowers individuals to manage their identity data, controlling where and how much information is shared.
A decentralised identity system uses a digital wallet owned and managed by the individual. The wallet stores verifiable credentials (VCs) and records containing information that helps identify the individual. This information, such as PII, certifications, associations, or accomplishments, can prove the person's identity.
VCs have tamper-proof properties as digital formats and undergo cryptographic verification, making them more secure than physical identification. Users typically store their wallets on phones or websites for easy and secure access.
Benefits and Challenges of Decentralized Identity
Mobile devices and computers are already equipped to store credentials on behalf of users, facilitating the easy and quick adoption of decentralised identity. Simultaneously, standards are being adopted to create a globally unified system with interoperable credential sharing.
These technological advancements offer benefits for both users and organisations. Users can experience reduced friction when accessing online services and share less personal information, mitigating the risk of identity theft and privacy breaches. Organisations can also save time and effort by storing, managing, and protecting fewer customer data.
However, the industry must address several challenges to pave the way for this next evolution of digital identity.
Data Privacy Regulation Relevancy
Data privacy regulations, designed for something other than self-sovereign identity management, challenge widespread decentralised identity adoption. Regulations will need to be revisited and updated, which may take time.
User behaviour is another hurdle. Decentralised identity relies heavily on users taking ownership of their digital identities, requiring diligent self-management and significant behavioural shifts shaped by large-scale education efforts.
Interoperability issues can also slow adoption. Organisations may struggle to adapt existing technology to accommodate decentralised identities, especially if their systems lack capabilities like token handling. Reengineering identity and access management and API access security solutions may be necessary to handle new requirements.
What Decentralised Identities Mean for Businesses
The most significant change in adopting decentralised identities is that users gain control over their data instead of organisations assuming a custodial role. As digital wallet adoption increases, organisations must rethink user authentication capabilities. While the basics of identity management and API access remain the same, some aspects need adaptation.
Key changes organisations must address include:
Implementation of a Token-Based Architecture: Building API security and identity management around identity verification tokens aligns with best practices and ensures compatibility with digital wallets and verifiable credentials.
Limitation of Information Requested: Tokens should be configured to use only necessary data for user access to applications and data. Determine the absolute minimum required while maintaining strong security.
Preparation for Different User Identities: If organisations rely on a single identity type for user login, they may need to accommodate other identifiers. Decentralised identity introduces a new customer login method that eliminates the need for account creation forms. Users may provide their identity from digital wallets, which include decentralised identifiers that can vary.
Conclusion
As decentralised identity technologies advance, the future of digital identity aims to deliver enhanced customer authentication efficiency and security. The tech community is actively working to address technological challenges. Non-technological challenges like regulatory concerns and user behavior may require more time to resolve. However, as with other digital advancements, the landscape can rapidly adapt once the shift gains momentum.
Ready to embark on the digital authentication journey? Attend the Digital Identity Innovation Summit in Amsterdam on November 7-8.
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