What is digital identity?
Your email, social media profiles, search history, and more make up your digital persona, or identity. But the irony is you don’t own it yourself. All the data that comprises your digital identity sits in centralized servers controlled by companies like Facebook, Google, and X. In fact, to access your data from these platforms, you often need to request it from the app.
As we’ve seen in recent years, the centralized control of users’ digital identity has led to data-privacy abuses, security breaches, and what some would call censorship. These challenges have become so routine to our online experience that they sometimes seem inevitable.
But what if we could use blockchain to give you control—and true ownership—over your digital identity? In this post, we’ll cover the challenges posed by centralized digital identity and explain the ways in which blockchain might be able to mitigate them.
The challenges of centralized digital identity
Before we dive into blockchain’s potential for transforming digital identity, it’s important to cover the challenges associated with the status quo of centralized ownership over user data. The fact that companies own your data has very real implications for your experience online, implications that often seep into real life, too. Here are some of the key challenges posed by the centralization of digital identity:
- Content restriction: There’s debate about whether the word “censorship” should apply to private companies choosing what to allow and not allow on their platform, so we’ll go with content restriction. The fact is, centralized platforms have the power to restrict content and user access to service on their websites and applications. Many argue that when centralized companies make these decisions (rather than the community), freedom of expression and access to information are hindered. Think of things like shadow banning, for example, or elevating certain types of content over others.
- Manipulation of user attention: Social media and other apps can be a lot of fun, and can be consumed healthily. Nevertheless, we’ve seen that when user data is controlled by centralized entities, it can be used to manipulate users. Social media platforms, for example, have used algorithms to exploit data in a way that promotes addictive behavior among users.
- Fragmentation: Maintaining fragmented identities on various platforms is inconvenient, requiring users to remember multiple login details.
- Security: When data is concentrated in one centralized location, it becomes a juicy target for attackers. Data breaches, identity theft, and fraud are therefore too common on centralized databases.
As we’ll explain, blockchain-enabled decentralized digital identity can tackle these challenges head-on, creating a more secure, private, and user-centric digital landscape.
How blockchain can change digital identity
Imagine a world in which you fully control your digital identity, independent of centralized companies. There are various visions for how this could work, but it goes something like this:
The “new internet” will be built on blockchain—that is, decentralized databases—that are interoperable. It will enable things like decentralized social media platforms, on which users decide the rules together. Each user will own their own data and shape their own app experience. Users will be able to use a single wallet—or some other sign-in mechanism—for most or all of the platforms they use online, and again, they will have full custody of all the data in that wallet.
To enable this, blockchain stores your data across a scattered network of nodes instead of on a centralized server, making it tamper-proof and highly secure. This approach means no single entity can manipulate or censor your information, allowing for greater transparency and trust.
As part of the broader vision above, the solutions to some of the challenges we highlighted with centralized digital identity are as follows:
- Community governance: To address the issue of centralized organizations restricting content, the solution here could be to implement voting mechanisms on decentralized social media platforms, in which users themselves decide on what to restrict. After all, there will have to be some restrictions on any platform that’s worth using. No one wants to be inundated with violence or illegal activity while scrolling through for their morning news.
- Users own their attention: In a world dominated by decentralized digital identity, users themselves own their data. That also gives them back control over their own attention to a large degree, as profit-driven companies will no longer be able to come up with algorithms to keep users addicted based on their data, because, well, they won’t have their data.
- Interoperability: The goal here is to establish an online reality in which users can log into various platforms using the same wallet or blockchain ID. This would eliminate the need to remember dozens of passwords and usernames, making the web-browsing experience less fragmented and more seamless.
- Better security: Blockchain also offers enhanced security benefits. The system is much harder to hack because it operates on a decentralized network of nodes that distributes your data across multiple nodes, rather than storing it in a single server. True, there are still endpoints that are susceptible to vulnerability, such wallets, but overall, blockchain greatly reduces the risk of network-wide data breaches.
These are the main tangible improvements to users’ online experience and digital identity that blockchain could bring. The question is, what progress have we made toward the development of decentralized digital identity?
Decentralized digital identity in the real world
We still have a lot of work toward achieving a decentralized internet so interoperable that users only need a single wallet to use every app, but there are promising solutions that give users more control over their identities. To get a better understanding of what decentralized identity looks like, let’s take a look at how it’s already being used in several real-world applications.
- Self-custody wallets enable users to hold and manage their digital assets without relying on third parties. They give users full control over their private keys and let them interact seamlessly with decentralized finance (DeFi) platforms and other decentralized applications (dApps). Some examples are Ethereum’s MetaMask, and Starknet’s Argent and Braavos.
- Ethereum Name Service (ENS) assigns readable names, such as Tony.eth, to Ethereum wallets. This makes blockchain interactions simpler and more user-friendly, facilitating better use of wallets as digital IDs.
- Starknet.id is like ENS, except for Starknet wallets. users manage their identities securely on the blockchain, without the need for centralized intermediaries. Anyone can create their own Starknet identity, which functions as a sort of onchain passport.
- The InterPlanetary File System (IPFS) stores files without relying on central servers. IPFS gives users control over their own information, while allowing it to be safely verified by others, making data more accessible and resistant to tampering.
- Decentralized exchanges (DEXes) let users trade cryptocurrencies directly from their wallets without the need for intermediaries, providing liquidity using smart contracts. Examples of DEXes on Starknet include Ekubo, JediSwap, and mySwap.
- Decentralized Autonomous Organizations (DAOs) empower the members of an organization with transparent, democratic governance. They allow members to vote on proposals and verify membership without having to reveal their personal information.
These are just some examples of how decentralized digital identity gives users greater control over their own data while making online interactions safer, more transparent, and more user-centric.
Scalability and why it matters
How can we ensure decentralized digital identity is actually implemented widely? The key is blockchain scalability, and it’s a must, even for basic peer-to-peer (P2P) crypto transactions or token trading. That’s because the most widely used Layer 1 (L1) blockchains, like Ethereum, have high transaction fees and slow confirmation times when the network is congested.
A world where decentralized identity is widely used would mean using blockchain for far more than just P2P transactions and DeFi trading. It would also be used to browse social platforms, participate in DAO governance models, and otherwise seamlessly interact online. If we expect users to rely on blockchain for just about everything they do online, they’ll rightfully expect ultra-low fees and near-instant transactions.
That’s where Layer 2 (L2) validity rollups come in. These solutions make transactions on Ethereum faster and cheaper by offloading the heavy computation associated with transaction execution from the main layer. The greater adoption of validity rollups will pave the way for decentralized digital identity and the enhanced security and privacy benefits it has to offer.
Final thoughts
Blockchain is already paving the way for more decentralized alternatives to the centralized way in which digital identity is managed today. It opens the door to users controlling their own data, and therefore their own digital identity. With blockchain, digital identity can become more private and safer.
In addition to user control over their data, decentralized digital identity systems also have the potential to alleviate fragmentation by enabling you to maintain a single, secure identity across multiple platforms. This could reduce the need to rely on dozens of usernames and passwords to manage your accounts.
All of this can only be accomplished with scalability. Starknet, the validity rollup making transactions on Ethereum near instant and super low-cost (recently as low as $.005), paves the way for decentralized digital identity and other use cases.
Learn more about how Starknet scales Ethereum.
Stay tuned for Starknet updates on X.
