Web3 Decentralized Identity: Beginner's Guide
Written by  Daisie Team
Published on 8 min read


  1. What is Web3?
  2. What is decentralized identity?
  3. Why decentralized identity matters
  4. How to use decentralized identity
  5. Web3 and decentralized identity
  6. Real-world applications of decentralized identity
  7. Risks and challenges of decentralized identity
  8. Future of decentralized identity

Welcome to your first step into the world of decentralized identity in Web3. As you start to explore this dynamic field, you'll discover how it's transforming our digital lives. This guide serves as your introduction to decentralized identity (DID) in Web3, unraveling its importance, applications, and future prospects.

What is Web3?

Web3, often referred to as Web 3.0, signifies the third generation of internet services that harness the power of blockchain and decentralized networks. Unlike the current internet—Web2, which relies heavily on a few centralized entities (think Google or Facebook), Web3 empowers individuals by giving them control over their own data.

Let's break it down a bit:

  • Blockchain: This is the technology that underpins cryptocurrencies like Bitcoin. It's a kind of digital ledger that records transactions across multiple computers. In Web3, blockchain plays a key role in maintaining data integrity and transparency.
  • Decentralized Networks: These are systems where no single entity has control. Instead, control is spread across the network, with each participant having an equal say. This helps to eliminate single points of failure and creates a more resilient system.
  • Data Ownership: One of the main selling points of Web3 is that it allows users to own and control their data. This means you decide who can access your information and for what purpose, rather than a big tech company making those decisions for you.

In essence, Web3 is about returning power to the people. It's about creating a digital world where you are in control. This is where decentralized identity comes into play, serving as a cornerstone of this new internet era. But before we get into that, it's important to understand what decentralized identity actually is—a topic we'll explore in the next section of this guide.

What is decentralized identity?

Decentralized identity, often referred to as DID, is a novel approach to digital identity that puts you, the user, in the driver's seat. In its most basic form, DID is a user-controlled identity, independent of any central authority or intermediary. It's your digital passport in the world of Web3 that you control.

Let's break it down:

  • User Control: You are in control of your identity. That means you decide who sees your data, what they see, and how they can use it. No more middlemen or third parties controlling your data.
  • Interoperability: DIDs are designed to work across different networks and platforms. This means you can use the same identity on multiple platforms without having to create a new one each time.
  • Security: DIDs leverage blockchain technology to ensure the security and integrity of your identity. This makes it significantly harder for bad actors to steal or manipulate your identity.

Think of DID as your digital equivalent in the world of Web3. It represents you and only you. It's a tool that gives you the freedom to interact, transact, and operate in the digital world, all while maintaining control and privacy. The beauty of decentralized identity is that it's universal, secure, and, most importantly, it's yours to control.

Why decentralized identity matters

Now that we've covered what decentralized identity is, let's talk about why it matters in today's digital world. You might be thinking: "Ok, I get it, but why should I care?"

Well, for starters, let's look at the current internet landscape. Right now, most of your online identity is controlled by big tech companies. They store your data, they decide who can access it, and they profit from it. You're essentially handing over your digital identity and trusting these companies to handle it responsibly. But as we've seen with numerous data breaches and privacy scandals, this isn't always the case.

Enter decentralized identity.

With DID, you're no longer a passive participant in the digital world. You're in the driver's seat. You control your own data, who can access it, and how it's used. This shift in control is a game-changer for personal privacy and data security. But that's not all.

Decentralized identity is also a key component in the shift towards a more equitable and inclusive digital ecosystem. With DID, anyone, anywhere can establish a digital identity. This opens up a world of opportunities for individuals who are currently underserved or excluded from the digital economy.

So, why does decentralized identity matter? Because it's about more than just control and privacy. It's about empowering individuals and creating a more inclusive and equitable digital world.

How to use decentralized identity

Alright, so we've talked about why decentralized identity matters. Now let's get into the nitty-gritty: how can you start using decentralized identity? Let's break it down step by step.

Step one: Create your digital identity. This is your personal online presence, represented by a unique identifier. This is like your online passport, only it's much more secure and private. You create this using a decentralized identity provider—a service that, unlike traditional providers, doesn't store your data centrally.

Step two: Prove your identity. Once you have your unique identifier, you need to prove that you're the rightful owner. This is done through a process called self-attestation. You provide evidence of your identity, which is then verified and linked to your unique identifier.

Step three: Control your identity. Now comes the real power of decentralized identity: control. With DID, you decide who can access your identity data and for what purposes. You can grant permissions, revoke access, and even monetize your data if you choose to.

Step four: Use your identity. With your decentralized identity up and running, you can use it to sign in to services, make transactions, and interact with the digital world in a secure and private way.

So there you have it: a simple guide on how to use decentralized identity. Remember, it's all about taking control of your digital identity and using it on your own terms. And that, my friends, is the power of decentralized identity.

Web3 and decentralized identity

Now that we've covered how to use decentralized identity, let's dive into its relationship with Web3. If you're wondering "What's the link between these two?"—you're not alone. Let's unravel this digital mystery together.

Web3, or the third generation of the internet, is all about decentralization. In the same way that decentralized identity gives you control over your data, Web3 is about taking the power from centralized entities and giving it back to the people. So, when we talk about decentralized identity in the context of Web3, we're really talking about a match made in digital heaven.

Decentralized identity is a fundamental part of how Web3 works. In Web3, your DID is like your personal key to the digital world. It's how you interact with decentralized applications (dApps), make transactions on the blockchain, and even participate in decentralized finance (DeFi) systems.

Moreover, decentralized identity in Web3 is designed to respect your privacy and security. So, while you're enjoying all the benefits of a decentralized internet, you can also rest easy knowing that your data is safe and secure.

If you're starting to see the big picture here—that's great! The connection between Web3 and decentralized identity is not just a technicality. It's a revolution in how we think about identity, privacy, and the internet. And it's happening right now.

Real-world applications of decentralized identity

Okay, so we've talked about decentralized identity in the abstract, but what about real-world applications? You might be thinking, "Sounds cool, but how does it actually affect me?" Well, let's dive in.

One of the most straightforward applications of decentralized identity is in digital wallets. Imagine having a single, secure digital wallet that can verify your identity without needing to share sensitive personal information every time. That's the power of decentralized identity!

Are you a fan of online shopping? Decentralized identity could make your online shopping experience more secure and personalized. With your DID, you can prove you're a returning customer without having to remember a dozen different passwords.

Another fantastic application is in the healthcare sector. With decentralized identity, your medical records can be securely stored and shared only with your consent. This means no more filling out the same forms every time you visit a new doctor. Plus, it could also help in the faster processing of insurance claims.

Ever lost your passport or driver's license? A nightmare, right? With decentralized identity, your credentials could be stored digitally and securely, and you could verify your identity without the need for physical documents. This could make everything from international travel to opening a new bank account a lot smoother.

The applications of decentralized identity are vast and varied, and we're only scratching the surface. The important thing is, decentralized identity is more than just a concept—it's a tool that can make our lives better in very practical ways.

Risks and challenges of decentralized identity

While the potential of decentralized identity is exciting, it's only fair to also talk about the risks and challenges. Just like any new technology, decentralized identity isn't without its hiccups.

One of the main challenges is the issue of security. Yes, decentralized identities are designed to be more secure, but that doesn't mean they're invincible. Cybersecurity threats are always evolving, and even the most secure systems can be vulnerable. That's why continuous innovation and vigilance is necessary in this field.

Another challenge is the steep learning curve. Decentralized identity is a complex concept, and it can be a tough nut to crack for many people. Making this technology user-friendly and accessible is a significant hurdle. After all, what good is a technology if people find it too complicated to use?

Furthermore, there's the issue of adoption. For decentralized identity to work, it needs to be adopted on a broad scale. This means that businesses, institutions, and individuals all need to be on board. But change is hard, and convincing everyone to adopt a new system can be a long, uphill battle.

Finally, there's the question of regulation. Decentralized identity operates in a gray area when it comes to the law. How do we regulate something that's designed to be, well, unregulated? It's a delicate balance that needs to be struck.

Despite these challenges, the potential benefits of decentralized identity make it a risk worth taking. With careful planning and execution, we can mitigate these risks and pave the way for a more secure and private online world.

Future of decentralized identity

So, what's next in the story of decentralized identity? Well, it's a narrative that's still being written, but there are some exciting possibilities already taking shape.

Imagine a world where you have full control over your digital identity. You decide who gets to see your personal information and who doesn't. No more worrying about data breaches or identity theft - your digital information is secure and in your hands. This is the promise of decentralized identity.

One potential development we could see is the integration of decentralized identity into everyday life. Imagine logging into your email, social media, or even your bank account using your decentralized identity. It could replace the need for passwords, making our digital lives simpler and more secure.

Decentralized identity could also play a key role in areas like digital voting. It could make the process more secure and transparent, reducing the risk of fraud. It would also give people the confidence that their vote is private and can't be tampered with.

And let's not forget about the potential for innovation. With the rise of Web3, developers are exploring new ways to use decentralized identity. It's a field ripe for creativity and experimentation.

But remember, this future isn't guaranteed. It depends on how we navigate the challenges and risks I mentioned earlier. It's a journey, and like all journeys, it will have its ups and downs. But with the right steps, the future of decentralized identity could be bright indeed.

If you're excited to learn more about web3 and decentralized identity, don't miss the workshop 'Start Your web3 Journey' by Tom Glendinning. This workshop will help you better understand the world of web3, giving you the foundations you need to explore and navigate this exciting new frontier in technology.