Decentralized Identifier

Updated on April 12, 2024
Article byRutan Bhattacharyya
Edited byAshish Kumar Srivastav
Reviewed byDheeraj Vaidya, CFA, FRM

What Is A Decentralized Identifier (DID)?

Decentralized identifiers (DID)s refer to lines of letters and numbers that collectively create a one-of-a-kind digital identifier stored and registered on the blockchain network or any other form of distributed ledger technology (DLT). They enable individuals to identify themselves on the Internet without the utilization of a central authority.

Decentralized Identifier

You are free to use this image on your website, templates, etc, Please provide us with an attribution linkHow to Provide Attribution?Article Link to be Hyperlinked
For eg:
Source: Decentralized Identifier (

The identification and verification of persons take place utilizing cryptographic techniques like digital signatures. Besides real individuals, DIDs can help identify organizations, Internet of Things (IoT) devices, locations, products, and things that do not physically exist, for example, a concept or an idea. Different types of DIDs exist, such as peer, static, and ledger-based DIDs.

Key Takeaways

  • Decentralized identifier refers to internationally unique identifiers that comprise a string of numbers and letters that collectively serve as an identifying address on any distributed ledger technology, like a blockchain. It helps persons identify themselves on the Internet and is independent of an organization.
  • DID documents refer to sets of data containing information related to a DID subject. Moreover, they consist of mechanisms making the identifier function.
  • A key decentralized identifier use case is that one can use this concept in blockchain ecosystems to increase the speed of authentication and improve data privacy.

How Does Decentralized Identifier Work?

Decentralized identifier refers to a modern trust framework involving universally unique identifiers (UUID) that do not require any centralized registration authority and are cryptographically verifiable. DIDs aim to give Internet users their identity control, empowering them to create unique identifiers utilizing systems they trust. By allowing for the authentication of the identifiers with cryptographic proof like digital signatures, both organizations and individuals can take advantage of secure, private, and seamless data exchange leveraging the distributed ledger technology (DLT) of the blockchain.

The DID framework enables users to store different accepted identifiers like tax and educational certificates, government-issued certificates, and more personal identification information (PII) in a private and secured digital wallet. Note that a distributed ledger based on blockchain technology is the source of every piece of information the wallet stores. Also, the identification information is stored in a wallet managed by the user and not on the ledger. This allows individuals to share their identities’ various parts with different services as they deem fit.

To better understand DIDs, it is vital to understand the following terms:

  • DID Subject: It is the thing that is behind the digital identity. Note that it can be a product, a location, a company, a device, or a real person.
  • DID Document: This refers to a data set consisting of information regarding a DID subject in addition to mechanisms making the identifier work. Examples of such mechanisms include pseudonymous biometrics and public keys. A subject utilizes it to complete authentication and prove that it is their identity.
  • DID Method: This refers to a mechanism offering complete functionality of DID documents and DIDs. It enables individuals to read, deactivate, update, or create identifiers on any DLT like the blockchain.

Financial Modeling & Valuation Courses Bundle (25+ Hours Video Series)

–>> If you want to learn Financial Modeling & Valuation professionally , then do check this ​Financial Modeling & Valuation Course Bundle​ (25+ hours of video tutorials with step by step McDonald’s Financial Model). Unlock the art of financial modeling and valuation with a comprehensive course covering McDonald’s forecast methodologies, advanced valuation techniques, and financial statements.


Let us look at the different types of DID:

#1 – Static DIDs

Limited DIDs support only the basic functions, for example, resolutions and creation, but not deactivating or updating. In essence, limited DIDs are public keys converted into the decentralized identifier format.

#2 – Ledger-Based DIDs

DID methods’ first set falls under the category of DLT or blockchain, for example, Ethereum and Bitcoin blockchain networks. Taking into account the decentralized nature, DIDs’ initial concept recommends not building them on centralized systems. Instead, decentralized systems are recommended.

#3 – Peer DIDs

All DIDs are not resolvable as they exist in some participants only. In other words, DIDs within specific networks and territories are resolvable. Two or more individuals maintain and exchange such DIDs utilizing agent protocols. They fulfill DIDs’ every functionality and core property. However, they remain restricted to immediate users only. In addition, such identifiers offer a high level of secrecy, privacy, and security.

#4 – Ledger Middleware DIDs

Although DLT and blockchain form the basis of such DIDs, they have an extra storage mechanism or layer that is more efficient and cheaper. Distributed hash tables or classic database replication might be able to hold various DIDs. Additionally, the second storage layer level allows for the updating and establishment of a large number of DIDs. Only the transactions within the blockchain require anchoring. As a result, such kinds of DIDs are faster, cheaper, and more efficient than others.


Let us look at a few decentralized identifier examples to understand the concept better.

Example #1

Suppose a clothing organization in the US specializes in offering ethically manufactured clothes. The producers pay the workers decent wages and ensure a healthy working environment. Their distributor seeks more details concerning the products’ origin. Moreover, they wish to procure goods made by individuals who work in favorable work conditions.

The manufacturing facility, clothing company, and inspector each possess a unique decentralized identifier. All the DIDs are stored safely on the blockchain network. 

The government inspector assesses the facility’s working conditions besides other key details. Post-assessment, the inspector finds that the factory fulfills the set labor standards. He utilizes his private key to put his signature and package every piece of relevant information in the form of a Verifiable Credential that verifiers can check at any time.

Because of the Verifiable Credentials technology, the verifiers need not waste money and time contacting the inspector to ensure the products were manufactured in favorable working conditions.

When the distributor gets the clothes’ shipment, they can find a QR linked with the DID and the related Verifiable Credential of the government inspector. After the distributor scans the code, they can instantly find out that the clothes fulfill the labor standards.

Example #2

.bit recently carried out an analysis and found that the use of decentralized identifiers for performing asset transactions involves severe risks. Let us look at some of the possible points where the potential risks may arise.

  • Hackers could get access to the server for the application programming interface or API (Application Programming Interface) service and make changes to the data or information returned to the query. 
  • The API service staff could tamper with information.
  • If an API service internal error occurs, the data returned to the query could be incorrect.

Use Cases

The decentralized identifier use cases are as follows:

  • It has applications in the travel industry. Evernym created a health application that enables people to manage COVID-19 vaccinations and certificates while traveling. This solution involves utilizing decentralized identifiers that help ensure the privacy of users. Moreover, it allows governments, airlines, and different organizations to check the vaccines and test results instantly. A key characteristic of this app is that it does not have any central database for using or storing data.
  • DIDs can offer digital identities for a refugee. Turkey’s Ministry of Foreign Affairs, collectively with the Istanbul Chamber of Commerce and the United Nations Development Programme, piloted the Self-Sovereign Identity Platform of Turkey. It aims to help increase the financial independence and employability of refugees. This solution utilizes DIDs, which are a key part of the platform. It simplifies the procedure concerning work permit issuance for refugees, thus allowing them to get work faster and become financially independent.
  • DIDs also have applications in blockchain ecosystems. Developers can establish and execute such identifiers in an extensive range of projects requiring easier authentication and improved data privacy.


The benefits of DIDs are as follows:

  • With the help of DIDs, organizations can complete the verification of credentials instantly.
  • An organization can issue fraud-proof credentials efficiently at a low cost using these identifiers.
  • DIDs offer robust data security.
  • These identifiers allow individuals to have full data ownership. Moreover, they can decide who can view the data. DIDs can also safeguard individuals by preventing device tracking as they browse apps and websites.
  • DIDs also help developers by eliminating inefficient authentication procedures and password requirements.


Although DIDs remain in their initial stages, with only governments and enterprises testing and piloting the technology, DIDs have the ability to become solid and popular tech because there is a lot of interest from audiences and businesses in their development.

As the world moves on toward Web3, a new era of decentralization, it is surprising that there are already ideas regarding Web5, in which DIDs will become vital components and will have a key role in the digital future.

Frequently Asked Questions (FAQs)

1. What are the features of decentralized identifiers?

Some key features of DIDs are as follows: 
Permanent: They are long-lasting and are not subject to link rots. 
Resolvable: Users can locate details, identity, or services associated with all DIDs in the form of DID documents whenever a DID is accessed or queried. 
Additionally, DIDs run on a decentralized database and play a vital role in DIDs’ security and authenticity. Besides this, DIDs are cryptographically verifiable.

2. What are the components of decentralized identifier documents?

The components are as follows: 
– Public keys and the other verification techniques used to verify the identity of an entity
– Services linked with the DID subject that help in the verification of the identity
– References to the service endpoints that help the issuer in achieving the above-mentioned associated services. 
– Additional details, including timestamps, past resolved keys, digital signatures, and more.

3. Who issues decentralized identifier standards?

The World Wide Web Consortium, or W3C, standardized and conceptualized the idea of DIDs.

This article has been a guide to what is a Decentralized Identifier. Here, we explain its examples, types, use cases, benefits, and future. You may also find some useful articles here –

Reader Interactions

Leave a Reply

Your email address will not be published. Required fields are marked *