The importance of digital identity has increased by huge margins owing to the growing adoption of digital solutions. Starting from an email account to an account on an e-commerce store, you need a digital identity to access important services. Why are tech experts seeking information about top decentralized identity uses when people could access digital services by creating an account?

The existing frameworks for digital identity follow a centralized approach, which leads to multiple limitations. Most important of all, digital identity is susceptible to a wide range of cybercrime attacks. Almost 71 million people in the US alone fall prey to cybercrimes, losing around $4,476 on average. On top of it, around 93% of Gen Z and 96% of baby boomers do not trust social media websites for security of their personal data.

The problems with existing digital identity systems have served as the foundations for the most popular decentralized identity use cases in different sectors. Centralized digital identity also creates issues in terms of efficiency and unauthorized use of power and control over digital identity systems.

For example, supply chain fraud is one of the biggest concerns for global business, and the primary causes include asset misappropriation schemes with fraudulent billing. Decentralized identity can serve as a promising solution to these problems alongside empowering users to control their digital identity. The following post helps you learn about some of the most notable use cases of decentralized identity and its significance.

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Definition of Decentralized Identity

Decentralized identity refers to an identity management system that enables users to control their digital identity without relying on a particular service provider. Digital identity represents the collection of information about a person, electronic device, or business with an online presence. How is decentralized identity important for the world right now?

Digital identity encompasses data such as search history, user names and passwords, buying history, and social security numbers. The relevance of questions like “What is the use case of decentralized identity?” is visible in the necessity of verifiable proof of existence for accessing different services. Apart from digital services, the digital identity of an individual is also a vital requirement for accessing essential services such as education, banking, and healthcare.

As a matter of fact, more than 1 billion people in the world don’t have access to banking services due to the lack of ‘identity.’ Decentralized identity systems use blockchain networks to offer simple and secure solutions to store and use their digital identity. Imagine being able to verify your age without revealing your date of birth. 

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What is the Significance of Decentralized Identity?

Decentralized identity provides a wide range of benefits and improvements over conventional centralized identity management systems. The first thing you would note in a decentralized identity example is the power for users to control their personal data. People could use identifiers, credentials, and data about their digital identity and store them in a digital wallet.

As a result, people could protect their privacy and improve security by reducing the possibility of data breaches with blockchain. The decentralized identity blockchain combination ensures that you don’t have to store personal data in a central database. Blockchain introduces decentralization and removes the risks of a single point of failure, as in centralized digital identity systems.

The benefits of decentralized identity also prove how it is important for organizations, individual users, and developers. Businesses could issue and verify immutable credentials and documents with immediate effect, alongside reducing the risk of data breaches by storing limited user information.

The examples of best-decentralized identity uses also prove that individuals could have better control over the privacy and security of digital identity. Developers could also ensure secure sign-in authentication for app users, which could eliminate the requirement for passwords and user verification with privacy safeguards.

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Use Cases of Decentralized Identity 

Government agencies need a digital identity as an important tool for verifying the identity of citizens. On the other hand, the conventional approaches for identity verification follow a manual, redundant, and time-consuming approach. Another important highlight of decentralized identity use cases is the ability to store identity information in a digital wallet owned by the individual. The advantages of decentralized identity also point to the flexibility for instant verification of identities through a distributed ledger.

Most important of all, use cases of decentralized identity have also ensured safeguards against identity theft. Interestingly, government agencies and organizations across different sectors have already started deploying decentralized identity solutions. Here are some of the most notable use cases of decentralized identity, which can revolutionize the digital identity landscape.

  • Use Cases of Decentralized Identity in Healthcare

Healthcare agencies encounter a wide range of setbacks in the implementation of programs for family health. One of the notable problems with existing identity verification systems points to the need for more time to process documents. For example, the Supplemental Nutrition Assistance Program or SNAP requires applicants to fill out complex forms and provide personal information. 

Such types of examples emphasize the need for one of the most popular decentralized identity use cases in healthcare. Why? Applicants would have to provide personal data, such as data of birth, and financial information, such as income, bank accounts, and expenses. Therefore, it slows down the process alongside increasing complexity and costs.

The problem becomes more complicated with the SNAP program, as the eligible citizens for the benefits of SNAP also earn eligibility for other government services. The government services include Children’s Health Insurance Program (CHIP), Medicaid, and Temporary Assistance for Needy Families (TANF). In the case of traditional identity solutions, citizens would have to submit similar information for each program. At the same time, every program would have to allocate manpower, resources, and time for verifying information. 

The applications of top decentralized identity uses for such examples could point at solutions like faster validation. Rather than waiting for weeks, the programs could verify the identities of citizens with a single decentralized identity credential. For example, one program could verify the digital identity of a citizen, and it can be stored in the digital wallet, which is under the control of the citizen. Subsequently, citizens could share the same credential with other agencies for faster verification. According to the new approach, residents could easily access assistance without any delays, alongside saving time and resources for agencies.

  • Decentralized Identity Applications for Business Services

The impact of cybercrime on government systems has been imposing formidable challenges in recent times. One of the examples of such cyber-attacks on government systems is the City of Oakland. Hackers compromised the business systems and temporarily shut down the licensing and permit portals. 

The decentralized identity blockchain combination could serve as a valuable improvement by removing a single point of failure. Decentralized identity leverages blockchain for managing information storage and exchange with the goal of improving efficiency and security.

The most important advantage of using a decentralized identity refers to the freedom from storage of data in a centralized location. Blockchain ensures that hackers never find a single point of failure, thereby making business services of government organizations less vulnerable. 

  • Faster Access to Unemployment Benefits

The impact of the pandemic in 2020 on employment is still one of the prominent highlights in history. Unemployment levels increased at unprecedented rates, which were witnessed in the 1930s. At such a dire point of time, unemployment benefits serve as a major source of livelihood for many people. 

The responses to “What is the use case of decentralized identity?” in the case of unemployment point to easier accessibility of unemployment benefits. Individuals seeking unemployment benefits have to provide proof that they have been terminated from work. Just like the field of healthcare, the centralized identity systems of government agencies could take more time to process information about employment of applicants.

The traditional identity management systems of government agencies could take days or even weeks to process a single application. On the contrary, agencies could switch to blockchain and decentralized identity systems for faster validation of citizen requests for unemployment benefits. 

It could be one of the best-decentralized identity uses for improving the lives of citizens. Most important of all, around 80% of US citizens do not trust private agencies or public institutions for control over their data. Decentralized identity could offer the opportunity for residents to take control of their data alongside encouraging trust in the government.

  • Essential Records Management 

The essential records or credentials include birth certificates, marriage certificates, death certificates, and other crucial documents. Citizens would need these documents for different types of transactions in their lives. For instance, a birth certificate is a mandatory requirement for social security number application, obtaining a passport, admission to schools and colleges, and receiving government benefits. 

In the case of existing identity management approaches, verification of personal information leads to storage of a copy of the personal data in different agency databases. As a result, citizens have their personal information at multiple points of attack, thereby making them vulnerable to fraud. 

The decentralized identity example for managing essential records could help in understanding how citizens could provide verifiable information without revealing their personal data. For instance, assume that a parent wants to secure admission into the local public school for their child. The parent has to prove that their child has reached the age required for registration in the school.

According to the existing systems, patterns would have to provide a copy of the birth certificate of the child. Now, the information about the child is in a database, which puts them at risk. With the help of blockchain, the parent could create a decentralized identifier that stores a copy of the birth certificate of their child. Therefore, the information about the child never goes into public domain. 

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Other Notable Use Cases of Decentralized Identity 

The guides for decentralized identity also emphasize transforming identity management in many other sectors. Here are some of the notable examples of decentralized identity use cases which have the potential to transform digital identity.

  • Decentralized Finance

A decentralized identity could provide an effective resource for billions of people worldwide to access financial services and solutions. The applications of decentralized identity can help in reducing the need for traditional banks and centralized intermediaries. For example, financial institutions could utilize decentralized identity systems for automation of AML and KYC processes alongside improving speed.

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  • Secure Voting 

The uses of decentralized identity for governments also focus on voting and elections. Decentralized identity could offer prospects for transparent and secure voting processes with complete anonymity. Therefore, the outline of most popular decentralized identity use cases focuses on how it can reduce the concerns of manipulation and fraud in elections. Decentralized identity could help transform the existing approaches to governance.

  • Decentralized Social Networks

Social media is an integral part of the lives of every citizen accessing digital platforms. However, the existing social media networks are centralized platforms that have complete control over the data of users. For example, the images you post on Facebook or Instagram are stored in centralized servers, which are vulnerable to cybercrime. 

On top of it, social media platforms could use your images according to their objectives without your consent. Decentralized identity could help in sharing content and communicating with others without depending on centralized platforms for collecting and controlling user data.

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The emerging applications of decentralized identity are prominent highlights in the existing technological landscape. At the same time, it is important to wonder whether the interplay of decentralized identity blockchain technology is a suitable replacement for existing identity management systems. However, the path of every new technology goes through innovation for improvement, and decentralized identity would also follow the same path.

The advantages of decentralized identity, such as more control over usage of personal data and ability to control their online presence. The evolution of decentralized identity technology would encourage different industries to adopt decentralized identity for offering secure, user-centric, and trusted data exchanges. Decentralized identity is a major component of web3, and it could serve as one of the major milestones in transformation of digital experiences. Learn more about decentralized identity and how it works right now.

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