Decentralizing Identity: Empowering the Consumer

By Michael Queralt, Co-Founder, Startup IQ


The importance of identity and authentication in our increasingly digital world cannot be understated. As more and more of our daily activities are performed online, digital identities have become the keys to access a vast array of services. Unfortunately, it has also led to an increase in identity theft and fraud, underscoring the urgent need for robust and secure digital identity systems.

In the current landscape, application providers predominantly control and monetize end user information. These entities often require users to divulge extensive personal data to access their application and services, which they will use to create additional revenue streams. This practice has led to growing discomfort and distrust among users,and it highlights the need for a fundamental shift in how we handle digital identities.

Decentralized Identity

Many new companies are jumping into the decentralization approach as a solution.  However, it’s crucial to dispel common misconceptions surrounding this concept. Often, ‘decentralized identity’ is confused with what I call  ‘false wallets’—wallets that, while marketed as decentralized, are still tied to specific ecosystems, repeating the mistakes similar made in previous approaches and now implementing a new technology stack but same economic models. This presents a significant barrier to the true potential of decentralization within consumer application.

Lessons learned:Apple’s Secure Wallet

A possible use case is the Apple wallet. Apple, within its ecosystem, offers a practical example of a more user-friendly model. The Apple Wallet acts as a secure, trusted wallet, capable of interoperating with multiple applications for authentication and transactions. This model, which has gained significant user trust, represents a step in the right direction, while remaining within a centralized framework.

A truly decentralized identity system would extend a similar level of trust and interoperability, but across diverse ecosystems, eliminating the need for a central controlling entity. The goal here is not to replicate Apple’s model, but rather to acknowledge the benefits it has achieved and extend those into a more decentralized context.

The Future of Consumer Identity: Extending the Secure Wallet Model

Imagine extending this model across all consumer applications. Instead of each application creating its own isolated island of user data, they could all refer to a user-controlled, secure, and interoperable digital identity.

Current mobile identity standards enable the creation of vetted identities, which can only be unlocked by the individuals themselves using secure authentication mechanisms, like biometric sensors or secret passcodes that reside on the device itself. These features significantly reduce the likelihood of these credentials being harvested by external organizations.

This approach aligns more closely with user expectations and preferences and represents a significant opportunity for innovation and improved user experience.

The wallet should be leveraging the best of current standard protocols and blockchain technology. For example, blockchain can be used to store the identity credential, or the validation event, or some other attribute. While leveraging standard authentication protocols to interact and operate with application providers. This would make the wallet more secure and tamper-proof, and it would also make it easier to share identity information with other parties.

In addition to storing identity credentials, the wallet could also use blockchain technology to store other types of data, such as validation events or other attributes. This would make the wallet more versatile and would allow users to share more information with other parties.

Economic Considerations

Moving towards a truly decentralized model requires a reassessment of the current economic incentives for both application providers and consumers. In the current landscape, the trade-off for free identity and authentication services is often the surrendering of personal data. In the decentralized model, this dynamic changes.

This raises the question of how a decentralized identity model can provide comparable value to both parties. One potential approach is to incentivize application providers to adopt decentralized identity systems by demonstrating how they can reduce costs associated with data breaches, regulatory compliance, and the management of user identities.

For consumers, the value proposition includes enhanced privacy and control over personal data. While this doesn’t have a direct monetary value, the increased security and autonomy are powerful incentives, particularly in an era of heightened concern about data privacy and security.

Furthermore, this approach can be the foundation for the creation of new economic models where consumers are rewarded for choosing to share their data with service providers. Such an approach can redefine the value exchange between consumers and application providers, creating a more equitable digital economy.

As we transition to a future with decentralized identities, we need to foster an environment where new economic models can emerge. These models should respect user privacy and autonomy while also offering incentives for application providers to continue innovating and providing quality services.

Practical Implementation and Challenges in Consumer Applications

Implementing a truly decentralized identity system for consumer applications presents both opportunities and challenges. It demands a paradigm shift from both providers and users, necessitating user education and transparent communication.

Let’s explore a possible use case:Seamless and Secure Healthcare Records Access and Sharing through Decentralized Identity


Imagine Sarah, an active individual who frequently travels due to her work. She has her primary care doctor in New York but consults with specialists in San Francisco and Chicago due to specific health conditions. Each of these healthcare providers has a piece of her health records. Sarah, equipped with a decentralized digital identity wallet, finds managing her health records across these providers seamless and secure.

User Identity Verification

Sarah has her vetted identity information on her digital identity wallet. This could be a mobile driver’s license or a self-verified identity that’s been validated and linked to her biometric data or other secure methods for authentication.

Interoperability across Healthcare Providers

When Sarah visits her healthcare providers in San Francisco and Chicago, she does not need to fill out long forms or submit multiple proofs of identity. She presents her decentralized digital identity wallet. The wallet, operating on standard protocols like FIDO2 or OAuth, allows seamless interaction with the healthcare providers’ systems. Her identity is verified, and she gains access to her electronic medical records without divulging any additional personal information.

Aggregated Health Records

Using her digital identity wallet, Sarah can aggregate her health records from all her healthcare providers. This interoperability feature allows her to have a comprehensive medical history in one place and under her control.

Sharing of Medical Records

Sarah recently decided to see a new nutritionist to develop a healthier diet. With her digital identity wallet, she can securely share her aggregated health records with the nutritionist without the need for paper documents or faxing reports.

She can control what information the nutritionist can access. For example, she can provide access only to her cholesterol levels and previous dietary reports without revealing other unrelated medical information. She can also choose to provide access for a specific duration – for the length of her consultation with the nutritionist. After that, the access is automatically revoked.

In summary

With a truly decentralized digital identity wallet, Sarah can control, manage, and share her medical records across different healthcare providers securely and conveniently. She does not need to worry about her medical records’ safety and can focus on her health and treatment. She feels more in control of her healthcare journey, which leads to better patient engagement and overall improved health outcomes.

This use case illustrates the transformative potential of a decentralized digital identity system in the healthcare sector, significantly enhancing interoperability, security, patient privacy, and the overall user experience.

The future of identity management and authentication in the consumer digital landscape lies in true decentralization—emphasizing user control, interoperability, and the separation of identity and application layers.


  • Decentralized Identity Foundation: https://identity.foundation/
  • World Wide Web Consortium: https://www.w3.org/TR/webauthn/
  • Berkman Klein Center for Internet & Society: https://cyber.harvard.edu/

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