Identity management is one of the fundamental questions that should be solved for any online ecosystem stated Bahaa Abdul Hadi. With most of our affairs moving to a digital society, identity verification, and personal data security have become more important than ever before. Broad approaches to digital identity are divided into centralized and decentralized models. This article looks at the key differences between the two.

Centralized identity systems rely on a single, trusted entity to manage user identities. In this method, the identity provider ensures the user is authenticated and authorized to access online services and further connected systems. Some examples of this type of system are:

  • Social login – Log into apps and sites using your Facebook or Google account. These companies then become identity providers.
  • National identity systems – Governments that issue digital IDs to citizens enable access to public services.
  • Enterprise identity management – Controlling employee access to internal networks and data through a central system.

Advantages of Centralized Identity

  • Simplicity – This is convenient for users who have to remember just one login across dozens of sites.
  • High adoption – There are many big sites that use centralized identity; hence, it is easy to adopt.
  • Advanced security – Huge providers can have sophisticated security requirements for the protection of user data.

Disadvantages of Centralized Identity

  • Single point of failure – Risk to all connected systems if the identity provider is breached.
  • Data consolidation – Raises major privacy issues with a central authority controlling user data.
  • Lock-in effects – Redoing identity verification means hopping providers.

How Decentralized Identity Models Work

Decentralized identity facilitates users’ direct control of data. Users actually become the authoritative elements in this kind of digital identity management through private keys and other cryptographic mechanisms. The following are a few examples:

  • Self-sovereign identity – Users retain identity credentials on their devices, shared selectively through QR codes or other protocols.
  • Blockchain-based identity – Using distributed ledger technology for tamper-proof, decentralized identifiers.
  • Federated Identity – This facilitates secure identity portability across varied domains through the use of standards.

Benefits of Decentralized Identity

  • User control – Identity fully belongs to individuals, not organizations.
  • Privacy – Users only share the minimum data needed for transactions.
  • Censorship resistance – No central body can deny access to identity services.
  • Interoperability – Open standards enable connectivity across different systems.

Drawbacks of Decentralized Identity

  • Complexity – Requires advanced cryptographic expertise to implement securely.
  • Limited adoption – The ecosystem of services accepting decentralized ID is still small.
  • Recovery difficulties – Recovering lost keys/credentials can be very challenging.

Key Differences Between the Models

Centralized

  • Managed by a trusted third-party
  • Simple for users
  • Risks include single point of failure, data breaches, privacy violations

Decentralized

  • Controlled directly by users
  • More complex implementation
  • Benefits include user ownership of data, censorship resistance, interoperability

Which Model is Better?

There’s no clear “better” model – each has tradeoffs. That said, the decentralized approach better positions this application in terms of emerging data rights legislation (e.g. GDPR) that places users in charge of sharing personal data.

Now, hybrid models that embody aspects of centralized and decentralized identity are beginning to emerge. The field will likely continue evolving, particularly with the advent of blockchain and other distributed ledger technologies and governance frameworks such as crypto networks. However, decentralization appears to be the way of the future for digital identity.

Conclusion

Identity management underpins participation in the digital economy. Both the centralized and decentralized models have their pros and cons. For this reason, while the decentralized identity values the control of personal data by the user, decentralized provides simplicity and integration into leading platforms.

New technologies and regulations are emerging. These, along with what consumers want, will probably push the industry towards a system where things are less centralized. In this system, people will own and control their own digital identities. However, centralized identity will still play a role, especially in interfacing with major consumer platforms. The blog has been authored by Bahaa Abdul Hadi and has been published by the editorial board of Identity Herald. For more information, please visit www.identityherald.com.