Centralized Vs Decentralized Identity Management: Which Protects Identities Better?

For many, online shopping can be scary, especially in Facebook Marketplace, where there have been reports of scams and fraudulent sellers. One way to protect your identity while shopping online is by learning about identity management.

Centralized and decentralized identity management are two ways companies use to protect user identities online. Let’s explore how centralized and decentralized identity management systems work, their benefits and challenges, and, most importantly, how they differ in safeguarding your digital identity.

What is identity management?

Identity management involves knowing who is using a service. Think of it like having a digital ID card. When you sign up for a website or an app, you’re asked to provide personal details, like name, contact number, and email address. The company then stores and uses this information to verify your identity whenever you access their service.

As a marketplace seller, understanding identity management can help you gain the trust of potential buyers and protect yourself from fraudulent activity. On the other hand, as buyers, being aware of how identity management works can help you make more informed decisions on which sellers to trust and which websites or apps to use.

How centralized identity systems work

The first type of identity management system involves having one system that keeps track of all web users’ digital IDs. It’s key for managing user identities across various platforms and making sure that people can easily get into the services they have the right to access with a single set of credentials.

In this setup, there’s one main hub or authority that holds all the identity information, which simplifies access management and security. Let’s take a deeper look at how this system operates.

As mentioned, when you sign up for a service, you have to create a username and password, which is saved into a central database. Next comes the authentication process, where the system verifies your credentials when logging in.

If the username and password match the stored data, access is granted. Additional measures, such as security questions or two-factor authentication, may be set in place to further confirm the user’s identity.

The system determines the level of access each user has, which could range from viewing permissions to full editing rights. Different roles have varying levels of access. For instance, an administrator usually has more extensive access than a regular user.

What is an example of centralized identity management?

A great example of centralized identity management is a company’s internal network system. Businesses typically manage employee access to work tools and resources through a single identity verification process.

Facebook is another example of a centralized identity system since it controls the access and management of user identities as a single entity.

When you create a Facebook account, you are registering your identity with Facebook’s centralized system. It then collects and stores users’ personal information, such as names, email addresses, phone numbers, and demographic information, in its servers.

How decentralized identity systems work

Meanwhile, in decentralized identity management, control shifts from a central authority to the individual users themselves. If you’re familiar with blockchain technology, decentralized identity management operates the same way.

Instead of relying on a single organization to manage and verify identities, each user can manage and share their own identity information. You get to decide how, when, and with whom to share your data. This empowerment is a big step forward in protecting individual privacy and autonomy online.

In decentralized systems, you create a digital identity independently. Most people use blockchain technology to create secure and verifiable identities through public and private key pairs.

The concept of self-sovereign identity (SSI) is central to decentralized identity management. Each individual gets their own unique digital identifier, which they use to authenticate and access various services and platforms.

As such, each user becomes the sole owner and custodian of their identity information and has the final say on how their personal information is used and shared.

When you want to access a service, you present your digital identifier. The website or app can then verify the user’s identity through the digital identifier without needing to access a centralized database.

What is an example of decentralized identity management?

Confirm is a practical example of a decentralized identity management system. We leverage blockchain technology to store your information and distribute it across a network of nodes. This way, anyone trying to tamper with your data will need validation across the entire network. 

Key differences between centralized and decentralized identity management

While both centralized and decentralized identity management systems work towards protecting user identities online, each has its unique way of handling user identities, access, and data security. 

So, let’s talk centralized vs decentralized identity management and explore their differences further:

Control and access

A single entity, like a company or organization, manages the level of control and access each user has. The authority grants or restricts access based on predefined rules.

On the other hand, decentralized identity management systems offer a more user-centric approach. With these, users can grant access to their data as needed rather than the other way around. Such is the case with our platform here at Confirm. Only our users can determine what parts of their information are shared. We don’t even store user data locally, which leads to our next point.

Data ownership

The company or organization collecting user information in a centralized system typically retains ownership of that data. Users have limited control over how their data is used and shared.

In contrast, decentralized identity management systems shift data ownership to users through unique digital identifiers (DIDs) and verifiable credentials (VCs).

DIDs are public keys that act like a “lockbox” address, while private keys are the ones that open it. Sharing the public key lets others verify data associated with the DID, while the private key controls access and signing operations.

VCs, on the other hand, are digitally signed statements that attest to certain information about a user. These credentials can be shared with others to prove specific attributes or qualifications without revealing unnecessary personal information.

Confirm buyers and sellers can present VCs verifying their identity to build trust on the platform without revealing sensitive details like full names or social security numbers. This can go a long way to fight scams and fake listings, protecting everyone in the community.

Security and privacy

Since centralized systems use a single database, just one point of failure in the process can increase their vulnerability to attacks. Compromising the database can then affect all users, which not only puts their data and privacy at risk but also causes major reputational damage to companies.

Decentralized systems since they reduce the risk of large-scale breaches. Even when a decentralized system is compromised, the impact is limited to individual users. As such, you enjoy peace of mind while shopping online or accessing various services.

Scalability and flexibility

Centralized systems can face challenges in scaling up efficiently as the number of users increases because of the infrastructure required to support a large database. Additionally, making changes to the system, such as adding new features or updating security measures, can be time-consuming and complex.

On the other hand, decentralized identity management systems are designed to be more scalable and flexible. Since users’ identity information is stored in a distributed network of nodes, adding more users does not significantly impact the system’s performance.

User experience

When it comes to user experience, centralized identity management systems can be simpler since you only need a single sign-on for multiple services. Meanwhile, with decentralized systems, you may need to manage different digital identifiers for various services and platforms. Many might consider this inconvenient, especially for those who aren’t familiar with blockchain technology or managing their own identities.

Additionally, the responsibility for security and data management lies with users of decentralized identity management systems. This can be seen as a drawback for those who prefer a more hands-off approach and prefer to rely on a central authority to handle these technical responsibilities.

Integration and standardization

Centralized systems may have limitations in integrating seamlessly across different platforms, while their decentralized counterparts can easily work with various marketplaces and services.

However, both systems face challenges in standardizing protocols and practices. Centralized systems often rely on proprietary technology, while decentralized systems are still relatively in their early stages of development. Both scenarios present challenges in achieving widespread interoperability.

Centralized vs decentralized identity management: Which protects identities better?

While centralized identity management systems offer convenience, decentralized management technology provides enhanced security, privacy, and user control.

We at Confirm strive to balance identity protection and personal data sovereignty. To this end, decentralized identity management systems have the upper hand due to their user-centric approach that doesn’t compromise security and privacy.