Describe the challenges with current digital identities and credentials
Think about all the online apps and services you currently use and how you register with and access them. You may be using your email address, an existing social media account, or you may set up a new username. Whichever method you use, it becomes your online digital identity to that service or app.
In many cases, once you use that online digital identity to access the service or make an online transaction, you begin to get targeted advertisements, emails for services for which you never signed up, and other spam or junk mail. That’s because it’s hard to retain control of your identity once you've shared it in exchange for access to a service. The organization providing the service has and controls the personal information tied to your identity. Similarly, the privacy and security of your personal information that makes up your digital identity, depends on the organization providing the service.
Individuals and organizations expect to be able to control their online digital identities. This is where a decentralized identity system comes into play. A standards-based decentralized identity system can unlock a new set of experiences that give users and organizations greater control over their data, how that data is shared, and deliver a higher degree of trust and security.
Why we need verifiable credentials
Credentials are used to assert one or more claims about the subject of that credential. Examples of commonly used credentials include your driver’s license and passport. We use these credentials to establish our identity and they're optimized to work in the physical world where you physically present the credential. The person to whom you present the credential may look at the picture on the credential to ensure it really is you, may physically inspect it to ensure it's legitimate, and may even pass it through a digital reader that is connected to a centralized database from the issuer, to verify it’s valid.
In the digital world, transactions are increasingly done over the web and often require individuals to make claims or assertions that organizations can digitally verify. Consider a scenario where an individual needs to provide proof of current employment for an online bank loan application or where an individual needs to provide proof of their education qualifications to an employment agency. The current process of obtaining and presenting a digital credential that can make required claims and that can be verified can be difficult and cumbersome. Individuals and businesses need a way to express this and other types of qualifications and/or personal information, i.e., our digital identities, over the web, in a manner that is cryptographically secure, compliant to privacy requirements, and machine readable for verification. Additionally, individuals and organizations want to be able to control how and when their digital identities are used and shared. Verifiable credentials help address these challenges.
Verifiable Credentials are based on a decentralized identity model and employ a new type of identifier called Decentralized Identifiers (DIDs). Before we go further into how verifiable credentials work, it's helpful to first understand what are DIDs and what makes them special.