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How decentralized identity works
A decentralized identity system has these main elements:
Blockchain: A decentralized database that is shared among computers in the blockchain network that records information in a way that makes it very difficult to change, hack, or cheat the system.
Decentralized Identity Wallet: An app that allows users to create their decentralized identifiers and manage their Verifiable Credentials.
Decentralized Identifier (DID): A unique identifier on the blockchain made up of a string of letters and numbers that contains details like the public key and verification information.
Verifiable Credential (VC): A digital, cryptographically secured version of both paper and digital credentials that people can present to organizations that need them for verification. These are the main parties in the VC system:
Holder: A user who creates their decentralized identifier with a digital wallet app and receives the Verifiable Credential.
Issuer: The organization that signs a Verifiable Credential with their private key and issues it to the holder.
Verifier: A party that checks the credentials and can read the issuer’s public DID on the blockchain to verify if the Verifiable Credential the holder shared was signed by the issuer’s DID.

For example:

Internet:     Coinbase.com   202.192.1.168

Blockchain   Coinbase.com   0xd4E89296f3041848Ab2Ce270da4fFFBb999

Internet:     Blockchain.com  202.192.1.188

Blockchain   Blockchain.com  0xd4E89296f3041848Ab2Ce270da4fFFBb888

Internet:     Nike.com  202.192.1.68

Blockchain  Nike.com  0xd4E89296f3041848Ab2Ce270da4fFFBb666

Internet:    Google.com  202.192.1.55

Blockchain  Google.com  0xd4E89296f3041848Ab2Ce270da4fFFBb555

Internet:    Meta.com 202.192.1.133

Blockchain  Meta.com  0xd4E89296f3041848Ab2Ce270da4fFFBb333

Decentralized Identity on Blockchain
Blockchain is a digitally distributed database that is shared among nodes, which are computers in the blockchain network, that makes it difficult or impossible to change, hack, or cheat the system. Blockchain’s design allows everyone in the network to know that the information contained is true and valid. Each block has unique data and the blocks combine to complete a chain. The nodes execute functions like sending and receiving information. Blockchain technology is also referred to as Distributed Ledger Technology .

Here is how each party uses the blockchain in a decentralized identity system:
Holder: Owner of the Verifiable Credential (e.g. driver’s license) has their public DID on the blockchain.
Issuer: The issuer’s public DID and associated public key is on the blockchain. When an issuer, like a licensing organization, provides a credential to a holder like a driver’s license, the issuer signs the credential with their private key.
Verifier: A verifier like an on-demand driving company can check the blockchain to ensure that the licensing department that they trust did in fact issue the license and who it was issued to.
The blockchain allows everyone in the network to have the same source of truth about which credentials are valid and who authenticated the validity of the data inside the credentials. The blockchain establishes a basis of trust by maintaining a verifiable registry (or records) of