What is the Difference Between Centralized and Decentralized Identity Management

Rising concerns over data and network security have propelled businesses and other organizations to tighten their security measures and draw actionable plans to be ready in case they’re the intended target of a security breach. This gave way to Identity Access Management (IAM) wherein only authorized users could gain access to services and accounts.

Consequently, the global IAM sector is expected to reach a valuation of US $34.52 billion by 2028, growing at a CAGR (compound annual growth rate) of 14.5% between 2021 and 2028. Revised and more stringent regulatory compliances and adoption of cloud technologies are also contributing to the growth of IAM. However, developments in blockchain and AI (artificial intelligence) have changed the name of the game and have given birth to decentralized identity management.

But what is IAM? And what is decentralized identity management? Moreover, how is it any different than the status quo (centralized) identity system? Keep reading to find out.
What is Identity Access Management (IAM)?

Identity management, or IAM, refers to rules, policies, and technologies that authorize only the right individuals to access an entity’s data sources. This concept is a cross between IT security and data management and promotes role-based access control.

For instance, if Company FITX wants just the upper management to have access to data regarding its latest software development, it can tap into IAM and ensure only the desired employees have access to this confidential information. This ascertains that only the people who need to have access to some data or resource can access it.

Wondering how this system keeps non-authorized individuals out? The logic is quite simple actually. Only authorized people can log in and access the information. Others will simply not be allowed to bypass this security measure.

Multi-factor authentication (MFA) tools, access provisioning and deprovisioning, and password controls are all some common examples of IAM and how a company can benefit from this security measure.

This won’t just keep unauthorized individuals out but also minimize the instances of data breaches—at least the ones that happen due to weak or deceitful links internally.

Basically, IAM has four major components that define all that it stands for. The components include authentication, authorization, administration, and auditing and reporting.

Now that you’re clear on the concept of IAM, it’s time to dive into centralized and decentralized identity management and uncover their differences.

What is Centralized Identity Management?

A centralized identity management system that collects and stores identity-related data (identifiers) in a single centralized location (or database). The identifiers could include login credentials, email addresses, and any other identifier like government-issued ID used by an individual to bypass a security measure.

In a centralized identity system, users get to access all the data, resources, websites, applications, and other systems using the same set of credentials over and over again. This eliminates the need for creating multiple accounts or remembering a whole lot of passwords.

Due to this feature, this identity system is very popular among users as it is extremely user friendly and provides heightened visibility over the devices, applications, networks used to access an organization’s resources.

For instance, your organization might allow you to log in to your employee account through multiple devices (yours or others) as long as you’re doing your work on time and don’t take part in any unlawful activities.

Though these advantages are unbeatable and make our lives easier, they come at a steep price: weakened security. Imagine how easy it would be for a professional hacker to break into the centralized database and steal or manipulate all the information they like.

What happens when you lose one of your logged in devices and the thief gets a hold of your account before you can use another one of your devices to block access to your system? They can do as they please while you search for your device and approve, edit, or create processes as they like—all in your name and using you as a scapegoat.

But what’s the alternative? No security? Or no IAM? Actually, the answer is offered by blockchain-powered decentralized identifiers.

What is Decentralized Identity Management?

Decentralized identity management refers to a system that authenticates and approves users without requiring a centralized authority to play referee. It facilitates transparency and trust. But, most of all, it helps entities tighten their security measures.

A decentralized blockchain identity system empowers users and gives them complete control over their data. As such, a decentralized identifier (DID) serves as a proxy identifier for an individual or entity. What makes them different from centralized identities is that each of these identifiers are protected with a unique private key and give the owner 100% control over their personal information.

Better yet, a single organization or person can have multiple DIDs. This helps them use the DIDs however they wish and even use them for specific tasks. For instance, if Mark has 2 DIDs, he could use the one containing most of his personal information for applying to jobs. The other containing surface-level information can be used for online purchases, gaming, and more.

However, this raises the question: How would a verifier know the information provided by a DID holder is correct? After all, for all intents and purposes, they can enter and control all the information they store in a DID.

While that’s true, the real beauty of a DID lies in how it is connected to verifiable credentials that help verify the information provided by a DID almost instantly. On the other hand, these credentials are cryptographically secured and provide ultimate control to the users.

To elaborate, decentralized identities are secured through cryptography. This ensures that only the owner of a DID has access to manage, control, edit, and share the underlying information. The paired public key helps DID holders share their information without much hassle, making the process secure and convenient.

Given its many benefits, this decentralized system is far superior to centralized identity management.

Centralized vs Decentralized Identity Management

The following table presents the major differences between centralized and decentralized identity management:

Basis of distinction Centralized Identity Management Decentralized Identity Management

Data storage - The data is stored on a centralized database. Here, the data is stored on a user's device.

Data ownership In the centralized model, all your data is owned and controlled by a centralized authority. Decentralized identity management provides users more flexibility and freedom. This means that users have ownership over their data.

Data disclosure - Data disclosure is available at every step of the process and for each credential. This management model is marked by selective data disclosure, meaning data is available at the will of the owner.

Data sharing - The collected and stored data can be easily shared by third parties without informing or taking consent from the user. Explicit user consent is required to use or share their data.

Identity use case - One identity is required for one platform or system. For example, you just need one set of credentials to log in to your employee account through multiple devices. One identity composed of numerous verifiable credentials that can be viewed upon the user’s discretion.

Security and better control over their information have made decentralized identifiers the need of the hour and popular among security enthusiasts.

So, what are you waiting for? Take advantage of ProofEasy’s blockchain and QR-based platform to get started on your decentralized identity management journey today! In fact, why stop there when you can benefit from verifiable credentials? You even get to choose the template theme!

The best part, though? You can use ProofEasy to secure your existing documents and forget all about expensive and effort-intensive document management. You can even integrate this budget-friendly solution into your existing system since ProofEasy offers a customizable API layer that’s intuitive and doesn't require any training.

Contact the ProofEasy team today to secure your organization!