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Decentralized Identity Challenges & How to Tackle Them

In our previous article, we highlighted what decentralized IDs (DIDs) are and why they matter to users and businesses. And although DIDs are a cornerstone of the Web3 future and have numerous potential use cases, they still face challenges due to their novelty as a technology, which need to be tackled before DIDs become mainstream.

In this article, we explore the top challenges of issuing and adopting decentralized IDs, and what the future holds for DIDs.


The benefits of having a decentralized identity that represents a single version of the truth can only be realized if it is accepted by all organizations, governments, and other ecosystems. In turn, this depends on achieving standards for issuing, holding, and verifying DIDs such that all credentials are verified, trustworthy, and securely stored and transferred.

For instance, passports are issued based on international standards that make them acceptable credentials by different nations, verifiable by multiple entities, and stored in a manner such that no one can tamper with their authenticity (e.g. one person cannot have more than one passport of the same nationality).

The same way, decentralized identities will require appropriate standards that allow them to be fully acceptable and utilized by different institutions.

Efforts are being made by large institutions, such as W3C and DIF, to establish grounds for such standards.


Similar to standardization, an important issue that faces DID adoption is interoperability, or the ability to achieve communication across two or more blockchains.

When issuing a DID for general use, you probably intend on using it to prove your uniqueness and liveness across multiple platforms (e.g. NFT marketplaces, DAOs), however, if blockchain distributed ledgers are not interoperable with each other, then users will need to issue different DIDs for different platforms, and may even need to have a different wallet for each DID, and struggle with vendor lock-in.

To ensure interoperability, DID issuing entities need to build their infrastructure on a blockchain that supports cross-chain communication and safe data transfer.

How does Fractal tackle these challenges?

To tackle the challenges of interoperability, Fractal leverages the Substrate framework to deploy our protocol and DID infrastructure. Substrate-based blockchains can be integrated as parachains, enabling them to gain interoperability with other parachains as well as other independent blockchains such as Bitcoin and Ethereum. Interoperability lies on Cross-Conesnsus Messages (XCM), in which Cross-Chain Message Passing (XCMP) plays a significant role. XCMP enables parachains to share trusted logic on the same relay chain, for example, transferring tokens between networks, without any additional trust assumptions!

As explained by our protocol developer in the detailed guide, Shelby Doolittle, we chose to use Substrate to build our blockchain primarily because it:

  • Is built on the Rust programming language
  • Is open source, like Fractal Protocol
  • Has an easy API for common code
  • Is fully-featured, meaning that it handles all aspects of a blockchain

In terms of verifying credentials, Fractal Wallet allows users of Fractal ID to manage their credentials. Users upload their information to Fractal website (e.g. passport, proof of residency) where it is verified by Fractal, encrypted, and stored securely. Whenever a user is required to verify their information — for example, they need to be KYCed to take part in an IDO or participate in a token sale — Fractal will issue the required credentials which are later stored on their Fractal Wallet and users can share them with the requesting platform. This way, users can avoid sharing unnecessary data and waiting for KYC processes to take place by the platform they want to use. This allows for a KYC/AML process as easy as connecting a cryptocurrency wallet to a website or exchange, and provides users with the ability to reuse their issued credentials across multiple platforms.

To explore how Fractal processes your data and which regulations we abide to, read our privacy policy.

About Fractal

Fractal’s mission is to empower and incentivize users & businesses to exchange data in a privacy-preserving way so that the balance of power and control between web platforms and their users is restored. Find out more in our roadmap for 2022.

If you are interested in exploring how KYC and decentralized identities (DIDs) can help you and your business, reach out to or book a meeting with our team.

Twitter |Discord |Fractal ID Support | Announcements | Telegram Community | LinkedIN | YouTube | Website | Wallet

This article does not include elements of any contractual relationship. This article shall not be deemed to constitute a prospectus of any sort or a solicitation for investment or investment advice; nor does it in any way pertain to an offering or a solicitation of an offer to buy any securities in any jurisdiction.

For the avoidance of doubt, please note that the Protocol has not been fully developed. Any statements made about the Protocol are forward-looking statements that merely reflect Fractal’s intention for the functioning of the Protocol. There are known and unknown risks that can cause the results to differ from the forward-looking statements.

Fractal does not intend to express investment, financial, legal, tax, or any other advice, and any conclusions drawn from statements in this article or otherwise made by Fractal shall not be deemed to constitute advice in any jurisdiction.

Fractal’s intended purpose of the Tokens is to be used as means of payment for the services that will be offered within the Protocol (the “Services”). The purchase, ownership, receipt, or possession of Tokens carries no rights, express or implied, other than the right to use Tokens as a means to enable usage of Services in accordance with the then-applicable terms of use relating to the Services offered within the Protocol. The Tokens do not represent or confer any ownership right or stake, share, security, or equivalent rights, or any right to receive future revenue shares, intellectual property rights, or any other form of participation in or relating to the Protocol, Fractal, Service Providers or any of their corporate affiliates, other than any rights relating to the provision and receipt of Services, subject to the applicable terms, conditions or policies that may be adopted by participants in the Protocol.

This article was written by Alamira Jouman Hajjar, research analyst and content creator at Fractal ID.



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