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Decentralized Identifiers in Microsoft Entra Verified ID: A Game Changer for Identity Management

5 min read Microsoft LearnApr 26, 2026Reviewed for accuracy
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PractitionerHands-on experience recommended

The need for a new form of identity arises from the limitations of existing systems. Traditional identity management often lacks self-ownership and is susceptible to censorship. Decentralized Identifiers (DIDs) address these issues by providing user-generated, self-owned, globally unique identifiers rooted in decentralized trust systems. This shift enables individuals to control their identities without relying on central authorities.

DIDs work by leveraging a technical foundation built on seven key innovations, including user-owned identifiers and a user agent to manage keys associated with these identifiers. This architecture allows for encrypted, user-controlled datastores, ensuring that identity attributes are securely managed and accessible only by the user. In this system, verifiable credentials serve as data objects that contain claims made by the issuer, attesting to information about the subject. This means that when an employee presents a verifiable credential, it acts as a portable, cryptographically signed proof, eliminating the need for the verifier to contact a central authority for validation.

In production, it’s crucial to understand that the sign-in process still relies on traditional authentication methods, such as username and password, to verify the employee's identity with the issuer. This separation between the sign-in step and the verifiable credential itself is a key detail that can trip up teams new to this technology. A basic understanding of DIDs is recommended for anyone looking to implement a verifiable credential solution based on Microsoft’s offering.

Key takeaways

  • Understand DIDs as user-generated, self-owned identifiers that enhance identity management.
  • Leverage user-controlled datastores for secure identity attribute management.
  • Recognize that traditional authentication methods are still necessary during the sign-in process.

Why it matters

In production, adopting DIDs can significantly enhance user control over identity, reducing reliance on central authorities and improving security. This is crucial for organizations looking to innovate in identity management while ensuring privacy and ownership.

When NOT to use this

The official docs don't call out specific anti-patterns here. Use your judgment based on your scale and requirements.

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