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

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

The need for a new form of identity is pressing. Traditional systems often fail to provide the self-ownership and censorship resistance that users demand. Decentralized Identifiers (DIDs) address these gaps by offering user-generated, self-owned, globally unique identifiers rooted in decentralized trust systems. This shift is crucial for creating a more secure and user-centric identity landscape.

At the core of DIDs is a technical foundation built on seven key innovations. These include user-owned identifiers, a user agent for managing keys associated with these identifiers, and encrypted, user-controlled datastores. This architecture allows for verifiable credentials, which are data objects consisting of claims made by the issuer about a subject. Notably, the sign-in process still relies on traditional authentication methods, such as username and password, to verify the employee's identity with the issuer. However, once verified, the verifiable credential serves as a portable, cryptographically signed proof that the employee can present to any verifier without needing to contact a central authority.

In production, understanding the nuances of DIDs and verifiable credentials is essential. You need to ensure that your implementation aligns with the expectations of self-ownership and decentralized trust. Be cautious with the traditional authentication step, as it remains separate from the verifiable credential itself. This can lead to confusion if not properly managed. Moreover, having a basic understanding of DIDs is recommended for anyone creating a verifiable credential solution based on Microsoft’s offering.

Key takeaways

  • Understand that DIDs are user-generated, self-owned identifiers rooted in decentralized trust systems.
  • Leverage verifiable credentials as portable, cryptographically signed proofs for identity verification.
  • Recognize that traditional authentication methods are still used to verify identity before issuing credentials.
  • Implement user-controlled datastores to enhance security and privacy in your identity solutions.
  • Familiarize yourself with the seven key innovations that form the technical foundation for DIDs.

Why it matters

In production, DIDs can significantly enhance user privacy and control over personal information, reducing reliance on centralized identity providers. This shift can lead to more secure and resilient identity management systems.

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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