Bitcoin Transactions in Decentralized Identity

At John Craddock’s Introduction to Decentralized Identity webinar, he asked: what if YOU were in sole control of your identity, rather than relying on multiple organizations to protect it for you?

Unfortunately, the audio was lost for a minute 23 minutes into the live broadcast. To aid understanding, here John shows the slides again and explains what’s going on.

You will have seen this slide in the Blockchain webinar I presented in May 2019. A transaction moves funds between addresses. To move the funds, the owner of the transaction must prove that they own the source funds and that they have created the transaction.

To prove they own the source funds, held at address M in transaction #TXe, the public key that resolves to address M is added to the #TXm transaction, and the transaction including the public key is digitally signed by the owner’s private key.

To validate the transaction, the public key is used to validate the signature. If the validation is successful, it proves that the private key is owned by the creator of the transaction, and consequently, the creator also owns the associated public key that was added to the transaction. Hence the owner owns the source funds.

When using this to represent a digital identity, the public key in the transaction represents our user’s digital identity.

Eric is excited that his digital identity is represented by transaction #TXm. The transaction can propagate throughout the Bitcoin network and be fully verified by each node. However, until the transaction is added to Blockchain, it is unconfirmed and reversible.

The transaction is only confirmed once it has been mined into the blockchain.

On Twitter, Kirit P said:

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