XRP Ledger’s DID Amendment Brings Decentralized Identity to Blockchain Transactions

The XRP Ledger has implemented its Digital Identity (DID) Amendment through XLS-40, marking a significant development in blockchain-based identity management. The amendment, activated on October 30, 2024, received approval from 28 out of 35 validators, achieving an 85.71 percent approval rate.

The XRP Ledger is a decentralized blockchain network designed to facilitate fast, low-cost financial transactions, primarily supporting the XRP cryptocurrency but also capable of more advanced applications like identity management. Within the XRP Ledger, an amendment refers to an upgrade or change in the network’s functionality, such as introducing new features or improvements. These amendments are not imposed unilaterally; instead, they must be approved by a group of entities called validators, who are responsible for verifying and agreeing on transactions across the network to maintain security and consistency. Validators are nodes on the network, operated by independent parties, that collectively decide whether an amendment should be implemented.

For an amendment to pass, a majority of validators (typically around 80 percent or more) must signal their approval over a specified period, ensuring that changes reflect broad consensus rather than centralized control. This process allows the XRP Ledger to evolve in a way that is both secure and reflective of its diverse user community.

The DID implementation allows users to maintain control over their digital identities without relying on centralized authorities, addressing longstanding concerns about data privacy and security in digital transactions.

“A DID is roughly equivalent to a fingerprint in the real world. Everybody has one, and though it doesn’t really do anything on its own, it’s useful in other contexts,” said Mayukha Vadari, senior software engineer at RippleX. “For example, it can connect to Verifiable Credentials (VCs) or other data that prove who you are without relying on a centralized authority.”

The technical implementation employs a bidirectional pointer system, as detailed by Aanchal Malhotra, head of research at RippleX: “A DID is represented on-chain via a series of two-way links. The user creates a DID document and links to it in their on-chain DID object on the XRPL. The DID document also refers to the on-chain DID object, so there’s no way for someone else to forge your identity.”

This implementation arrives as financial institutions face increasing pressure to enhance their Know Your Customer (KYC) and Anti-Money Laundering (AML) compliance measures. The DID system streamlines these processes while maintaining high security standards, potentially reducing operational costs for financial institutions.

The amendment builds upon previous digital identity initiatives in the blockchain space, including the Sovrin Network’s pioneering work in self-sovereign identity. Unlike earlier attempts, the XRP Ledger’s implementation integrates directly with its existing financial infrastructure, potentially offering broader utility for both institutional and individual users.

Industry analysts note that this development could significantly impact the adoption of decentralized finance (DeFi) services, as robust identity verification remains a key challenge in the sector. The implementation allows for compliance with regulatory requirements while maintaining user privacy through selective disclosure mechanisms.

The DID system’s architecture supports three key roles: users who control their DIDs, issuers who provide verifiable credentials, and verifiers who validate these credentials. This structure aligns with emerging standards for digital identity verification while adding blockchain-specific security features.

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November 7, 2024 – by Cass Kennedy

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