Building a Decentralized Identity Wallet: From Key Management to UX

Decentralized identity wallets are the gateway to self-sovereign identity—letting users own their keys, manage their Verifiable Credentials (VCs), and interact securely with Web3 applications without relying on centralized providers. But designing a wallet that balances robust security with an approachable user experience remains a major challenge. In this guide, we’ll cover the essential components of a decentralized identity wallet: secure key storage, social recovery, credential handling, and intuitive onboarding flows.

Secure Key Management

At the heart of any decentralized wallet lies its key store. Users generate a cryptographic key pair—typically an Ed25519 or secp256k1 private key + public key pair—which becomes their Decentralized Identifier (DID). Protecting the private key is paramount:

• Hardware-Backed Storage: On mobile, leverage secure enclaves (iOS Secure Enclave, Android Keystore) to isolate keys from the main OS. On desktop, support hardware wallets (Ledger, Trezor) via WebUSB or WebHID.
• Encrypted Local Vaults: For environments without hardware support, encrypt the key with user-chosen passphrases using an algorithm like PBKDF2 or Argon2 for key stretching, then store it in local storage or IndexedDB.

// Example: deriving encryption key from passphrase
import * as argon2 from 'argon2-browser';

const deriveKey = async (password, salt) => {
  return await argon2.hash({
    pass: password,
    salt: salt,
    type: argon2.ArgonType.Argon2id,
    time: 3,
    mem: 4096,
    hashLen: 32
  });
};

Social Recovery & Backup

Users often lose devices or forget passphrases. Social recovery replaces single points of failure with a set of trusted “guardians”:

1. Key Sharding: Split the private key into N shares using Shamir’s Secret Sharing.
2. Guardian Selection: During wallet setup, the user designates 3–5 trusted contacts or devices to hold shares.
3. Recovery Flow: If locked out, the user requests shares from guardians; once a threshold (e.g., 3 of 5) is collected, the wallet reconstructs the private key.

Implementing this requires secure, out-of-band distribution of shards (QR codes, encrypted messages) and a clear UI that guides guardians through the recovery process.

Verifiable Credential Handling

Beyond authentication, decentralized identity wallets store and present VCs—JSON-LD documents signed by issuers:

• Credential Storage: Maintain an encrypted vault of received credentials, indexed by schema type (e.g., “UniversityDegree,” “KYCVerification”).
• Selective Disclosure: Use JSON Web Token (JWT) or BBS+ signatures to allow users to prove specific attributes without revealing entire documents.
• Presentation Layer: Provide a “Wallet Pass” UI where users review and approve each VC before sharing with a service.

// Simplified VC proof request
{
  "@context": ["https://www.w3.org/2018/credentials/v1"],
  "type": ["VerifiablePresentation", "KYCProof"],
  "presentation_submission": {
    "descriptor_map": [
      {
        "id": "kyc1",
        "format": "jwt_vp",
        "path": "$.verifiableCredential[0]"
      }
    ]
  }
}

Onboarding & UX Patterns

Smooth onboarding is critical for mainstream adoption:

• Guided Setup: Walk users through passphrase creation, hardware-wallet pairing, or social-recovery setup step by step, with clear explanations of security trade-offs.
• Progressive Disclosure: Introduce advanced features (e.g., manual gas fee selection, custom RPC endpoints) only when users become comfortable.
• Contextual Tooltips: Provide inline help for terms like “DID,” “VC,” and “proof.” Help links should open concise tutorials, not long whitepapers.
• Test Credentials: Offer sample credentials (e.g., “Demo Badge”) that users can issue to themselves for practice presenting and verifying.

Interoperability & Standards

Adhering to W3C DID and VC specs ensures compatibility across ecosystems:

• DID Methods: Support popular methods like did:ethr, did:key, and did:web. Implement a resolver layer that maps DIDs to public keys and service endpoints.
• VC Formats: Accept both JWT-based and JSON-LD VCs. Validate cryptographic proofs client-side before accepting credentials.
• Protocol Integrations: Integrate with SIWE (Sign-In With Ethereum) for authentication and OIDC/OAuth2 flows for hybrid Web2/Web3 use cases.

Testing & Security Audits

Before release, conduct thorough testing:

• Unit & E2E Tests: Simulate key generation, encryption/decryption, recovery workflows, and credential presentations.
• Penetration Tests: Engage third parties to probe for vulnerabilities in key storage, shard distribution, and API integrations.
• Open-Source Review: Publish code under a permissive license, inviting community audits and contributions.

Conclusion

A decentralized identity wallet bridges the gap between cutting-edge Web3 standards and everyday usability. By combining hardware-backed key storage, social recovery, robust VC handling, and user-centric onboarding, Pavilion Network’s wallet can empower users to truly own their digital identities. Rigorous adherence to open standards and security best practices will pave the way for a user experience that’s both secure and approachable—crucial for the next wave of decentralized applications.