Can I Have Digital Identity and Privacy at the Same Time?
Digital identity gives us quick and easy access to online resources and communities.
But as we increasingly rely on digital identities for daily interactions, our personal data becomes both more detailed and vulnerable to misuse, especially if we are not vigilant.
So, can we have full privacy while creating a digital persona that lets us interact genuinely with others online?
Let’s explore.
In this article, we use the term “digital identity” broadly, to refer to both online identity and official digital credentials. To understand the difference between the terms, read What Is the Difference Between Online Identity and Digital Identity?
Understanding privacy in digital identity
Privacy has a rich history and can mean different things, such as:
- Confidentiality in personal communications
- The right to be “let alone”
- Protection from fraud and digital crime
- Minimizing surveillance by corporations
- Freedom from state surveillance, e.g. in authoritarian regimes
- Greater control over personal data
The concept of privacy has changed dramatically since major technology companies built business models around large-scale collection, analysis, and monetization of user data. As a result, privacy today is no longer just about keeping information safe from unauthorized access—it’s also about granting individuals control over their personal data and how it is shared.
This vision is at the heart of privacy in the context of digital identity. And while improving security and combating digital crime is an ongoing effort, the goal of giving control back to individuals is still largely unfulfilled.
As we’ll see in this article, fully addressing privacy challenges requires a comprehensive approach that combines technical solutions and regulatory frameworks.
Technical solutions to privacy
Privacy by design is a systems engineering approach that incorporates privacy protections into the architecture of digital systems from the start, rather than adding them at later stages. It aims to minimize data exposure, ensure secure data handling, and limit data collection to what is strictly necessary. Previously considered too theoretical and abstract, the framework is now more practical thanks to advances in Privacy-enhancing technologies (PETs) and methods to encode privacy protections directly into data handling processes.
A few examples of privacy-enhancing technologies include:
- Homomorphic encryption, which allows computations on encrypted data.
- Zero-knowledge proofs, which enable one party to prove that they know something without revealing any additional information.
- Secure multi-party computation, which allows parties to jointly compute a function over their inputs while keeping those inputs private.
- Differential privacy, which enables a data holder to share aggregate group patterns while limiting the information revealed about specific individuals.
National privacy laws encourage—and sometimes mandate—the use of certain privacy-enhancing technologies.
Privacy regulations
The General Data Protection Regulation (GDPR) in the EU, the California Consumer Privacy Act (CCPA) in the US, and similar laws worldwide set rules for data protection, requiring organizations to adopt better privacy practices.
Consider the European GDPR: It was designed to ensure that users are fully informed about the data companies collect and have the opportunity to consent to sharing it. The regulation requires businesses to be transparent and gives individuals the right to access, manage, and delete their data. GDPR violations carry severe financial penalties. The largest to date was a €1.2 billion fine imposed on Meta.
However, even regulations backed by such enforcement power may fail to fully meet the expectations of privacy advocates and the general public. Consider how GDPR compliance looks like in practice.
Cookie banners and GDPR
After the GDPR went into effect in 2018, websites started introducing cookie banners. These notifications invite you to read the “cookie policy” (which most people skip) and explain that tracking via cookies is meant to improve your browsing experience.
Cookie banners resulted from an ongoing debate around digital privacy, including the question of who should own data and be responsible for protecting it. While they aim to promote transparency, they’re often seen as a source of frustration and are sometimes even called “cookie banner terror.” Furthermore, some experts argue that these banners have become “almost a useless exercise,” as many users click “accept” simply to move forward or even install extensions to bypass banners altogether.
An inconvenient truth is that despite all the efforts to strengthen digital privacy, the public often lacks the awareness or tools to fully benefit from it. And it’s not really the users’ fault. Cookie banners, overly complex by design, have desensitized people to their presence and given companies another way to manipulate users. Companies now use “consent management platforms” to optimize cookie banners for more “accept” clicks, which essentially turns privacy tools into manipulation tools, contrary to the intent of GDPR.
This dynamic contributes to a broader phenomenon known as digital resignation. Even if individuals want to protect their personal information, the systems in place create an impression that it’s impossible to do so. The complexity of cookie banners and behavioral manipulation tactics reinforce the feeling that trying to protect one’s privacy is futile.
All this points to a broader issue: Despite the regulatory push for greater digital privacy, there is a significant gap between the intent of privacy measures and their real-world impact.
Privacy and user experience
As we’ve seen with cookie banners, people naturally seek speed and convenience online. When privacy measures become overly complex, they often cause frustration and disengagement.
Looking at privacy from a different angle—as a means of protection from digital crime and unauthorized access—let’s consider Multi-Factor Authentication (MFA). MFA aims to increase security and protect user privacy by adding extra steps to identity verification. However, poorly designed MFA can discourage users who find the additional steps cumbersome. MFA can become less effective if users find it inconvenient and look for ways to bypass it.
The same logic applies to any overly complex identity system that, no matter how secure, fails to become widely adopted. That’s why it’s important to prioritize user experience when designing digital identity systems, also for privacy’s sake.
Privacy and security
The debate between privacy and security has been ongoing for decades, with governments struggling to balance national security against individual privacy rights.
Several landmark cases have shaped this discussion. One of the earliest was the Clipper Chip introduced by the US government in 1993. The initiative aimed to create a backdoor in encrypted communications to assist law enforcement. It faced significant opposition due to fears of government overreach, leading to its demise by 1996.
In 2013, Edward Snowden exposed the NSA's mass surveillance programs, revealing the extent of government access to private communications of both foreign and domestic nationals in the name of counterterrorism. This triggered a broader conversation about the limits of government surveillance.
Following Snowden’s revelations, Apple and Google promised to lock down all data stored on their smartphones with encryption that even the companies themselves couldn't decrypt, even with a court order.
The Apple-FBI iPhone Encryption dispute in 2016 again raised questions about whether the government should be able to bypass encryption for criminal investigations.
As technology advances and surveillance capabilities grow, the question of how much access governments should have to private information will keep coming up. Since governments play a key role in building national digital identity systems, this directly impacts the identity space.
Corporate surveillance
Beyond governments, corporations also engage in surveillance at an unprecedented scale.
Tech giants like Google and Facebook track users across their platforms and beyond, building detailed profiles to deliver personalized ads and drive sales. Using "log in with Facebook" or "log in with Google" means handing over your personal information to an intermediary. It is convenient for you, but it benefits big businesses even more.
Corporate surveillance practices are widely recognized, but addressing them requires a shift to new digital identity models that prioritize user privacy and control. Decentralized identity (or self-sovereign identity) offers an alternative by allowing individuals to manage their personal data and reducing reliance on centralized systems. This transformation is only starting to take shape.
Privacy and social media
Social media platforms not only collect vast amounts of data but also actively shape user behavior. Algorithms designed to maximize engagement often encourage users to share more personal information, leveraging social validation and peer influence. This creates additional challenges for protecting privacy.
The implications of oversharing extend beyond data collection. Social media has blurred the boundaries between personal and professional lives. Content meant for one audience (like friends or family) becomes accessible to unintended audiences (such as employers or strangers). For instance, many employers review candidates’ social media profiles as part of the hiring process, which shows how online disclosure can have offline consequences.
What’s next?
Solving privacy challenges with digital identity requires a combination of technological innovation, effective regulations, and increased public awareness. Effective solutions must balance functionality with privacy to ensure that identity systems are secure and user-friendly at the same time.
The encouraging news is that the identity landscape is starting to shift and decentralized identity models are gaining traction. However, these emerging approaches face significant hurdles, including technical complexity, adoption barriers, and resistance from businesses that benefit from current systems.
To make privacy-preserving digital identities become the norm, we must make thoughtful decisions by prioritizing user rights, enforcing accountability, and fostering collaboration among stakeholders. The choices we make today will define whether digital identity truly serves individuals in the future.
