How Trust Is Proven On-Chain

How Verifiable Credentials Work

At its core, a Verifiable Credential is a digital statement issued by a trusted party that anyone can independently verify. Unlike traditional paper certificates or centralized databases, VCs don’t require real-time queries to the issuing authority; verifying the signature alone confirms authenticity.

The standard VC workflow typically includes the following stages:

• Issuance: The issuer generates and signs a credential for the holder based on certain facts or qualifications.
• Holding: The holder stores the credential independently, usually in an identity wallet.
• Presentation: When needed, the holder presents the credential—or parts of it—to a verifier.
• Verification: The verifier checks the credential’s validity through cryptographic signatures and DID resolution.

Throughout this process, blockchain doesn’t store credential contents. Instead, it serves as a trust anchor, ensuring the issuer’s identity can be verified and credentials cannot be forged. This offline-verifiable model greatly reduces system dependency and privacy risks.

Issuer, Holder, and Verifier

The VC trust model is built on clear roles for three parties, each with distinct responsibilities but without any centralized control between them.

Role breakdown:

• Issuer: The entity that issues credentials, typically an institution, platform, or organization with public credibility.
• Holder: The individual or entity who receives and owns the credential, maintaining full control over it.
• Verifier: The party that validates the credential’s authenticity in specific scenarios.

The key advantage of this structure is transferable trust. Once a credential is issued by a trusted issuer, holders can reuse it across different scenarios without having to return to the original platform for authentication. This frees identity and credit from being locked into a single system. Additionally, since verifiers only check signatures and status—not store data—the entire system remains highly efficient as it scales.

Privacy Protection and Selective Disclosure

Traditional identity systems often require users to expose excessive personal information just to prove a single point. One of VC’s major innovations is integrating privacy protection as a fundamental feature. Through selective disclosure and zero-knowledge proofs, holders can prove specific conditions without revealing unnecessary details—for example, proving they’re over 18 without sharing their full birthdate.

In practice, privacy protection is reflected in several ways:

• Credentials are stored locally by users, preventing centralized data leaks.
• Only necessary fields are disclosed when presenting credentials.
• Unlinkability is supported to prevent cross-scenario tracking.
• Zero-knowledge proofs can be combined for enhanced privacy protection.

This mechanism ensures trust and privacy aren’t at odds, making decentralized identity systems well-suited for sensitive sectors like finance, healthcare, and education.