The Decentralisation Paradox in Digital Identity: Centralising Decentralisation with Digital Wallets?

Abstract

Digital identity is shifting from service- and network-centric approaches toward user-centric ones that promise users increased control over their data. Despite their decentralised design, such approaches often reintroduce centralised components in different forms. This research explores this tension, i.e., the decentralisation paradox, and argues that user-centric architectures tend to redistribute rather than eliminate centralisation. Based on Critical Systems Thinking (CST), digital identity is framed as a "wicked problem" that spans across the technical, legal, social and ethical dimensions. The paper argues that understanding all these interdependencies is essential for designing reliable architectures and ensuring the next generation of digital identity goes beyond superficial decentralisation.