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A Decentralized Identifier (aka DID), is a globally unique identifier that provides a general purpose way of looking up public keys associated with the identifier.
This means that ownership of a UUID can be proven and that support for common cryptography operations such as signing, verifying, and encrypting messages is possible. This makes DIDs strictly more useful than traditional UUIDs as account identifiers and are very useful for building federated or decentralized services.
Services that use DIDs give users self-custody over their account identity. Authentication of users can happen without the need for a centralized authentication service or user database. Instead, whoever holds the private keys associated with a DID will be able to authenticate as the account owner.
This gives users the ability to maintain the same account handles/identities across multiple separate services (or migrate homeservers in a federated system) without having to create a different account or identity for each service.