Hybrid Ecosystems: Combining OpenID Federation with Decentralized Identifiers (DIDs)

Federated identity systems were designed for policy-driven trust– with registries, accreditations, and metadata chains. Decentralized identity introduced the opposite model: cryptographic trust anchored in distributed ledgers through decentralized identifiers (DIDs) and verifiable data registries (VDRs). Each solves different problems: federations deliver governance and assurance; decentralized systems enable privacy, portability, and no-call-home verification.

A hybrid approach that links OpenID Federation entities with DIDs combines the assurance of regulated federations with the cryptographic integrity of decentralized identifiers. This article examines how these trust models can be technically integrated—covering issuer registration, credential issuance, and verification flows.

Why Hybrid Ecosystems?

Traditional federated trust frameworks, such as those now emerging in digital wallet ecosystems, operate through a central trust registry. Participants– issuers, verifiers, and wallets–are onboarded under governance policies, and their metadata chains are signed and distributed by a federation operator. This guarantees regulatory assurance but introduces runtime dependencies: verifiers must often resolve live metadata or token introspection endpoints controlled by the federation or issuer.

Decentralized identity frameworks remove that dependency. Credentials are signed using keys anchored in decentralized identifiers (DIDs) and verified against on-ledger data such as status lists or schema definitions. The verifier can check a credential’s integrity and revocation state without contacting the issuer or federation in real time—a property known as no call home verification. It improves privacy (the issuer is not notified of every presentation) and reliability (verification works offline or across borders).

A hybrid trust model merges these two assurance layers:

• OpenID Federation provides governed onboarding, accredited roles, and transparent metadata chains that describe who is allowed to issue and verify.

• DIDs and verifiable data registries (VDRs) provide cryptographic proofs, revocation registries, and no call home credential verification.

• Combined, they let verifiers trust both the policy provenance (through federation metadata) and the cryptographic authenticity (through DIDs) of a credential—without sacrificing privacy or compliance.

For initiatives like the EU Digital Identity Wallet, this convergence is not optional: large-scale, cross-border interoperability demands both governance and decentralized assurance.

Federated vs. Decentralized Trust Models

Hybrid wallet ecosystems combine federated trust with decentralized identifiers (DIDs). Each model brings unique strengths, and when integrated, they complement each other to provide a secure, interoperable, and privacy-preserving system.

Feature / Property	Federated Trust (OpenID Federation)	Decentralized Trust (DIDs / VDRs)
Trust Anchor	Centralized federation operator; highly auditable	Publicly resolvable DID on ledger
Participant Onboarding	Accredited roles, policy-backed governance	Self-sovereign, flexible
Credential Verification	Verifies metadata and compliance	Verifies cryptographic proofs independently
Revocation / Status Check	Managed through federation metadata	Ledger-based revocation / status lists
Privacy / No Call Home	Requires minimal federation interaction	Fully no call home, privacy-preserving
Governance Visibility	High, policy and accreditation enforced	Low; relies on cryptographic proofs
Interoperability	Across accredited participants and ecosystems	Across DIDs and verifiable credential models

Key insight: Federated trust provides structured governance and auditable roles, while decentralized identifiers deliver cryptographic assurance and privacy-preserving verification. Together, they form a hybrid ecosystem that maximizes both compliance and autonomy.

Anchoring Decentralized Identifiers in OpenID Federation

OpenID Federation and decentralized identifiers (DIDs) establish trust in fundamentally different ways. In OpenID Federation, trust is delegated through federation operators that publish signed entity statements. Each participant inherits assurance through a verified chain of metadata issued by those operators. In contrast, DIDs rely on decentralized trust: identifiers are anchored in verifiable data registries (ledgers), and their associated DID Documents expose public keys and service endpoints that anyone can resolve without a central intermediary.

To combine these two trust layers, the entities must reference each other in a bi-directional way:

• The federation entity statement includes a pointer to the participant’s DID (for example, using an alternativeEntityId field).

• The DID Document or a DID-Linked Resource file contains references back to the federation identifiers or metadata endpoints.

• Both may reuse the same cryptographic keys for signing credentials or TLS certificates, establishing cryptographic continuity between the two trust domains.

This linkage creates a consistent and auditable trust chain between centralized federation registries and decentralized identifiers, allowing verifiers to validate an entity’s governance provenance and cryptographic authenticity as one coherent identity record.

Key Components of Hybrid Ecosystems

A hybrid wallet ecosystem brings together two complementary trust layers: a federated layer that governs participants and their metadata, and a decentralized layer that provides cryptographic proofs and verifiable status information. Each layer plays a distinct role in establishing end-to-end trust across issuers, wallets, and verifiers.

Decentralized Layer

The decentralized layer is built on a verifiable data registry (VDR) such as a distributed ledger or similar immutable store. It provides:

• Decentralized Identifiers (DIDs) for globally resolvable, tamper-evident identifiers.

• Credential and status registries, using standards such as bitstring-based Status Lists

• Cryptographic key material and DID Documents that allow verifiers to validate signatures without dependency on the issuer’s runtime systems.

• Privacy-preserving, no-call-home verification, enabling credential checks without revealing user activity to the issuer.

Federated Layer

The federated layer provides governance, accreditation, and policy control for organizations participating in the ecosystem. It typically includes:

• Trust registries for onboarding and discovery of issuers, verifiers, and wallet providers.

• Role assignment and accreditation policies published through signed metadata chains (as defined in OpenID Federation).

• Transparency services for inspecting trust relationships and verifying that participants operate under approved governance frameworks.

• Dynamic metadata exchange to support automated authorization decisions.

Practical Example: Raidiam + cheqd Integration for Hybrid Wallet Ecosystem

In this example, the two trust layers are illustrated using Raidiam Connect as the federated layer and cheqd as the decentralized layer, showing how a hybrid wallet ecosystem can be structured without assuming any specific deployment or implementation stage.

• Raidiam Connect as the federated layer — acting as a trust registry that manages accredited participants, roles, and metadata chains aligned with OpenID Federation.

• cheqd as the decentralized layer — providing a DLT-based verifiable data registry (did:cheqd), credential status lists, and privacy-preserving verification APIs.

Together they form the dual trust anchors of a hybrid ecosystem: governed directories + cryptographically decentralized proofs.

Hybrid Issuer Registration Flow

The registration of an issuer demonstrates how federation and DID anchoring combine:

Key points:

• Issuers can either store their own private keys or delegate to cheqd’s registrar.

• The entity in Raidiam's federation is updated with the DID as an alternativeEntityId, enabling DID lookups during verification.

This shows how a federated registry ties directly into decentralized infrastructure.

Issuance and Presentation Flow

The issuance and verification of credentials is where hybrid trust adds the most value.

Benefits of this approach:

• Privacy: No live dependency on issuer services (no call home).

• Flexibility: Works with both SD-JWT-VC and W3C VCDM (JSON-LD format).

• Assurance: Combining decentralized cryptographic verification with federated accreditation ensures both authenticity and compliance.

Cryptographic Continuity Across Layers

Maintaining trust in a hybrid wallet ecosystem requires cryptographic continuity: a verifiable link between decentralized identifiers, federated metadata, and credentials.

Key points:

• Unified key material ensures that the participant’s DID, federation metadata, issued credentials, and TLS sessions all reference the same cryptographic identity.

• Lifecycle management propagates key rotations and revocations consistently across DID Documents, X.509 certificates, and federation entity statements.

• Auditability is preserved by retaining historical keys in revocation or status lists.

This structure allows verifiers to trace a participant’s trust anchor across all layers, combining decentralized cryptographic assurance with federated governance metadata in a seamless, auditable chain.

Example Initial Implementation Scope

The initial implementation demonstrates three hybrid integration patterns:

• Registration: Issuer onboarding in the federation and DID allocation on cheqd.

• Verification and Revocation: Credential validation through both DID registries and federation metadata.

• Cryptographic Bridging: Shared key material across DID documents, federation statements, and X.509 certificates.

Supporting mechanisms include:

• Use of alternativeEntityId in OpenID Federation metadata to reference a DID.

• Inclusion of federation identifiers in DID service endpoints or DID-linked resource files.

• Cross-binding between DID keys and federation-issued X.509 certificates to unify trust chains.

Applicability to Future Standards: HAIP / FAPI 2.0

Hybrid wallet ecosystems can leverage existing security and interoperability standards, ensuring future scalability:

• FAPI 2 (Financial-grade API 2.0): Provides advanced OAuth2 / OpenID Connect security for high-assurance flows, useful for federated API interactions with issuers and verifiers.

• HAIP (High Assurance Identity Profiles): Defines levels of identity assurance and cryptographic binding requirements, complementing DID-based verification.

Implication: Future iterations of hybrid wallets can incorporate these standards to enable regulated, cross-border deployments without redesigning the core hybrid architecture.

Embedding standard-based security early ensures that cryptographic continuity and federated governance are compliant with high-assurance identity frameworks.

Value and Strategic Insights

• Privacy-preserving verification (No call home)

  Credentials can be validated without live connections to the issuer or federation, protecting user activity and reducing exposure of sensitive operational data.

• Cross-model assurance

  By combining cryptographic proofs from DIDs with governance metadata from the federated layer, verifiers gain both policy-level trust and cryptographic authenticity, ensuring compliance and reducing reliance on a single trust source.

• Interoperable, future-proof ecosystem

  The hybrid model aligns with EU Digital Wallet pilots and emerging OpenID Federation standards, enabling wallets, issuers, and verifiers to operate seamlessly across borders and trust frameworks.

• Flexible participant onboarding

  Issuers, wallets, and verifiers can be federated depending on ecosystem needs. Autoregistration patterns allow wallets and verifiers to participate without manual approval while maintaining auditable trust chains.

• Embedded governance in DIDs

  Federation metadata, including roles, accreditations, and trust marks, can be referenced in DID documents or linked resources, giving verifiers immediate insight into governance and compliance without additional queries.

• Multi-membership reconciliation

  When an entity holds multiple federation memberships, verifiers can resolve the effective trust anchor using the DID as a unifying cryptographic identifier, ensuring consistency across different governance domains.

Conclusion

Hybrid wallet ecosystems represent a natural next step in digital identity, where OpenID Federation registries and decentralized identifiers (DIDs) work together to deliver wallets that are both governable and privacy-preserving.

The Raidiam + cheqd example shows how this model can be realised in practice using interoperable standards and implementation patterns, without tying the approach to any single deployment. This kind of hybrid architecture makes it possible to refine the bridges between federations and ledgers and to extend coverage across sectors and borders, so that high-assurance ecosystems can operate at scale. More broadly, combining federated governance with decentralized verifiable credentials demonstrates how open standards can underpin practical, privacy-preserving trust for digital wallets and related services.