Quick Answer
The answer is Decentralized Identifiers (DIDs), the core technology Microsoft Entra Verified ID uses to create decentralized digital identities. This is correct because DIDs are globally unique, cryptographically verifiable identifiers that operate without a centralized registry, enabling self-sovereign identity where users control their own data rather than relying on a single authority. On the Microsoft 365 Administrator MS-102 exam, this concept tests your understanding of how Entra Verified ID implements verifiable credentials and trust systems; a common trap is confusing DIDs with traditional GUIDs or Azure AD object IDs, which are centralized. Remember that DIDs are the foundation for decentralized identity, not just another identifier—think “DID = Decentralized, not Directory-based.” A quick memory tip: “DID it yourself” emphasizes user control, contrasting with Microsoft’s centralized Entra ID.
This MS-102 practice question tests your understanding of implement and manage microsoft entra identity and access. Read the scenario carefully and evaluate each option against the stated constraints before committing to an answer. After answering, compare your reasoning against the explanation and wrong-answer breakdown below. Once you have made your selection, read the full explanation to reinforce the concept and understand why each distractor is designed to mislead on exam day.
You are implementing Microsoft Entra Verified ID. Which technology does it use to create decentralized digital identities?
Decentralized Identifiers (DIDs)
DIDs are the foundation of Verified ID.
OpenID Connect
Why wrong: OpenID Connect is for authentication, not decentralized identity.
OAuth 2.0
Why wrong: OAuth 2.0 is for authorization, not decentralized identity.
Security Assertion Markup Language (SAML)
Why wrong: SAML is for federation, not decentralized identity.
Answer choices
Answer the question above first, then reveal the full breakdown to understand why each option is right or wrong.
Correct answer & explanation
Decentralized Identifiers (DIDs)
Microsoft Entra Verified ID uses Decentralized Identifiers (DIDs) as the core technology to create decentralized digital identities. DIDs are globally unique identifiers that are cryptographically verifiable and do not rely on a centralized registry, enabling self-sovereign identity scenarios where users control their own identity data.
Key principle: Answer the scenario, not the keyword: identify the specific constraint before choosing the most familiar-sounding option.
Answer analysis
For each option: why learners choose it and why it is or isn't the right answer here.
Decentralized Identifiers (DIDs)
Why this is correct
DIDs are the foundation of Verified ID.
Related concept
Read the scenario before looking for a memorised answer.
OpenID Connect
Why it's wrong here
OpenID Connect is for authentication, not decentralized identity.
OAuth 2.0
Why it's wrong here
OAuth 2.0 is for authorization, not decentralized identity.
Security Assertion Markup Language (SAML)
Why it's wrong here
SAML is for federation, not decentralized identity.
Common exam traps
The trap here is that candidates confuse authentication/authorization protocols (OpenID Connect, OAuth 2.0, SAML) with the underlying decentralized identity infrastructure (DIDs), mistakenly thinking these protocols are used to create the identity itself rather than to secure access to it.
Detailed technical explanation
DIDs are defined by the W3C DID Core specification (https://www.w3.org/TR/did-core/) and are typically paired with Verifiable Credentials (VCs) to enable trust without a central authority. In Microsoft Entra Verified ID, DIDs are created on the ION (Identity Overlay Network) decentralized identifier network, which uses the Sidetree protocol on top of the Bitcoin blockchain for anchoring and resolving DIDs without requiring a blockchain transaction for every operation.
Key takeaway
Answer the scenario, not the keyword: identify the specific constraint before choosing the most familiar-sounding option.
Real-world example
A company's IT admin needs to give a contractor read-only access to production logs without sharing account credentials. Using role-based access control (RBAC) and temporary scoped permissions — not a permanent shared password — is the correct pattern. Questions like this test whether you can apply least-privilege access across cloud identity services.
What to study next
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FAQ
Implement and manage Microsoft Entra identity and access — This question tests Implement and manage Microsoft Entra identity and access — Read the scenario before looking for a memorised answer..
The correct answer is: Decentralized Identifiers (DIDs) — Microsoft Entra Verified ID uses Decentralized Identifiers (DIDs) as the core technology to create decentralized digital identities. DIDs are globally unique identifiers that are cryptographically verifiable and do not rely on a centralized registry, enabling self-sovereign identity scenarios where users control their own identity data.
Identify which exam domain this question belongs to, review the core concept, then practise similar questions from the same domain.
Read the scenario before looking for a memorised answer.
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Same concept, more angles
These questions test the same concept from different angles. Work through them to make sure you can recognise it however the exam phrases it.
Variation 1. You are implementing Microsoft Entra Verified ID to issue verifiable credentials to employees for proof of employment. Which component is required to issue and verify credentials?
easyWhy D: Microsoft Entra Verified ID uses a decentralized identity model where each issuer and verifier has a unique decentralized identifier (DID) and a trusted identity system (such as a blockchain-based ION network or a web-based DID method) to publish and resolve DID documents. The DID and the trusted identity system are the core components required to cryptographically sign verifiable credentials and verify them without relying on a central authority, making option D correct.
Variation 2. An organization is implementing Microsoft Entra Verified ID for verifiable credentials. They want to issue credentials to employees that can be used to prove employment status to third parties. Which component must be created first?
mediumWhy C: The credential manifest defines the rules for issuing a verifiable credential, including the claims schema, display information, and issuance policies. In Microsoft Entra Verified ID, you must create the credential manifest in the Entra admin center before any credentials can be issued, as it serves as the template that governs the credential's structure and validation. Without a manifest, there is no definition for what the credential contains or how it should be presented.
Last reviewed: Jun 24, 2026
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