This paper explores different challenges that raise with implementing digital identity. It covers different issues from technical security guarantees and risks to social engineering attacks. Paper defines digital identity as a set of attributes that identifies individual or a group of people in cyberspace. It shows personal data as rightful possession which needs to be protected from misused. Paper discusses challenges with using authentication mechanisms which rely on wireless communication as they are vulnerable to cyberattacks. Storing and using biometrical data while improving security, possess additional psychological risks since people experience tense negative reactions as a response to being impersonated. Multi-factor authentication requires large cryptographic background and careful implementation to provide necessary security level. Paper mentions impact of social engineering attacks on preserving anonymity since users can be manipulated into reveling personal data.