  Federated and decentralized networks supporting frequently changing system
participants are a requirement for future Internet of Things (IoT) use cases.
IoT devices and networks often lack adequate authentication and authorization
mechanisms, resulting in insufficient privacy for entities in such systems. In
this work we address both issues by designing a privacy preserving
challenge-response style authentication and authorization scheme based on
Decentralized Identifiers and Verifiable Credentials. Our solution allows a
decentralized permission management of frequently changing network participants
and supports authenticated encryption for data confidentiality. We demonstrate
our solution in an MQTT 5.0 scenario and evaluate its security, privacy
guarantees, and performance.
