A valid identity document is far too important a need. Governments, businesses, other organizations, and people can see the limitations of physical identity documents. Digital identity (ID) management tools leave a lot to be desired. Organizations are increasingly exploring more robust technology solutions for digital identity management. Blockchain is making a mark here. Dive right in, as we discuss how blockchain can make digital identity management better for all.
Why digital identity management in the first place?
Why use digital identity at all, and why not just stick to physical identity documents? The answer is simple. The processes to provide valid physical identity documents to people don’t work well enough. A World Bank Report states that 1 billion people don’t have official proof of identity.
Many challenges plague physical identity management, e.g.:
• Governments that need to provide these identity documents use outdated and inefficient processes. This results in complexities.
• Various government departments need to provide inputs to provide physical identity documents. These departments work in silos.
• People misplace physical identity documents, alternatively, these documents might get damaged. They find it hard to get a replacement.
• Governments need to collect data from citizens to provide physical identity documents. The processes to collect this data are often inefficient and error-prone. This impacts the issuance of physical identity documents.
The challenges in implementing digital identity solutions
Digital identity management solutions should solve the above-mentioned challenges. They did improve aspects like efficiency and scale. The market for digital identity management solutions is growing. A MarketsandMarkets report projects this market to grow from $13.7 billion in 2019 to $30.5 billion by 2024. That translates to a CAGR of 17.3% during the 2020-2024 period.
Multiple challenges plague the present crop of digital identity solutions though. These are as follows:
The continuance of silos: As we mentioned, multiple government departments need to provide identity-related inputs. With the advent of digital identity solutions, different government departments use different solutions! Different digital identity solutions lack interoperability. Therefore, the silos that we talked about remain.
Complexities: Digital identity management solutions reduce some of the complexities of the paperwork-intensive traditional processes. However, end-users still need to contend with complexities. A citizen needs to apply for a valid digital identity document, receive a digital ID, and use it for accessing services. This entire cycle of transactions remains complex.
Data security: Organizations collect plenty of personal information using digital platforms to provide digital identity documents. Hackers routinely target that repository of personal information. While digital identity solution providers improve their data security mechanisms, hackers seem to remain a step ahead!
Users lack control of their identity information: Users provide their personal information to get digital identities. 3rd party digital identity solution providers process that. Users can’t control how these 3rd party providers use their data. Some of these providers might sell users’ data to marketers and advertisers. Users should control their digital identity documents and personal data, however, that’s not the case.
Why blockchain has relevance in the digital identity management space
The defining characteristics of blockchain make it relevant in the digital identity management space. These characteristics are as follows:
Decentralization: Blockchain is a peer-to-peer (P2P) network, which reduces the relevance of central administrators. This can help users exercise better control over their data and digital identity.
Distributed ledger: The distributed ledger of blockchain makes information sharing easier. Different organizations can easily access the information required to issue digital identity documents.
Encryption: Blockchain networks use robust encryption when they store data. This acts as a disincentive for hackers since they can’t get the personal information of end-users.
Digital signature: Users of blockchain networks can secure their transactions by using digital signatures.
Immutability: Malicious actors can’t tamper with data stored on a blockchain network. This improves trust. In turn, this makes it easier to issue digital identity documents. This also makes digital identity verification simpler.
Smart contracts: Open-source and autonomous smart contracts make contract administration easier. One can’t reverse their execution. Malicious agents can’t manipulate a digital identity management system powered by blockchain and smart contracts.
The market for blockchain-powered digital identity management solutions is growing. A MarketsandMarkets report projects this market to grow from $58.3 million in 2017 to $1.929 billion by 2023. This report estimates a CAGR of 84.5% during the 2018-2023 period.
Blockchain uses cases in the digital identity management space
The following use cases of blockchain in the digital identity management space are noteworthy:
1. Decentralized Identifier (DID)
Organizations can use blockchain-based platforms to create a DID (Decentralized Identifier) for a person or organization. A DID offers the following advantages:
Flexibility: A DID can be a pseudonymous or anonymous identifier.
Security: People or organizations having a DID also have a private key, and they secure their DID with it. This private key allows owners of DIDs to exercise full control over their digital identity.
Preventing hackers from tracking users: Owners of DIDs can have multiple such DIDs. Each DID could be associated with one particular platform. E.g., someone might have a DID for online services like email or cloud storage. The user might have a separate DID for banking purposes. Hackers can’t track this user across multiple apps/websites due to different DIDs.
Utilized existing verified credentials: Each DID has its own set of attestations, i.e., verified credentials. Issuers of these verified credentials cryptographically sign these credentials. E.g., a user might have a degree from a university. The university cryptographically signs the relevant credentials.
Control: DID owners can each of these credentials themselves, and they don’t need to depend on other 3rd party providers.
Tamper-proofing: The DIDs remain secure on a blockchain platform, thanks to cryptographic hash functions, consensus algorithms, and encryption.
Ease of use: Users of DIDs can present their DID in the form of a QR code on a mobile app. They can then access relevant services.
An example is Zug Digital ID or Zug ID. The local government of Zug, Switzerland used a blockchain platform to provide DIDs to citizens. Citizens can access various services by presenting this DID.
2. Self-sovereign identity (SSI)
Individuals can have SSI (Self-sovereign Identity), thanks to blockchain. An SSI is a lifetime portable identity. Any person or organization can have it. SSI offers the following advantages:
Reducing the dependence on 3rd party providers: Users of SSIs don’t need to depend on a centralized authority to get an SSI. They can get it on a blockchain platform by showing the required verified credentials.
Permanence: No one can take away your SSI.
Portability: SSI is a digital identity, which is portable.
Security: An SSI is secure on a blockchain. The security measures include digital signature, encryption, cryptographic hash functions, and consensus algorithms. They keep hackers at bay.
Autonomy: Owners of SSI control their credentials. They decide how much information they should divulge. If an identity verification transaction requires only some of the identity-related data elements, owners of an SSI divulge only those elements.
Using existing credentials: SSIs involve using existing verified credentials, e.g., a degree certificate from a university, a government ID, etc.
Sovrin, an open-source project provides a platform for managing SSIs. 3rd party developers can use the Sovrin blockchain network to create applications to manage SSIs.
The team that created Sovrin also created Evernym. Evernym is a leading SSI solution provider. The company offers Verity, an application to issue and verify digital credentials.
We reviewed the challenges faced by digital identity management solutions. Blockchain can help, and we discussed blockchain use cases in this space. Keep watching this space for more insights.