Blockchain technology has multiple use cases, but its usefulness in the identity management field is largely understated. To make a long story short, blockchain technology makes information about identity verifiable and auditable in seconds, making platforms more secure.
With blockchain identity solutions, users won’t need to worry about malicious third-parties disrupting the verification process or providing sensitive information to an unknown person.
This ensures greater protection from identity theft and fraud, but you’re probably wondering if it offers a massive advantage over traditional methods. This article will explore that question and highlight how blockchain technology can benefit users and organizations via various use cases.
The Problem With Current Digital Identity Systems
A digital identity contains the total information about a person or company online. This info includes buying history, search history, user names, and more. The identity we have offline is almost entirely accessible online, which is why companies adopt identity governance and administration (IGA) measures to protect it. This often occurs in a centralized system.
It’s routine for companies to collect sensitive information and store it on their servers, but this can increase business risk due to the emergence of privacy regulations. An example of this is the GDPR Act, which is one of the toughest privacy acts the world has ever seen.
Along with these problems, current digital identity systems also face:
- Risk of Data Breaches With Centralized Systems
- Bad User Experience Managing Multiple Accounts
- Expensive and Time-Consuming KYC and AML Checks
- Lack of Data Control and Ownership
- Inaccessibility to Official Identity
Fortunately, most of these problems can be solved when companies adopt blockchain technology for their security systems. It can be used to make the internet much safer.
Blockchain Technology and Identity Management
Many businesses are using or considering using blockchain technology for identity management. This is because of the unique functionality of the system itself.
Here are some reasons why blockchain is ideal for identity management:
- It’s a decentralized, shared database;
- It’s almost entirely tamper-resistant;
- It’s highly secure with the use of cryptography;
- It can trace and verify all recorded transactions;
- It enables privacy and consent and;
- It uses consensus mechanisms to keep fraudulent information off the blockchain.
Blockchain has multiple use cases, but its most common include secure identity verification, storing healthcare records, and supply chain management. People can create, secure, and gain access to their digital identity with a customizability unheard of in traditional systems.
The Role of Decentralised Identifiers and Verifiable Credentials
There are two things that make the blockchain unique in regard to identity management: decentralized identifiers and verifiable credentials. Here’s their role in identity management.
Decentralized Identifiers (DIDs)
A cornerstone in the world of digital identity management is decentralized identifiers, often known as DIDs. These globally unique identifiers allow any object or entity to verify its identity autonomously without needing a centralized authority or intermediary.
What makes DIDs different from other digital identifiers is that they’re anchored on blockchains or other distributed networks. They grant individuals direct control over their personal data by creating a robust layer of security and privacy. Among others, you could use DIDs for verifying your online banking account, medical records or simply controlling access to personal data.
Verifiable Credentials (VCs)
After understanding decentralized identifiers, introducing verifiable credentials (VCs) further clarifies blockchain’s application to identity management. VCs are digital assertions or testimonials verifying one’s qualifications, competencies, or claims in the blockchain.
They’re the digital equivalent of physical credentials such as academic degrees, professional licenses, or identity documents. Blockchain technology ensures these credentials are tamper-proof and instantaneously verifiable without consulting the issuing authority each time.
For instance, an employer can swiftly check a potential hire’s educational credentials encoded on the blockchain. This transparency and reliability greatly increase efficiency in verification.
The Benefits of Blockchain Identity Solutions
There are many benefits to adopting a blockchain identity solution, but these benefits depend on whether you’re an organization or a single user. Here, we’ll look at the benefits for both.
Here are the benefits of blockchain identity solutions for organizations:
- Data Security: The decentralized nature of DIDs ensures data security like no other system. Verifiable credentials resist tampering, forging, or unauthorized access.
- Faster Verification: Blockchain enables swift verification of credentials without repeatedly contacting issuing authorities or maintaining massive databases.
- Lower Costs: Processing identity checks with blockchain reduces overhead costs. It eliminates many administrative tasks in the authentication process.
- Prevents Identity Fraud: By consolidating identities on a transparent, easily auditable system like blockchain, possibilities for identity fraud diminish significantly.
- Creates a Trail: Blockchain inherently creates a transparent audit trail which is very useful in tracking transactions tied to an individual’s DID for accountability purposes.
Here are the benefits of blockchain identity solutions for users:
- Content to Share Data: Blockchain’s use in identity management gives users the power to choose what information they want to share, with whom, and for how long.
- Secure Global ID: It’s resistant to fraud or theft because it doesn’t rely on location-specific or physical documents that can be easily lost or replicated.
- Complete Data Ownership: With blockchain, users truly own their personal data, bypassing centralized intermediaries who typically store and control access.
- Decentralized Storage: Even if one node in the decentralized network fails, others ensure data remains reachable at all times, making the system reliable and redundant.
- Universally Accessible System: Blockchain-based IDs create an inclusive ecosystem viable to anyone with internet access around the globe, making it convenient.
Just as we increasingly recognize the potential of blockchain technology across various sectors, its application in identity management brings along innovative solutions. By exploring this toolset, you have the opportunity to take control of your and your customer’s digital identity.