Blockchain Digital Identity
23 May

Blockchain Digital Identity: Advantages, Use Cases and Challenges

Mahipal Nehra

Blockchain offers a new approach to identity verification, revolutionizing the process by providing robust and decentralized solutions. The article delves deep into understanding blockchain digital identity, explores the need for blockchain technology, and highlights its advantages, use cases, and standards and protocols.


The emergence of blockchain digital identity marks a new era in the realm of cyberspace. Since the dawn of cyberspace, billions of dollars have been spent on the security and privacy of data. In 2022, the Identity and Access Management market was valued at $17 billion and is expected to reach $43 billion by 2029, according to Statista. And blockchain is seen as a light of hope in this scenario, signaling a new era of improved data security, and user-centric control for managing digital identities.

Read: Exploring Blockchain Beyond Cryptocurrencies

Understanding Blockchain Digital Identity

Blockchain digital identity utilizes the potential of blockchain decentralized technology to offer transparency and safe identity verification and management systems.

The security and integrity of identity verification procedures are improved with the elimination of central control when using blockchain while identity-related data circulates over a network of computers, or nodes.

Why Do We Need Blockchain Digital Identity?

The system of blockchain identity management eliminates some identity issues such as Inaccessibility, Data insecurity, and Fraudulent identities.

Inaccessibility

To gain access to the financial system, it is necessary to have a verifiable identity. However, over a billion people face significant barriers using standard identification systems including time-consuming documentation procedures, costs, restricted access, and a general need for more awareness about their identity verification.

On the other hand, more than 2.7 billion people who do not have bank accounts use mobile phones, which creates an opportunity for blockchain identity solutions.

These solutions can streamline verification processes, reduce costs, and provide secure, accessible identification methods, thereby empowering vulnerable populations and facilitating their inclusion in the financial system.

Data Insecurity

There are large databases centralized by the government that store valuable Personal Identification Information (PII) which is appealing to hackers who seek to exploit such information for financial gains, identity thefts, and malicious purposes.

However, governments have implemented various laws and regulations, and businesses are implementing cybersecurity measures and blockchain identity management to protect data and improve cybersecurity practices.

Fraudulent Identities

Due to the increasing sophistication of smartphones, there are an increased number of fake identities. There was no standardized way to access the data from one platform to another and the weak links between digital and offline identities make it relatively easy to create fake identities.

There are tools such as Decentralized Identifiers (DIDs) and Self-Sovereign Identity (SSI) that have complete control over the identities and make them more secure.

Read: Role of Blockchain in Fintech

Advantages of Blockchain Digital Identity

Blockchain technology can transform digital identity providing a secure, transparent, and affordable solution. Some benefits are Decentralization, Immutability, Transparency, Privacy, Compatibility, and many more.

Decentralization

Blockchain technology offers a decentralized system where a distributed network of nodes can securely store and verify data. Users benefit from greater control over their data, reducing cyber-attacks and identity theft risks.

Immutability

Blockchain enables access to identity data that is stored only by authorized parties using cryptographic techniques. Once data is stored in a blockchain, it cannot be edited or deleted, making it a highly secure method for storing and preventing modification of data.

Transparency

Blockchain offers a distributed network that allows everyone to access and verify the information enhancing the trustworthiness and transparency of managing digital identities. This increases the confidence of the users of blockchain-based digital identity as they verify the information themselves.

Privacy

Blockchain technology allows users to have control over their data and share information with whomever they choose. This enhances the privacy and security of the data, as users have control over sharing information for a specific transaction.

Compatibility

Blockchain-based digital identity enables the creation of a universal identity that can be used on various platforms and services. This can eliminate the need for multiple identity verification and can improve the user experience.

Cost-effectiveness

Blockchain digital identity systems enable lower management costs by eliminating intermediaries and verifying redundant identification. This makes managing identities much cheaper and quicker than traditional methods.

Identity Syncing

Blockchain technology allows users to share their credentials across multiple platforms without needing different logins and passwords, lowering the risk of account hacks and collisions.

It also enables data minimization meaning that users will have the option to only share parts of a credential needed by the verifier such as being able to show the city they live in without revealing their whole address.

Read: Metaverse Application Development

Zero Redundancy

Due to its immutable nature, blockchain ensures that all the data edits are traceable and permanent as every change made to a credential is recorded and cannot be altered or deleted. This feature makes blockchain-based digital identity systems highly secure and trustworthy.

Proof of Existence

The overall system is transparent and can be publicly audited, enhancing trust and accountability with the help of blockchain-based digital identity. Control is decentralized, meaning no single entity has complete authority, reducing the risk of repudiation.

KYC Redefined

Blockchain digital identity solutions can easily verify customer information by accessing data shared on the blockchain to eliminate the need for customers to repeat KYC processes. These identities are secure and reusable across multiple platforms.

Use Cases of Blockchain Digital Identity

Top use cases of blockchain digital identity and management can be seen across industries such as:

  • Healthcare

  • Employee Verification

  • Supply Chain Management

  • Government

  • Online Services

  • IoT Security.

Use Cases of Blockchain Digital Identity

Healthcare- Blockchain technology can ensure the integrity of confidential health records while making it easier for healthcare providers to transfer patient information securely. Patients can use their mobile phones to give healthcare providers immediate access to their health records, maintaining control over their data.

Employee Verification- Blockchain-based digital identity enables secure passwordless login systems reducing the risk of data breaches caused by hacked employee accounts. It also allows employers to verify candidates' credentials instantly by scanning a QR code linked to a digital Identity (DID).

Supply Chain Management- With the help of this technology items can be tracked from production to marketplace using DIDs, enabling customers to verify the authenticity of products via a QR code.

Read: Top 10 Latest Banking Trends

Government- Citizens can use DIDs to access online services, log in securely, and manage important documents. Also, it allows decentralized authority to streamline the management of registries like marriage certificates, land titles, and criminal records.

Online Services and IoT Security- The technology can utilize blockchain credentials to securely manage participants, payments, and schedules, and streamline checkout processes using DIDs to reduce the need for personal data entry and storage.

Blockchain Digital Identity Management Standards & Protocols

There are a few protocols that you must consider before adopting blockchain digital identity, namely:

Decentralized Identity Foundation (DIF)

DIF is a group of enterprises, financial institutions, educational organizations, and businesses working to create a uniform, open-source environment for decentralized, blockchain-based identity solutions.

DIF's objective is to develop a framework that enables individuals, companies, and devices to securely and privately maintain their own digital identities, removing the need for centralized authorities. In addition, DIF is working on specifications and tools to assure consistency and stability across various decentralized identity systems.

Self-Sovereign Identity Principles

Self-sovereign identity principles focus on user control, transparency, interoperability, and approval. It is a concept that allows individuals to have privilege and control over their data relying on decentralized databases or authorities to verify identities.

Read: Consensus Algorithms in Blockchain

Conclusion

Businesses and organizations are actively seeking secure and efficient methods for identity management. It's clear that blockchain technology will play a crucial role in the future of identity management solutions. If you need any blockchain-related app development, feel free to get in touch with us.

FAQs

  • What is Blockchain Digital Identity?

Blockchain digital identity utilizes decentralized blockchain technology to offer transparent and secure identity verification and management systems. This method improves the security and integrity of identity verification processes, making central control optional when identity-related data is shared across a network of computers, or nodes.

  • What are the benefits of blockchain identity?

Some benefits are Decentralization, Immutability, Transparency, Privacy, Compatibility, and many more. Users benefit from greater control over their data, reducing cyber-attacks and identity theft risks. Once data is stored in a blockchain, it cannot be edited or deleted, making it a highly secure method for storing and preventing modification of data.

  • What are the standards of blockchain digital identity?

Decentralized Identity Foundation (DIF) and Self-sovereign identity are the major standards of blockchain digital identity. While DIF is an alliance of companies, financial institutes, educational institutes, and businesses that is developing a unified ecosystem for decentralized blockchain-based identity solutions; Self-sovereign identity principles focus on user control, transparency, interoperability, and approval.

  • What is KYC redefined in blockchain?

Blockchain digital identity solutions can easily verify customer information by accessing data shared on the blockchain to eliminate the need for customers to repeat KYC processes. These identities are secure and reusable across multiple platforms.

  • In what industries Blockchain Digital Identity is used?

Some of the industries that use blockchain are Healthcare, Employee Verification, Supply Chain Management, Government, Online Services and IoT Security, and many more.

Posted by Mahipal Nehra | Posted at 23 May, 2024 Web