Published Friday, November 6, 2020, 9:49 am
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It is no secret that advances in technology and the digital space have and will continue to revolutionize almost every aspect of our daily life. We have modernized the way we manage our money, how we communicate, access entertainment and even do basic activities like shopping.
This data-driven and artificial intelligence (AI) computerization of systems has been described as the fourth industrial revolution. As we intertwine technology with our systems and processes, data privacy and digital identity have become issues of paramount importance.
According to the International Telecommunications Union (ITU), digital identity represents information recorded on digital platforms about a person, group or organization.
It can be their physical address, bank account information, email address, or their social media photos. This identity is not standard and differs between platforms such as e-commerce websites, banking systems or social media channels.
Unfortunately, many people, lobbyists, governments and companies have raised the alarm about the growing cases of identity theft. The existing identity management system is not as reliable or secure as people believe.
Numerous data breaches have led people to have serious concerns about the privacy of their data. As a solution, the demands for data systems for the adoption of blockchain identity management have increased. Blockchain provides a more secure digital identity storage system by offering a tamper-proof and unified infrastructure for both organizations and individuals.
Below is an in-depth look at the importance of digital identity in the modern world, how digital identity works today, and what blockchain technology, how it works and how it can be leveraged for better digital identity management.
The importance of digital identity
Digital identity is an important aspect of online financial transactions. A robust digital identity management system helps ensure that customer-company interaction is accurate and non-fraudulent, thus helping to prevent anti-money laundering (AML) activities.
Digital identity management can also help governments deliver more services to their citizens much more effectively. A good example of where digital identity is used to uplift communities both socially and economically is in the provision of citizen welfare measures.
Singapore, for example, through the Smart Nation Initiative, has developed the National Digital Identity (NDI) system, which is supposed to help people access e-government services securely.
India has also generated the Aadhaar ID, a single digital identity that is connected to all social regimes and has changed the way benefits are paid to sections of society who are not economically strong.
How digital identity works now
As highlighted above, identity is a critical aspect of any functioning economy or society. People and organizations need to have an adequate way to identify themselves and their assets. For individuals, this usually implies their full name, nationality, date of birth and a national identifier such as a social security number, driver’s license or passport number.
National identifiers are issued by governments and the information is stored in a centralized database. People with no national identity cannot vote in elections, find a job, own property, find a job or own a business. Without access to the financial system, people’s freedoms are consequently limited.
Despite this, governments, banks and credit agencies are widely regarded as the weakest link in the current identity management system due to their vulnerability to cyber attacks and data breaches.
User data collected by companies is usually stored as business data. But with the rise of regulations focused on user privacy like the General Data Protection Regulation (GDPR), companies are held accountable to the public should they commit corporate cybercrimes.
For example, today there are over 8 billion devices connected to the Internet and that number is growing incessantly. Unsurprisingly, a company that has sold hundreds of thousands of active devices working with a few hundred outdated servers. But with blockchain technology, businesses can manage user data in a more secure system that will ultimately add value to their business.
What is the blockchain?
The first blockchain model was built in the early 1990s by physicist Scott Stornetta and computer scientist Stuart Haber. They used cryptographic methods through a chain of blocks as a means of protecting the data within different digital documents from tampering.
This technology inspired the creation of the first decentralized electronic cash system known as bitcoin in 2008. Although blockchain technology is much older than bitcoin or any other cryptocurrency, it was only after 2008 that its potential began to be recognized. .
Since then, interest in technology has grown significantly. While it is used to record cryptocurrency transactions, it can be used for other types of digital information in a wide variety of applications.
How does the blockchain work?
Also known as Distributed Ledger Technology (DLT), blockchain technology allows data storage on thousands of decentralized databases (blocks) across a peer-to-peer (P2P) network.
It allows anyone on the network to see everyone else’s voices in real time, making it difficult for one user to control the network. Decentralized databases, or blocks, contain transaction information such as the time, date, and amount of money involved.
They also have information on the parties involved in the transaction. For example, a transaction detailing what you bought from Amazon would have your name. However, instead of your real name, the details will be recorded using a digital signature or username.
Blocks also have information that distinguishes them from other blocks. In the same way that a set of twins has different names to distinguish from each other, each block has a unique code known as a “hash”. Hashes are cryptographic codes created by special algorithms that help identify different blocks.
Depending on the size of the transaction, a single block can host a few thousand transactions as a block contains approximately 1 megabyte (MB) of data.
Use of blockchain technology in digital identity management
Since it was first used to track ownership of bitcoin, blockchain technology has undergone significant developments, so much so that it now has the potential to replace traditional identity management mechanisms with a “ self-sovereign identity ” .
It is a highly reliable system that can provide users with better and more secure control over their identities. The self-sovereign ID can allow users to choose which data they want to remain private, to carry it, and even to delete the identity if they prefer.
People would also use their self-contained identities to verify who they are as they transact online. This is a big change in how people use their identities to log into different online services as it can completely eliminate the need for passwords.
At the moment, when we need to authenticate our identity, our address, passport number or name, a verification entity confirms whether our data is true or false.
However, there are some privacy issues that arise during an identity authentication process. For example, a verification entity that asks you to prove your name using your passport can access more information in the document while looking at your passport. The entity does not need to know your age or where you were born.
A blockchain identity management system that uses zero-knowledge proof can serve as a good solution to this problem. Zero-knowledge authentication is a data authentication method that allows a verifier to prove the identity of an entity without revealing any additional information that may or may not support the data in question.
The verifier has “zero knowledge” of the data to support the test, but believes that the evidence provided is sufficient and valid. For example, you can prove you are over 25 without having to reveal your date of birth.
Archetypes of digital identity management
With the continued interconnection of digital applications and services with our physical lives, our digital identity is an online manifestation of ourselves that shapes the way we use the internet and how we interact with other users online.
One archetype of digital identity management that we use is known as a “federated model”. This is where public and private organizations establish unique systems bound by agreements and each of the organizations is an anchor of trust.
This allows identity owners to use proof of identity in different contexts. For example, the driver’s license can be used to identify the driver of a car and, if necessary, to prove the age of the owner.
Another archetype is the decentralized one in which an organization issues unique digital identities to people so that they can access its services. In this model, users request a new digital identity every time they interact with a different organization. This model, however, has been criticized for providing poor user experience.
The future of blockchain technology
Managing digital identity has become a vital issue of deep concern. Before the digital age, human identity was something that occupied a lot of discussions among social scientists and philosophers.
Digital identity, however, is more involved with the machine. It is gradually becoming crucial to allow people to open bank accounts, vote and even access education or health care.
Harnessing the benefits of trust and transparency provided by blockchain technology is important in helping us create a safer digital world for data.
