Blockchain and digital identity are the two mainstream technologies that have gained prominence in recent times. The relevance of blockchain to digital identity becomes visible when we think about secure records and transactions that appear in the virtual world, which is highly dependent on a high degree of safety, privacy, and trust.

The global market for blockchain identity management is expected to reach USD 11.46 billion by 2026, registering a CAGR of 79.2% from 2019 to 2026.

Let’s discuss how blockchain can be used in digital identity management in detail. We will also explain the importance of this technology in ensuring privacy, security, and trust.

Why blockchain?

Satoshi Nakamoto was the person who introduced blockchain technology to solve a double-spending problem of digital currency and to act as a ledger, a registry, of the transactions of Bitcoin. Every person who performs bitcoins transactions acts as a node in the network, forming a transaction on the Bitcoin blockchain. This makes it decentralized as no central authority is needed, and each person present in the network can access the ledger. It also allows for consensus in the network without the need for a middle-man. As the blockchain network grows, it adds a new record in chronological order, each one connected to the next. The blocks are connected in an unbroken manner, hence the name blockchain. It can also store any form of data in applications, such as digital voting systems or identity management.

What is digital identity management?

Digital Identity Management (DIM) keeps track of an individual’s uniqueness, reflecting his/her actuality. It can be broadly defined as a method that identifies and authenticates a subject/user in both online and offline systems, thus handling the digital representation of identity that is traditionally dependent on a centralized authority.

With digital identity management, it is possible to perform trustless interaction between users and the decentralized platform on which they operate. This helps build an auditable trail that can be used in legal or regulatory proceedings in case fraud or other crimes are detected at a later stage.

Digital identity management helps overcome many problems faced by centralized authorities. Problems include high transaction costs because of the slow processing times, dependency on third party processors whose interests do not always coincide with those of the customers, as well as some outright fraudulent transactions that can get better solutions.

Role of blockchain in digital identity management

Blockchain is turning out to be an ideal solution for the inefficiencies in identity management. It is one of the three pillars of a self-sovereign identity that are Verifiable Credentials, Decentralized Identifiers, and Distributed Ledger Technology, correspondingly. All these factors help find a solution for all the upcoming issues and a positive, global answer.

  • Verifiable credentials 

This protocol allows users to manage their own digital identities and allows them to put their reputation ahead across systems/networks. It also replaces passwords as a proof of identity method with cryptographic signatures developed from asymmetric keys derived from user entropy such as voice samples and fingerprint scans.

Verifiable credentials protocol allow users to choose an endorsement key that helps build up a profile for that identity on each system. There is no need to maintain multiple profiles for different social networks – a single profile across all platforms is enough.

  • Decentralized identifiers

Decentralized identifiers are considered unique and personal identifiers where identity owners hold a complete charge. Such a protocol allows for a public method of unique ID/address resolution. Also, it is independent of any centralized authorities and identity providers.

  • Blockchain

Blockchain technology enables decentralized consent via time-stamped transaction blockchains. At its most basic, it allows users to agree on when transactions occurred and guarantees that all parties follow through on their commitments.

How can blockchain help solve identity management issues?

Blockchain can very well solve the issues related to identity management. Particularly, it can help solve inefficiencies in the following ways –

  • Offer identity synchronization
  • Eliminate redundancy issues
  • Eliminate identity Sybil-ing
  • Provide proof-of-existence
  • Provide individual control to users

Let’s elaborate on these points –

  • Identity synchronization

Identity synchronization is a core feature of blockchain. It enables users to show their identity across multiple systems without passwords, thus eliminating account hacks and collisions.cIf one wishes to control their private keys, the service provider no longer owns a user’s identity. Instead, it is of the users alone. Implementing this system is a convenient way to manage multiple profiles across different social networks.

  • Issues in redundancy

Blockchain makes it possible for digital objects to be checked against previous versions of themselves. As a result, there will be no confusion about who owns the digital objects as all the changes can be easily tracked back to their first user. It helps to find a better and ideal solution for non-rejected time-stamping.

  • Identity sybil-ing

The aforementioned Verifiable Credentials Protocol can also be implemented with the result that there is no incentive for users to create multiple identities. Furthermore, a reputation system can be set up in which the identity’s previous endorsements are noted on each future endorsement. So, as long as the initial reputation gets established (say by accomplishing security chores), all subsequent activities will be irrevocably stamped with the individual’s identity. One way to think about this is to consider each transaction confirmation equivalent to the verification supplied by a fingerprint or iris scan.

  • Proof of existence

Blockchain provides an immutable public ledger for non-repudiable time-stamping. One would say that this was always possible to do this via blockchain from the very beginning. But for the current process to continue, it would require resources that are currently impractical to maintain.

Blockchain provides proof of existence by storing a transaction that is connected to the hash of a related document. This provides non-repudiation, which can be further enhanced by including a digital signature produced with the originator’s private key.

A non-repudiable record of existence can turn out to be a useful tool for notarization purposes. This helps to provide the following advantages over existing solutions:

    • It is permanent – It is not possible to change the blockchain transaction and digital signature retroactively.
    • It is public – It is important to use a private key that is secured and is not known to anyone as anybody can view the proof to verify its validity.
    • Centralized control – The blockchain transaction with document hash can be written for any purpose in other contracts or for authorities who require further action from the private key owner.
  • Individual control

With the rise of blockchain, it is possible to claim individual control over one’s identity and reputation. There is no need to support central authorities who may censor, sell, or lose personal information. Users now have a better option where they can decentralize entities where individuals truly matter.

Take away

Blockchain technology is applicable to several identity applications. Several companies can easily deploy blockchain to build trust among their users. Blockchain also facilitates companies to instantly make, approve, and verify various types of transactions after leveraging a collaborative digital ledger. Once transactions or other data are entered into the blockchain’s ledger, encryption takes control, and existing verification hurdles are greatly reduced, with the possibility of data theft eliminated.

Undoubtedly, blockchain technologies are intriguing and inventive. They have the potential to be beneficial in various applications, including the establishment of evidence chains for identity verification and the creation of smart contracts. As a result, blockchain unquestionably has a positive impact on and safeguards digital identities.