Blockchain in Digital Identity - BigStep Technologies
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Blockchain in Digital Identity

Blockchain in Digital Identity

What is Blockchain Identity Management System?

Blockchain Identity Management System offers a decentralized and secure solution that puts users back in control via a distributed trust model. Blockchain technology benefits several industries with transparency, security, and many more features, adding value to their businesses.

What is the use of a Blockchain Identity Management System?

Blockchain Identity Management systems could be used to eradicate current identity problems such as:

  • Inaccessibility
  • Data insecurity
  • Fraudulent identities

1. Inaccessibility

Around 1.1 billion people worldwide have no identity document, and 45% of people without identity are among the poorest 20% on the planet. Cumbersome identification paperwork, expense, lack of access, and a simple lack of knowledge about personal identity are the primary barriers that keep more than a billion individuals out of traditional identification systems.

Conversely, 60% of the 2.7 billion unbanked people already own mobile phones, paving the way for Blockchain-based mobile identity solutions that better meet the needs of vulnerable citizens.

2. Data Insecurity

A recent study shows that personally, identifiable data is the most targeted data breach, accounting for 97% of all breaches in 2018. Despite regulatory legislation and corporate efforts to increase cybersecurity, 2.8 billion consumer data records were exposed at an estimated cost of more than $654. billion in 2018.

3. Fraudulent Identities

With the increasing sophistication of smartphones, advances in cryptography, and the advent of Blockchain technology, we have the tools to build new identity management systems; Digital Identity frameworks based on the concept of decentralized identifiers (DIDs) – potentially including a unique subset of decentralized identities known as self-sovereign identities (SSIs).

Effectiveness of Blockchain for Digital Identity

The development of Digital Identity protection technologies has produced many candidates, including robotic process automation and machine learning. At the same time, new solutions are proving to be costly and less efficient when implemented in centralized Digital Identity management systems.

1. Safety

Security is one of the most important points for the future growth of Blockchain Digital Identity companies. Blockchain includes elements of keeping data immutable and encrypted. It also offers the benefit of security through cryptography when maintaining Digital Identity data. As a result, Blockchain can help ensure that Digital Identity is secure and easily traceable. In addition, Blockchain-based Digital Identity systems eliminate vulnerability issues due to password protection.

2. Privacy

Another important benefit of Blockchain-based Digital Identity relates to privacy, as regulators fuel debates about protecting citizens’ personal and sensitive information. The efficiency of Blockchain encryption, together with the capability of digital signatures, ensure effective “privacy and design”. Additionally, digital signatures associated with all transactions can help make them immune to change.

3. Integrity

A Blockchain-based Digital Identity system would provide the flexibility to maintain a record of each identity across all nodes in the network. Regardless of the distribution of data in peer-to-peer networks, continuous identity verification and updates make it trustworthy. In Blockchain, stored data is immutable and permanent, it cannot be modified or deleted, which makes the technology meet the main data integrity requirements, according to the FDA’s ALCOA concept.

What is Digital Identity in Blockchain?

Blockchain can solve the pressing problems of identity management with promising improvements. However, many of you doubt Blockchain’s role in Digital Identity. How does Digital Identity work on the Blockchain? Let’s assume the example of how decentralized Digital Identities work on Ethereum to find the answer.

Defining Digital Identity using Blockchain technology on Ethereum focuses on essential components such as identity management, decentralized identifiers, and embedded encryption. Users must register with their own sovereign identity and data platform to create and register a Decentralized Identifier or DID. This process involves creating a public-private key pair, and users can store public keys in a chain or rotate their storage to avoid security risks.

A Decentralized Identifier or DID is an important concept in explaining the use of Blockchain Digital Identity solutions. It is a pseudo-anonymous identifier for a specific object, person, or company, and DID secures a private key. Individuals in possession of a private key can demonstrate ownership or control over a particular identity. One person can have multiple DIDs, limiting the range of monitoring during multiple activities of daily living.

How do Decentralized Digital Identities work on Ethereum?

Blockchain technology allows users to create and manage digital identities through a combination of the following components:

  • Decentralized identifiers
  • Identity management
  • Built-in encryption

What is a Decentralized Identifier?

A decentralized identifier (DID) is a pseudo-anonymous identifier of a person, company, object, etc. Each DID is secured by a private key. Only the owner of the private key can prove that they own or control its identity. One person can have many DIDs, which limits the extent to which they can be tracked across multiple activities in their life. For example, a person could have one DID associated with a gaming platform and another, completely separate DID associated with their credit reporting platform.

How are decentralized identities secured?

A key element in securing decentralized identities is cryptography. In cryptography, private keys are known only to the owner, while public keys are widely distributed. This pairing serves two functions. The first is authentication, where the public key verifies that the message was sent by the holder of the paired private key. The second is encryption where only the paired private key holder can decrypt a message encrypted with the public key.

What are the use cases of Blockchain in Identity Management?

Decentralized and digital identities can be used in many ways. Here are some of the most common use cases that we have identified:

  • Self Sovereign Identity
  • Data Monetization
  • Data Portability

What is Self-Sovereign Identity?

Self-Sovereign Identity (SSI) is the concept that people and businesses can store their identification data on their own devices; choosing which pieces of information to share with validators without relying on a central identity data store. These identities could be created independently of nation-states, corporations, or global organizations.

What is Data Monetization?

Data Monetization refers to the use of personal data for quantifiable economic benefits. Data itself has value, but insights derived from personally identifiable data increase substantially

value of the underlying data.

What is Data Portability?

Data Portability reduces friction for users while simplifying the sign-up process, increasing user adoption. DID data portability also enables reusable credentials where a user can quickly re-authenticate while meeting regulatory Know Your Customer (KYC) requirements.

Final words

Digital Identity is increasingly becoming part of people’s social and economic well-being worldwide. It is essential for the individual as it enables their right to vote, access to education, and participation in banking services. However, identity management problems with existing systems point to the need for reform. Interestingly, Blockchain Digital Identity projects serve as an ideal foundation for transforming Digital Identity management for the future.

Blockchain can help create Decentralized Identifiers along with a device to connect Digital Identity with verifiable credentials. Therefore, you can integrate your Digital Identities across different platforms into one Digital Identity under your control and ownership.

If you need further assistance to develop a strong foundation for your strengthened digital identity for your blockchain framework, our team of professionals will help you out. Contact us at and we’ll take care of the rest.

karishma Verma

Content writer with a passion to write for a variety of niches to broaden my horizon as a professional writer.

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