The Use Case of Blockchain Technology in Identity Management

In today’s digital era, we can accomplish a lot of our daily tasks with a few taps and clicks on our mobiles, tablets and laptops. Everywhere we transact we are required to prove our identity either by entering a pin or a password or by scanning our biometric like our fingerprints and retinal scan. The more we transact online, the more digital footprints we leave fingerprints behind These digital footprints are extensive and include everything about us like our name, age, gender, work history, location, financial history, specific interests, our addresses, and other personal records.

blockchain for identity management

These individual pieces of data when combined together form our online profile, which we have no control over. Once we transact, our data gets stored in the central databases of these service providers which may be a bank, an insurance company, an employer or any subscription service like Amazon or Netflix. As we have no control and access to this data, we have no clue as to how does this data gets used and who all have access to this data. There are many challenges with this current way of Identity data capturing and storing. Let us discuss each of them in detail:

Personal Data Theft. As already discussed, for you to avail any service you are first required to prove your identity to the respective service provider. For example, when you open a new bank account or apply for a loan, or register yourself for the services of a digital wallet – you are required to produce and provide your identity documents to these service providers. This information then gets stored in the individual centralized databases of these service providers. These centralized databases become a soft target for hackers who can then misuse and abuse your confidential personal and private information.

The second challenge is Cognitive overload for the user. There are far too many online services that one depends on today. Every service platform or app requires you to uniquely register yourself with an ID and a password on their platform.

For example, when you use a movie ticket booking application you create a profile with your username and password or when you want to connect with your school friends on facebook you again are required to create a username and a password or when you want to want to trade in cryptocurrencies you can’t escape this unique registration process.

The list is endless for the type and number of service providers we interact with on a daily basis. And to remember the usernames and passwords for each of these platforms is a herculean task. The cognitive load is too high for the user in such a scenario where he is required to remember so many
details. In such a case, a user is left with only 2 options either to use the same ID and password across all the service platforms or to create different usernames and passwords and note them down in his mobile phone or laptop. In case of a single username and password, hacking of any one account spreads the risk across all other platforms and in case the passwords are noted down somewhere, the security risk level reaches to a next level.

The third challenge is lack of transparency and control. The personal data collected by these service providers lacks the required transparency. A user has no clue on where his personal data is kept, for what purpose it gets used and who all can access his data. A user is always left wondering about the safety and security of the data collected. Further, many of these service providing platforms sell users’ data to various third parties without the knowledge and consent of the users. These parties then use this data to market and sell their services and products to these users.

This sharing of data proves that the power of data lies in the hands of the database owner and the user has no control over his own data. Simply put, the current online identity management practices are unsustainable and requires a more robust solution.

The blockchain powered platform can provide the required solution to manage users’ identity in a more transparent, secure and reliable manner. A blockchain based identity management system puts control of the user’s data back in the user’s hands. In this new Self Sovereign Identity system, a user’s data can be accessed by a third party to validate his identity but the data resides with the user and doesn’t get stored on the servers of the service provider. Thus eliminating the possibility of inappropriate use of his personal data by these service providers.

blockchain technology for identity management

In this blockchain based system, a user will be required to download a Self Sovereign Identity app on his mobile phone. He will then be required to upload all his Identity Certificates on this platform. Once uploaded, a unique hash gets generated for the user’s information. All of these certificates will then be sent to a government agency or a government approved agency for the purpose of verification. These documents can either be approved or rejected by the government agency based on its criteria and judgment.

The verification status of the Digital ID will then get stored on the Blockchain. And whenever the user’s information is required for authentication by a service provider, the user can grant access to the relevant information to that service provider. The data resides with the user in an encrypted format and doesn’t get stored in the centralized databases of these service providers. Thus, mitigating the risk of data breach and hacking of your personal data. These encrypted digital identities will replace the need for remembering multiple usernames and passwords. Thus reducing the cognitive load of the users.

blockchain implementation for identity management

For instance, if a user wants to apply for a bank loan, he is first required to authenticate himself. In the current scenario, this process is a tedious task where the user is required to submit multiple documents to prove his identity. And because the process is manual, it takes days and sometimes even weeks for the bank to process the loan. But in this new Blockchain powered Identity Management System, a user can provide the required access to the bank to verify his personal details. And the bank can verify his documents then and there itself.

Thus streamlining the whole process and making the experience seamless. Additionally, this system will increase the efficiency of the banks and will reduce the costs and efforts for them. The applications of this ID management platform are infinite, right from ordering anything on any e-commerce website to applying for higher education. Proper implementation of this Blockchain based ID management platform, can take the data security to the next level in this digital age where data security is an ever growing concern.

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