Contact us anytime to know more — Abhishek P., Founder & CFO CISIN
Blockchain technology adds value to businesses by bringing transparency, security, and other features. It is also set to revolutionize the way identity management works today in a highly secure fashion.
It is not trustworthy or secure. You are required to prove your identity at every turn using a wide array of official documents, such as a passport, voter ID, or pan card.
Everyone uses identity documents, and sharing them with third people without permission is possible. They might be kept somewhere that has yet to be discovered.
Identity documents are required to create a bank account, get a SIM card, book tickets, and apply for credit. The current system of identity management needs to be improved in government financial institutions, banks, and credit agencies, as these are the most vulnerable to data theft and hacking.
The blockchain technology offers the opportunity to eliminate intermediaries and allow citizens to manage their identity independently.
Before we move to the Blockchain, it is essential to know how the current process of identity management functions and the problems that exist. What began as a concept for the development of a tech-libertarian currency is now attracting attention (and investment capital) due to its "silver bullet' status in cyberspace.
Blockchain technologies were initially tested as part of a trial program before being implemented as a result of hotly contested evidence.
As a tool for cyber security, it has been used to prevent identity theft as well as several other issues that affect banks, real estate companies, and investment corporations.
It is thrilling to think about the possible decentralization of blockchain protocols for information protection and how it is distributed.
It is vital to remember that the lessons of the dotcom collapse are that excitement can get in the path of pragmatism and common sense. When this happens, bad things happen. Whether we're talking about the latest high-tech gadgets or our own private decisions in matters of fiber, like how we manage our portfolios, it is true.
Blockchain Identity Management
Many businesses are now producing tools that assist with private authentication and verification procedures. The tool is another personal identity security software that uses blockchain technology to perform online authentication, identification, and verification.
This makes the job easier, quicker, and cheaper.
These distributed ledger solutions are made to offer a quick way to use data stored on the Blockchain to confirm a person's identity.
This information can be changed or removed without leaving a trace.
Enterprise Ethereum, which is both a cryptocurrency and a blockchain platform on which additional blockchain apps can be created, is the foundation around which Civic's tool for authenticating blockchain transactions is built.
Since this is a novel notion using novel software, there is no direct analog.
A decentralized network of consumers, providers, and validators is needed for this technology to function. Users save their private information for confirmation.
Civic doesn't protect any personally identifiable information (PII) on the distributed immutable ledger technology; instead, it keeps references to it that verify location and testifies that the person being confirmed is who they say they are in exchange for a "commission" payment given in CVC tokens.
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Why is Blockchain Needed for Identity?
The blockchain identity management system could help eliminate current issues with identity, such as
- Inaccessibility
- Insecurity of data
- Fraudulent identities
Inaccessibility
Around 1.1 billion individuals in the world lack proof of their identity. 45% are also among the 20 poorest people on Earth.
Over a billion people are kept out of the traditional identification system by cumbersome paperwork, high costs, limited access, and a lack of understanding of personal identity. One must identify themselves physically to apply to school, obtain a job, receive a passport, or use many government financial services.
It is essential to have an ID to gain access to existing financial systems. In contrast, 60 percent of the unbanked 2.7 billion people own mobile phones. This opens the door to mobile identity blockchain solutions based on Blockchain that better meet the needs of those who are vulnerable.
Security of Data
We store the essential identification data on government databases that are supported by old software and have many single failure points.
Hackers are attracted to large, central systems that contain the personally identifiable data (PII) of millions of accounts. According to a recent study, 97% of breaches were caused by breaches involving personally identifiable data. Despite regulatory laws and efforts by businesses to improve cybersecurity, more than 654 billion dollars worth of consumer data were compromised.
Fraudulent Identities
The digital identity landscape needs to be more cohesive. The user juggles multiple identities that are associated with usernames on different websites.
It is not possible to standardize the way data from one platform can be used on another. The weak connection between online and digital identities also makes it easy for fake identities to be created. False identities can create a fertile environment for counterfeit interactions, leading to fraud and inflated figures and revenue.
This vulnerability in society facilitates evils such as "fake" news, which can pose a threat to democracy. We have tools for building new identity management frameworks based on the idea of digital identifiers based on the concept of DIDs, which could include a subset of self-sovereign identities (SSI).
What Challenges Exist with the Current Blockchain Identity Management System?
There are four main challenges that the current identity management system must address.
- Identity theft
- Combination of Usernames and Passwords
- KYC Onboarding
- Control is lacking
Identity Theft
Online, people share personal data with unknown services or sources. This can lead to their identity documents falling into the wrong hands.
As online blockchain based applications use centralized servers to store data, hackers can easily hack these servers and steal sensitive personal information. The Breach Level Index shows that 4,861,553 documents are stolen each day. This includes:
- Every hour, 202-565 new records are made.
- Every minute, 3,376 recordings are made.
- Every second, 56 new records are made.
Breach statistics show how fast a hacker can steal confidential or personal information.
Combination of User Names and Passwords
Users must create unique usernames and passwords for each platform they sign up with. A person may need help keeping track of a variety of usernames, passwords, and access codes for different services.
It is challenging to maintain other authentication profiles.
KYC Onboarding
Three parties are involved in the current authentication process:
- Verifying companies/KYC Companies.
- Users can also use it.
- Third parties who need to verify the user's identity.
All these parties are paying a high price for the system. KYC firms have to deal with multiple entities, such as immigration officers, banks, and healthcare providers.
They need more resources to meet their demands. KYC firms are forced to charge higher transaction fees for the verification process and pass these costs on to consumers as processing charges.
Third-party companies also have to wait a long period before they can onboard customers.
Inadequate Control
Currently, users cannot control their own personally identifiable data (PII). The users do not understand the following:
- How many times has PI been used without consent?
- Where all your data is stored?
The existing process of identity management needs to be redesigned. By creating a global identity that can be used for multiple purposes, individuals can take ownership of their identities by using blockchain technology.
Blockchain can be a solution for the challenges above by giving users a feeling of security, knowing that their PII will not be shared with a third party without their permission.
Blockchain Technology
- A platform that protects individuals from identity theft and breaches can be created
- People can create their self-sovereign, encrypted digital identity.
- The need to create multiple passwords and usernames can be eliminated
Learn how to use a Blockchain-based identity management system.
How Does the Blockchain Identity System Work?
For us to understand the workings of a Blockchain Identity Management System, we must be familiar with the various technical essential elements involved.
The Blockchain-based Identity Management Process could involve five components or interfaces:
- Individuals can download the native Android/iOS app.
- Native Android/iOS App for third-party companies/verification companies.
- Interplanetary File System (IPFS) to store user's PII.
- Microservices programmed using Node. JS.
- Blockchain Component with Permission.
Let's now Understand Blockchain Identity Management. People need a better way than traditional paper documents to maintain their identities.
App for Blockchain Identity management helps people verify their identities in real-time.
Step 1: Installing the Mobile App
To verify their own identity, the individual must first download the app on the app or play store. The user creates a profile in the mobile app after downloading it.
The user receives a unique ID after creating the profile. This number will allow organizations to access identification documents.
Read More: 20 Biggest Misconceptions People Have About Blockchain
Step 2: Uploading Documents
The user will need to save the hashed address of the IDs in IPFS after they receive the ID numbers. The blockchain app development will pull the information out of these IDs for self-certification.
The user will own data. Users can decide what information they want to share with organizations. Data cannot be disclosed to identity thieves without the consent of the user.
Step 3: Smart Contract Generating Trust Scores of Individuals
Imagine that there was a score that determined the level of trustworthiness in a person. The business logic of smart contracts can be used to generate trust scores for users based on the data they provide.
This creates a sovereign identity.
Step 4: Requesting Access from Third-Party Companies
A notification is sent each time a company needs to use specific information about a person to authenticate them.
Third parties may use identifiable information to show a person once the user has permitted the company access. Individuals will also be able to track the purposes for which PII was used.
Blockchain doesn't store any data about the users. The Blockchain will record only the financial transactions between blockchain companies and identity holders.
If, for example, an immigration central authority confirms the identity of a person via an application, that transaction is added to the Blockchain. It will be visible to all nodes connected.
Discuss the example in more in-depth.
Imagine, a student who wants to study abroad, needs to verify his identity. The education center can validate his identity very quickly thanks to the identity management application that uses blockchain development technology.
He provides the center with the ID to access information. The education hub will verify his credentials after he has validated the request.
From the Perspective of the Users, What are the Advantages of the Blockchain Identity Management System?
There are four advantages of blockchain-based identity management from the perspective of users:
Unique ID
Each user that registers with the Blockchain Identity Management System will receive a unique ID number. IPFS is used to store all the user's personally identifiable data in encrypted form on their device.
The users can use their unique IDs to verify themselves with third parties directly using blockchain identity management.
Consent
Blockchain identity management systems will not save any information about the user. Smart contracts are used to control data release.
Data manipulation on the Blockchain is, therefore, not possible. A blockchain-based identity management system is also highly secure for identity holders. Information about the users cannot be used without their explicit consent.
The user is in control of their personally identifiable information.
Decentralized
Users' documents will not be kept on a central server. Reports ensure that all documents identifying users are stored in their devices, protecting them from data breaches.
IPFS and Blockchain Identity Management prevent hackers from stealing identifiable information. Decentralization means that there won't be a single point of failure. The single point of failure is the part of the entire system that fails.
The absence of SPOF guarantees that there will be no compromises in the design.
The Universal Ecosystem
The blockchain identity management system has minimal geographical limitations. Users can therefore use the platform to confirm their identities across national boundaries.
For Companies
Companies store sensitive data about users alongside routine business information. The rise of privacy regulations and the shift in blockchain industry emphasis to IT responsibility create new risks for businesses.
These data become less valuable for driving improvements in products and gaining a proper understanding of customers when they are locked away. Many enterprises will only pursue costly and risky blockchain projects after they receive hefty fines or develop more vital IT abilities to strike the perfect balance between business and data security.
IoT Devices
Around 7 billion devices are connected to the Internet. By 2024, this number will grow to 18 Billion and, by 2025, to 22 Billion.
Most IoT technology needs to have the appropriate capabilities for managing identity or access, similar to the early Internet, which was based on trusted institutions. Internet of Things (IoT), interconnected devices and objects, must be able to identify monitors and sensors and control access to sensitive data and non-sensitive information in a safe manner.
To address these gaps, leading IT vendors are now offering IoT Management Systems. It is common for an organization to own tens or even hundreds of IoT devices, compared to a few dozen traditional server and user devices.
With such a large number of devices, the mismatching standard is common. The implementation of management tools at a large scale can be a challenge, and security is often an afterthought.
For Persons
A healthy society and economy depend on identity. We can build healthy communities and international markets when we have an excellent way to identify ourselves and our possessions.
An identity is a group of assertions about a person, location, or thing. First and last name, date of birth, nationality, and some type of national identity, such as a passport number, social security number (SSN), driver's license number, etc., are typically included in this information for persons.
These informational pieces are generated by centralized organizations (governments) and kept in centralized databases (central government servers).
Even those with legally valid forms of identification nevertheless cannot wholly own and control their identities.
They view online labels in a fragmented way and unwittingly forfeit the value that their data produces. Frequent hacks against private companies that retain their data require end users to live with ongoing fraud mitigation.
There are few to no options after a social security number is issued and lost.
Read More: What is the Future of Blockchain Technology?
How will Blockchain-Based Identity Management Affect Users and Businesses?
User-Optimized
Blockchain ecosystem is highly efficient and cost-effective.
The cost of verifying identity is reduced for both businesses and consumers.
Transparent
Anyone connected to the blockchain network can trace transactions on the Blockchain. Every transaction is authenticated.
The Obscure
The Blockchain ensures that the transactional privacy of all parties involved is protected.
Decentralized
Decentralization allows the information to be distributed on all nodes in the private network. This reduces the risk of one single point of failure.
Universal Identity
The user can also ask for the organization to confirm its identity beyond the borders.
What is the Use of Blockchain in the Identity System?
We have covered five different real world use cases for blockchain-based identity management.
How to Apply for a Personal Loan?
Imagine that you need to open a bank account or apply for a credit card. In the past, this manual process took weeks.
You had to provide multiple documents to prove your identity. A blockchain-based ID could speed up the process because it would share pertinent information more quickly. The cost and effort could be decreased since a user would not need to keep track of multiple IDs.
You can Also Find out More about Immigration
A traveler must also carry a set of specific documents to be able to pass through security and clearance checks.
A blockchain-based universal identity can complete the whole process, from booking tickets to clearing security flying to moving into a different country. Decentralized identities would allow a person to avoid lengthy security procedures and complicated checks. Blockchain identity management will streamline the travel process for travelers as well as centralized authorities.
The Legal Process
A user might be required to provide different proofs of identity during any legal procedure, such as:
- Proof of Age
- Proof of occupation
- Address verification, etc.
People may need to carry fewer documents with them. A blockchain-based ID can be used by government and legal entities to verify an individual.
A comprehensive background check will no longer be required. Discover more Blockchain use cases for the legal sector.
Online Checkout
When placing an online order, individuals are required to enter specific details such as name, email address, phone number, and street address.
This process has to be repeated every time they register at a website, which is time-consuming. Signing up for multiple ecommerce sites using a single identification number will save time and energy.
Verification of Previous Employment
There is currently no standard for background checks of employees. In the global job market, it is essential to verify the information contained in a resume, a previous letter, or a reference letter.
The blockchain ecosystem allows users to request the validation of information in employee resumes.
Is This ID Management Possible in Blockchain Technology?
There are also unresolved issues about the best way to include the information references in the confirmation procedures required to make blockchain authentication possible.
For instance, to use Civic, one must enter the Secure Identity application (there are cellular and web versions). This is where the problem lies.
They risk having their mobile and Internet applications compromised if they use protected cognitive technologies.
Additionally, it can be challenging because the Secure Identity Programme needs your name, email address, tax ID number or Social Security number, passport, driver's license, etc.
What could go wrong? It. It's a stretch in this age, where security breaches and data compromises are the third most certain thing to happen.
It doesn't matter if programs are hacked now and then or if the apparatus is hacked constantly. Imagine what would happen if the device used to sign up for the blockchain authentication affirmation was infected with keystroke malware.
Another issue is the Blockchain. It's been hacked - coin purchases are ripped apart, insecure hardware from pockets is discovered, and phone apps have been cracked.
The rumor of the world's first blockchain-enabled election was greatly exaggerated. And also, let's be honest: there are probably a lot more than ten traders who would love to ignore an iced-tea company's stock price increasing by 500% after adding "blockchain" in their name.
You may know that their value can be altered in the same way as "actual cash." Is Blockchain safe? The solution may be no or yes, but that does not mean the uncertainty should prevail.
The same vitality which mirrored the dotcom stock prices became, in many cases, more than prescient. There was a huge market for pet supplies, diapers, and books. Internet-enabled devices are on the decline and will continue to do so.
Blockchain is similar to a class of people, especially when it comes to individuality. But we should wade into the water slowly.
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Conclusion
Implementing Blockchain Identity Management successfully can increase security and privacy.
Third parties can validate user data using the immutable, decentralized ledger without spending time or money.
