The blockchain technology is benefiting several industries with transparency, security and many more features, adding value to their businesses. Thus, it is to be believed that it is all set to transform the current working of identity management as well, in a highly secure manner.
The existing identity management system is neither secure nor reliable. At every point, you are being asked to identify yourself through multiple government- authorized IDs like Voter ID, Passport, Pan Card and so on.
Sharing multiple IDs leads to privacy concerns and data breaches. Therefore, the blockchain can pave the path to self-sovereign identity through decentralized networks.
A self-sovereign identity assures privacy and trust, where identity documents are secured, verified and endorsed by permissioned participants.
Read further to understand how blockchain can revolutionize the identity management process.
Before moving to the Blockchain, let’s understand how identity management works currently and what are the challenges in the existing process
Everyone uses identity document on a regular basis, which gets shared with third-parties without their explicit consent and stored at an unknown location.
Whether a person needs to apply for a loan, open a bank account, buy a sim card, or book a ticket, use of identity documents can be experienced in our day-to-day lives.
Companies such as government institutes, banks, credit agencies are considered to be the weakest point in the current identity management system as they are vulnerable to theft and hacking of data.
Thus, the blockchain comes with the possibility to eliminate the intermediaries while allowing citizens to manage identity on their own.
Here are some of the challenges that exist in Traditional Identity Management:
- Identity theft
People share their personal information online via different unknown sources or avail services which can put their identification documents into the wrong hands.Also, online applications maintain centralized servers for storing data; it becomes easier for hackers to hack the servers and steal the sensitive information.According to the Breach Level Index, 4,861,553 records are stolen every day, accounting for 202,565 records every hour, 3,376 every minute, and 56 records every second. The breach statistics indicate how quickly a hacker can steal the personal information or other confidential information.
- A combination of usernames and passwords
While signing up on multiple online platforms, users have to create a unique username and password every time.It becomes difficult for an individual to remember a combination of username and password for accessing different services.Maintaining different authentication profiles is quite a challenging task.
- KYC Onboarding
The current authentication process involves three stakeholders, including verifying companies/KYC companies, users, and third-parties that need to check the identity of the user. The overall system is expensive for all these stakeholders.Since KYC companies have to serve requests of different entities such as banks, healthcare providers, immigration officials, and so on, they require more resources to process their needs quickly.Therefore, KYC companies have to charge a higher amount for verification which is passed to individuals as hidden processing fees. Moreover, third-party companies have to wait for a long time to onboard the customers.In a global survey of “Know Your Customer” challenges, it has been found that global annual spend on KYC is estimated as the US $48million.
- Lack of Control
Currently, it is impossible for the users to have control over the personally identifiable information (PII). They do not have an idea of how many times PII has been shared or used without their consent.Moreover, individuals do not even know where all their personal information has been stored.As a result, the existing identity management process requires an innovative change. Using blockchain for identity management can allow individuals to have ownership of their identity by creating a global ID to serve multiple purposes.
Blockchain offers a potential solution to the above challenges by allowing users a sense of security that no third party can share their PII without their consent.
Using blockchain, a platform can be designed to protect individuals’ identities from breaches and thefts. Moreover, it can allow people the freedom to create self-sovereign and encrypted digital identities, replacing the need for creating multiple usernames and passwords.
Here are the technical components and interfaces, that could be involved in the Blockchain based Identity Management Process:
- Native Android/iOS App for individuals.
- Native Android/iOS App for third-party companies/verification companies.
- Inter-Planetary File System used to store user’s PII.
- Microservices programmed using Node.JS.
- Permissioned Blockchain Component.
Now, let’s understand how could the Blockchain Identity Management work
Here are the technical components and interfaces, that could be involved in the Blockchain based Identity Management Process:
Currently, people need the right way to manage their identity than paper-based documents. The app for Blockchain Identity management will help people to verify and authenticate their identity in real-time.
Step 1: Installation of Mobile App
An individual will first have to download the mobile app from play or app store to establish his/her identity.
After downloading the app in mobile phones, a user will create a profile on the app.
Once the profile is created, the user will get the unique ID number which will help organizations to get the access to user’s identification documents.
Step 2: Uploading the documents
After the user gets ID number, they need to upload the government issued IDs on the app which will be saved in the IPFS having hashed addresses stored in the blockchain.
The app will extract the personal information from these ID’s; so that user can do self-certification of his/her details.
The user will have the ownership of their own data. It helps users decide what information to be shared with organizations. Without the user’s consents, no information can be shared with any identity seekers.
Step 3: Smart contracts generating trust score of the person
Suppose there is a score that determines the trustworthiness of a person.
Smart contracts containing the business logic can generate a trust score for a user from the information provided by them while creating a self-sovereign identity.
Step 4: Third-party companies requesting access
Every time any company will have to access specific details of a person for authentication purposes, a notification will be sent to the individuals owning the identity.
Once the user allows the companies to access their details, third-parties can use the identifiable information for authenticating a person. Also, individuals will be able to trace for what purpose their PII has been used.
Blockchain does not store the user’s data or information. Instead, the transactions made between identity holders and companies will only be recorded on the blockchain.
For example, if an immigration authority verifies the person’s identity via an app, then that transaction will be added on the blockchain and visible to all the connected nodes.
Let’s discuss the example in more depth.
Suppose there is a person named Alex, who needs to authenticate himself to apply for study abroad programs. Thus, the education center can validate his identity fastly because of the blockchain-enabled identity management app.
Alex will provide the unique ID number to the center, enabling them to submit the request for accessing information. After he validates the request, the education hub can check his documents, and the transaction will be recorded on the blockchain.
Note: All these PII (personally identifiable information) will be stored on the phone backed by IPFS in an encrypted form.
As we mentioned above that the smart contracts can trigger the business rules and generate the trust score for every individual using blockchain identity Management. But what exactly does it mean? How will trust score work?
We will explain how trust score can help an organization to verify the user’s authenticity.
Higher will be the trust score, higher will be the trustworthiness of an individual
Trust score generated by the Smart Contracts can help organizations validate users identity in real-time.
A user can achieve a higher trust score by uploading multiple documents on the app.
Based on a user’s trust score, it can be inspected whether it’s a suspicious account or a valid account. Moreover, identity should be used on a regular basis to maintain or enhance the trust score.
A user can be considered to be as a newbie for the first six months after sign up; giving them the time to create the trust score. During that interval, they will have to upload the required information.
For example, if the Bank of America needs to check the authenticity of the person for granting him a loan, they can check the user’s trust score. It can give the bank an insight of the trustworthiness of an individual, saving time and money.
Three factors mentioned below that can help in building a trust score:
- Uploading of documents – The more identity documents a user upload, the more will be the trust score. It is the primary factor for newbies to start generating their score.
- Information should match – The system verifies if the fields like name, date of birth, and so on are same across the uploaded documents or not. More positive matches will enhance the trust score.
- Regular use – Users might require using the system regularly to keep the trust score improved and maintained.
Factors which may cause the trust score to drop
- When relevant documents are not uploaded within the system, it will drop the trust score.
- If a user does not provide access to specific organizations to verify identity, it will drop the trust score.
- Frequent changes in their personal information may drop down the trust factor, considering the person as a suspicious user.
Benefits of using Blockchain Identity Management from the users point of view
- Unique ID: Each user who registers on Blockchain identity management system will get a unique identity number. User’s unique ID number consists of all personally identifiable information in an encrypted format that is stored on their device backed by IPFS. Users can simply share unique ID with any third-party to authenticate themselves directly through the Blockchain Identity Management.
- Consent: A blockchain identity management system will not store any users information. Moreover, the system uses Smart contracts to enable the controlled data disclosure. Thus, data manipulation is not possible on the blockchain. Identity management system linked with blockchain is highly secure for identity holders as well. No transaction of users information can occur without the explicit consent of the user. It makes the user control their personally identifiable information.
- Decentralized: No personal identification documents of the users will be stored in a centralized server. All the documents that identify users get stored on their device backed by IPFS, making it safe from mass data breaches. Using the Blockchain identity management backed by IPFS doesn’t allow any hacker to steal the identifiable information. Since the system will be decentralized, there will be no single point of failure (SPOF). Single point of failure represents the part of the system; if it fails, the system will stop working. Therefore, the absence of SPOF ensures that the system will never compromise.
- A universal ecosystem: The blockchain identity management doesn’t set to any geographical boundaries. So, users can use the platform across the borders to verify their identity.
Impact of using Blockchain Identity Management on Users and Businesses:
- User-optimized: Blockchain ecosystem is highly cost and time efficient. Moreover, the cost incurred in verifying identities gets lowered both for business and users.
- Transparent: Everyone connected to the network can trace the transactions recorded on the blockchain. Verifiable authenticity exists for every made transaction.
- Obscure: It ensures the privacy of the transactions for the parties connected to the blockchain.
- Decentralized: Instead of the storing the data on a single centralized server, decentralization enables the distribution of information on every node in the network, reducing the chances of a single point of failure.
- Universal Identity: Users can ask the organization to verify their identity across the border as well.
Use-cases of Blockchain Identity Management
- Applying for a loan
Imagine you have to apply for a loan or open a new bank account. Traditionally, you have to submit multiple identity documents for completing the entire manual verification process, taking weeks to process the loan or credit. But a blockchain based identity could fasten the process by sharing pertinent information quickly. Since a user may not have to maintain different IDs, the cost, as well as efforts, could also be reduced.
Apart from carrying a passport, a traveler also needs to take along a specific set of documents for clearance and security checks at the airport. From booking a ticket to passing security checks, boarding a flight, and moving to a new country, an individual can present a universal blockchain based identity throughout the entire process. A person with a decentralized identity would not have to undergo through complicated security checks and other processes. So, blockchain identity management can make the process more streamlined for both travelers and authorities.
- Legal Procedures
While undergoing any legal process, a user may have to submit different identity proofs like proof of age, proof of occupation, address proof, and various other documents. With the help of blockchain identity management, people might not have to carry multiple documents wherever they go. Legal entities, as well as government bodies, can verify an individual from a single blockchain based identity. Therefore, a comprehensive background check is no more required.
Find more blockchain use cases in the legal industry.
- E-commerce Checkout
Whenever an individual places order online, they are asked to fill specific information like name, email, phone number, address, etc. They have to repeat this process every time whenever they sign up at an e-commerce site, making the whole process time-consuming and cumbersome. Henceforth, signing-up at multiple e-commerce sites with a unique identification number can save user’s time as well as efforts.
- Previous Employment verification
Presently, there is no fixed standardization to do a background check of the employees. In the global employment sector, it is essential to check employee’s information written in resumes, previous letters or reference letters. Validation of the information written in employee’s resumes can be requested directly through the blockchain ecosystem with a user’s permission.
Successful implementation of the Blockchain identity management can enhance the level of security and privacy. The immutable and decentralized ledger allows third parties to validate the user’s data without wasting time and money.
The team of Blockchain Experts at LeewayHertz can provide you extensive knowledge of how the attributes of the blockchain will bring transformation in the identity management industry.