Digital Identity
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TL;DR
Among the many emerging use cases of blockchain technology, digital identity management and verification is perhaps one of the most promising. In 2018 alone, billions of people were affected by personal data breaches, all around the world. There is an undeniable need for more secure methods of storing, transferring, and verifying sensitive information. In this context, blockchain systems may bring valuable solutions to some of the difficulties faced by most centralized databases.
There are many in a blockchain network that assure the integrity of a file's data when it's recorded. The legitimacy of all recorded data is supported by a "batch of claims" from several users.
To ensure the accuracy of digital records, nodes in the network might be controlled by authorized agencies or governmental institutions. For the files to be used as official documents with enhanced levels of protection, each node "casts a vote" verifying their legitimacy.
Blockchain-based identity systems don't necessitate the direct or explicit sharing of sensitive information. Cryptographic techniques such as hashing algorithms, digital signatures, and zero-knowledge proofs can instead be used to distribute and authenticate digital data.
A hash is a long string of letters and numbers that can be generated using hashing techniques. As a digital fingerprint, the hash here symbolizes all the data that went into its creation. Additionally, digital signatures can be provided by government agencies or other well-known organizations, ensuring the document's legitimacy.
For example, a citizen may supply an approved agency with their document so that a unique hash could be generated (digital fingerprint). Because of this digital signature, the hash can be utilized as an official document by a government agency.
Without giving any information about the identity or credentials, allow them to be shared and authenticated. Data can still be authenticated even if it has been . As a result, you might utilize ZK proofs to verify your age without revealing your precise date of birth, such as by driving or entering a club.
In the context of self-sovereign identity, each user has complete control over their personal data, which could be held in a wallet of their choosing (similar to crypto wallets). For example, one could determine when and where their information is shared in this situation. It is possible to use a private key to sign a transaction and send out sensitive information such as credit card data. They might use this to demonstrate their ownership of the credit card in question.
To store and exchange digital currency, blockchain technology is most commonly utilized. However it may also be used to share and authenticate personal documents and signatures, such as contracts. There are a number of ways a person can prove their position as an accredited investor, such as having a government agency sign off on it. To make sure they were dealing with a legit investor, the brokerage could verify their credentials even without knowing their net worth or income.
There are at least two significant benefits of using cryptography and blockchain in digital identification. In the first place, it gives users more control over how and when their personal information is utilized. As a result of this, the dangers of centralizing sensitive data would be considerably reduced. In addition, the usage of cryptographic methods in blockchain networks can provide a better level of privacy. Users can establish their documents' authenticity using zero-knowledge proof procedures, as previously stated.
Because blockchain-based digital ID systems are more secure than traditional ones, they have a second advantage: Verifying a claim regarding a user's authenticity, for example, may be made much easier using digital signatures. In addition, blockchain systems would make it more difficult for a person to fabricate a piece of information and effectively secure all kinds of data from frauds.
The usage of blockchain for digital identity systems has its own set of obstacles, just like many other use cases of the technology. The fact that these systems would still be subject to malevolent conduct known as synthetic identity theft is probably the most difficult aspect.
Synthetic identity is the creation of a new identity by mixing the valid information of multiple individuals. A synthetic identity can be fooled into thinking it is legitimate since each piece of information utilized to construct it is true. Credit card fraudsters frequently employ this tactic.
It is possible to prevent fabricated records from being accepted on a blockchain by implementing digital signatures. Individual digital signatures might be provided for each document by a government entity, but the organization could also provide a shared digital signature for all documents registered by a single individual.
Though there are certain drawbacks, blockchain technology has the potential to revolutionize how digital information is verified, stored and shared. A lot of work remains to be done, even though many companies and startups are already exploring the possibilities. We should expect to see more services focusing on digital ID management in the future. And it's safe to assume that blockchain will play a significant role in this.
Small blockchain networks are more vulnerable to , which are more prevalent in smaller networks. A blockchain can be reorganized and its records changed by a 51 percent assault. In public blockchains, where anybody can participate in the process of verifying and certifying blocks, this issue is particularly significant. There is a silver lining, though, in the form of private blockchains, in which only trusted parties are allowed to be validators. Although this is a more centralized and less democratic form, it is still possible.