Innovating Identity Management With Blockchain Technology

Technological progressions in the digital space have transformed every perspective of our lives, from shopping to collaborating with colleagues even to communicating with friends and handling our finances. Since the rise of the Internet, identity management has been critical, with billions of dollars being spent on usability, security, and privacy.

As more days are spent online, and the physical world becomes ever more digital, the very thought of identification is evolving dramatically. Organizations face heightened security perils, alongside needs to play in the digital economy, optimize workflows and enhance customer and employee participation. With data running the world today, digital identity is crucial to almost all businesses and social transactions. It oversees the interaction of users in the digital world. But traditional identity systems remain highly vulnerable, with single points of failure, drawing endless attempts to access the entire repository of high-value data. And, with organizations prioritizing cybersecurity, identity protection, and compliance management, customer activity is significantly compromised.

The Existing Challenges In The Traditional Identity Management System

The current identity management system faces the following major challenges:

• Fraudulent identities

• Inaccessibility

• Data Vulnerability

Fraudulent Identities

The user's digital identity scene experience is particularly fractured. Users manipulate several identities connected with their usernames across various websites. There is no regulated approach to using the data produced by one platform on another platform. Moreover, the weak link between digital and offline identities makes it comparatively simple to generate fake identities. Fake identities form a bearing spot for the events of false interaction, which can aid in the perpetration of fraud and direct to increased numbers and lost revenue. This vulnerability promotes the production and distribution of atrocities such as "fake news," which feigns a possible menace to democracy.

Inaccessibility

About 1.1 billion people worldwide have no proof of identity, and 45% of them without an identity are among the poorest 20% on the planet. Complicated identification paperwork processes costs, lack of access, and the mere deficiency of information around individual identity are significant hurdles that hold over a billion individuals outside of traditional identification systems. Without keeping physical identities, one cannot enroll in school, apply for jobs, or access various governmental services. Having an identity is essential to obtaining access to the current financial system. Conversely, 60% of the 2.7 billion unbanked people already own mobile phones, covering the procedure for blockchain-based mobile identity solutions that better suit vulnerable citizens' requirements.

Data Vulnerability

Today, we save our most crucial identification data on centralized government databases backed by legacy software working with various single points of failure. Extensive, centralized systems comprising the personally identifiable information of millions of user accounts are astonishingly enticing hackers. Despite regulatory legislation and industry aims to improve cybersecurity, consumer data records are still at risk.

The Emergence Of Blockchain Technology

Blockchain has advanced significantly from the distributed ledger technology designed to track bitcoin ownership. This technology can substitute traditional systems with a profoundly trusted mechanism of managing identities. Blockchain can enable users to have higher control over their own identities. Organizations can utilize the information only with customers' consent, and no central entity would be authorized to compromise a consumer's identity.

Blockchain technology benefits several industries with transparency, security, and more features, adding value to their businesses. Thus, it is all set to change the current working of identity management in a highly reliable manner. It has helped the so-called self-sovereign identity, essentially unchangeable and more secure than traditional identity systems. It has the potential to effectively transform the way we use identities to connect to various online services.

What Are the Advantages of Decentralized Identity?

Regulations establish identity standards that need modern identity solutions. Governments look towards distributed ledger technology to give identities to the unidentified and defend citizens' personally identifiable data. Blockchain technology extends the following benefits:

• Manageability and Control

• Decentralized Public Key Infrastructure (DPKI)

• Decentralized Storage

Control And Manageability

The entity providing the identity is typically responsible for securing the identity data in centralized identity systems. In a decentralized identity framework, security becomes the obligation of the user, who may choose to complete their own security rules or outsource the duty to some service like a digital bank vault or a password-manager-like application. Moreover, blockchain-powered, decentralized identity solutions drive hackers to engage individual data stores, which is expensive and generally pointless.

Decentralized Public Key Infrastructure (DPKI)

DPKI is the core of Decentralized Identity. Blockchain facilitates DPKI by producing a tamper-proof and trusted medium to disseminate the identity holders' asymmetric verifying and encryption keys. The decentralized PKI (DPKI) enables everyone to create or fasten cryptographic keys on the Blockchain, tamper-proof and chronologically arranged. These keys let others validate digital signatures or encrypt data to the individual identity holder. Everyone had to buy or get digital certificates from traditional certificate authorities (CA) before DPKI, but there is no requirement for a centralized CA anymore because of Blockchain technology. DPKI is an enabler for several use cases, specifically verifiable credentials (VC). Many people utilize verifiable credentials (VCs) to refer to digital certificates with such cryptographic credentials.

Decentralized Storage

Identities tied on blockchains are intrinsically more regulated than identities saved on centralized servers. Using the cryptographically secure Ethereum blockchain, combined with distributed data storage systems such as InterPlanetary FileSystem (IPFS) or OrbitDB, it's likely to disintermediate existing centralized data storage systems while keeping security and data integrity. Decentralized storage solutions, which are tamper-proof by intention, reduce an entity's ability to obtain unauthorized data access to abuse or monetize an individual's confidential data.

Blockchain Identity Management On Users and Businesses

• Transparent

Everyone connected to the system can track the transactions recorded on the blockchain. Provable authenticity exists for all made transactions.

• User-Optimized

The blockchain ecosystem is exceptionally cost-effective and time-efficient. Furthermore, the cost contracted in validating identities becomes lowered both for businesses and users.

• Universal Identification

Users can request the organization to prove its identity across the border as well.

• Decentralized

Instead of collecting the data on a single centralized server, decentralization allows sharing data on each node in the network, decreasing the uncertainties of a single point of failure.

Successful implementation of Blockchain identity management can improve the level of security and privacy. The immutable and decentralized ledger enables third parties to confirm the user’s data without losing time and money. But by allowing payment policy management, as well as identity management, is also equally as crucial in facilitating efficient and productive finance tracking, reducing vectors for fraud.

Businesses need a decentralized identity with an efficient policy management framework that establishes control and reduces fraud through a secure, systematic, and trusted data exchange.