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What is Digital Identity?

What is blockchain-based digital Identity? Take a closer look at how blockchain technology can help solve the problems of tomorrow.

Posted June 4, 2021
Last updated August 29, 2022

Illustration of 2 phones displaying digital identities on the screen.
Illustration of 2 phones displaying digital identities on the screen.

Industry experts agree that one of the next big applications of blockchain technology will be digital identity, a concept that is believed by many to be one of the most significant technological trends on the planet.

Digital ID technology will immensely increase the security and integrity of our personal information. Considering this, it will have the potential to virtually eliminate identification fraud.

Additionally, it will enforce ownership rights of a whole range of assets to your cryptographically secured signature.

Why is digital identity necessary?

As an individual, you identify yourself in many ways, including your name, address, age, profession and more. You see this identity in many forms, like on your driver’s license, your birth certificate, your work cards and your passport, which are all various forms of identity instruments.

Now think about all the ways that you have identified yourself, and then multiply it all by your daily online and offline interactions, such as buying something from the web, applying for a visa or calling up your bank. 

A fingerprint that is being scanned.
We have come a long way to reach a point where we digitize our own identity. Source: Pixabay

Juggling all of these accounts and identities can be outright tedious, but with digital identity in the cards, all of these identity instruments and accounts can be linked to one central ID, your digital identification, which is immutable and irreplicable.

What is digital identification?

A digital identity is a central storage location for information on an entity, to be used by computer systems to represent an external agent ー that agent could be a person, organisation, application, or device.

While all this sounds innovative, this technology is nothing new though, as one can already use their digital identity to authenticate themselves on another service. For example, you can log into Spotify with your Facebook account. 

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There is one caveat, though.

When you sign up to a new service, even though you own your password, you do not actually own your identity.

The truth is that your identity is in the hands of a central point, making it vulnerable to attacks and hacks if this central system’s security is compromised. 

How can blockchain be used to create digital identities?

Blockchain has an appealing trait for digital identity applications, as it offers an avenue where only you are in control of your ID.

Decentralised blockchain digital identity provides the user with the power to be fully in control of what information lies on their various accounts.

Child looking at herself through a digital mirror.
Blockchain allows us to enforce our ownership of money, assets, and now, our identities. Source: Pixabay

This means that rather than having an account on a website which owns a version of your digital ID, it will simply have access to your blockchain-backed digital ID instead. This access is controlled by you, and can be revoked at any time.

Another term that describes this, if you do some more reading on this topic, is self-sovereign identity.

The benefits of blockchain digital identity

There are so many benefits to having a blockchain digital ID.

Firstly, you can know that every account linked to your blockchain ID will be fungible, and that you can update and change this ID at any point. More importantly, you can choose whether to make your information private or public. 

These attributes are major game changers to the privacy of your information. For example, this can directly prevent media corporate giants from harvesting your personal information without consent for commercial use.

In the same way that cryptocurrencies can enable the user to take back control of their finances from the established central authorities, decentralised digital ID has the power to do this with your information too.

Global implications of blockchain digital identity

There are currently 1.1 billion people who live with no formal identity at all. Without a valid form of ID, an individual can not own property, vote, receive government services or open a bank account. 

Even more importantly, without the control over one’s own identity, it is easy to become virtually invisible, placing you in the role of a spectator, unable to partake in society simply because one can’t prove that they are who they say they are.

Identity is the crux of service delivery, and relying on physical identity documents can be unsafe, inefficient and expensive.

A fantastic light show depicting blockchains.
Blockchain is coming our way, like it or not. Source: fabio on Unsplash

It is believed that blockchain digital identity cannot only solve all of these problems, but also provide us the ability to streamline payments, ownership and contracting. 

The future of digital identity

With 63.4% of all internet use being on mobile, and with 68% of the world’s population expected to be living in urban areas by 2050, it is expected that digital identity will make a profound impact on the how we build future ‘Smart Cities’.

Digital Identity is not a fantasy, as some of the largest governments in the world are currently working on their own digital ID systems.

The UN and World Bank already have a goal of providing everyone on the planet with legal ID by 2030, however other countries are already making huge strides towards making digital ID the reality. 

Examples include new schemes in France, Canada, Italy, Belgium, Poland, The Netherlands, and Norway. 

Which blockchain network will accommodate digital identity?

The third generation blockchains like Cardano and Polkadot are moving forward to enable the adoption of blockchain-based digital identity.

A particularly interesting move by Cardano was apparent on April 2021, when Input Output Hong Kong (IOHK), Cardano’s founding team, was set to work alongside the Ethiopian Education Minister to implement a national blockchain-based database for tracking students’ academic performances.

Cardano (ADA) coin being held on a stand.
Cardano made a surprising appearance in Africa. Source: Executium on Unsplash

This is one of the most realistic applications of blockchain digital identity which will have a significant impact to the Ethiopia’s long-term developmental plan, as problems of missing identity and fraudulent academic records can be eliminated.

More on Cardano: Learn more about Cardano (ADA) here.

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Disclaimer: Information is current as at the date of publication. This is general information only and is not intended to be advice. Crypto is volatile, carries risk and the value can go up and down. Past performance is not an indicator of future returns. Please do your own research.

Last updated August 29, 2022

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