The final 13 years have experienced blockchain technology evolve into numerous use cases — finance, data, logistics and security, amongst others. However, the thought of using blockchain’s immutable abilities to ID humans got new existence when Changpeng “CZ” Zhao visited the area country of Palau to start its digital residency program.
The blockchain identity management marketplace is believed to develop by $3.58 billion within the length of 5 years from 2021 to 2025. Important aspects range from the rising interest in digitalization and privacy-respecting identity solutions. Consequently, an array of solutions breached the marketplace serving this need by means of nonfungible tokens (NFT), distributed ledger technology (DLT) and barebone blockchain technology.
Thinking about all the different use cases that blockchain can serve on the day-to-day basis, numerous government organizations started tinkering with we’ve got the technology — weighing heavily on central bank digital currencies (CBDC) and verifiable and immutable user identity.
Issues with traditional IDs
Properly identifying — or ID-ing — one has been vital to governments to make sure targeted delivery of services and allowances, among other needs, which is true even today. However, ongoing advancements in technology empowered everyone with tools to produce IDs visually like the original. Given blockchain’s capacity to keep immutable records, government bodies begin to see the technology like a fighting chance against fraud associated with ID thievery and fakes.
With traditional paper-based IDs comes the problem of confirming their authenticity across different systems. History has proven how people effectively use fake ID cards to assert unauthorized use of an array of benefits. However, technological advancements for example blockchain have given government bodies using the chance to issue verifiable certificates and IDs while making certain scalability, speed and security from the identity management system.
Efforts about this front saw an upswing of the new ecosystem comprising various blockchain-based digital ID choices. For instance, Shubham Gupta, an Indian Administrative Service (IAS) officer, lately spearheaded the launch of the Polygon-based system for issuing verifiable caste certificates with respect to the federal government of Maharashtra.
Talking with Cointelegraph, he stated, “if identity management systems need to be rated on the proportions of to at least one according to decentralization and individual control, traditional centralized ID systems is going to be around the far left and fully self-located, public blockchain-based IDs around the extreme right.”
Types of blockchain-based digital IDs
While blockchain technology can and has been utilized as-is perfect for maintaining immutable records on the internet, innovations spanning during the last decade led to the birth of sub environments around using blockchain technology.
“The concept of blockchain-based digital IDs continues to be going swimming for a long time but arrived to the limelight using the recent NFT boom,” blockchain advisor and Bundlesbets.com Chief executive officer Brenda Gentry told Cointelegraph.
While NFTs were first marketed like a tool to represent real-world objects including intellectual and physical assets, we’ve got the technology found itself well-suited for various applications. Lately, government organizations have started testing NFTs for ID-ing citizens as way to reduce operational costs.
“Wide-scale implementation of blockchain-based digital IDs — like issuance of national identity cards for example passports and driving licenses — needs time to work however i strongly believe that’s the destination the world should move toward,” Gentry added. Additionally to helping authenticate people, blockchain technology discourages counterfeiting, tampering or id theft attempts.
Citing the participation of luxury brands and artists that promoted using NFTs to authenticate the authenticity and possession of the product or art, Gentry opined that “luxury products could be checked for his or her authenticity on-chain which completely eliminates the risk of having a counterfeit product.”
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Neil Martis, the co-founder and project lead of LegitDoc, that is known within the space for delivering numerous blockchain-based certificates and ID methods to the condition governments asia, envisions a larger adoption of public blockchain-based ledgers within the next decade. Web3-native decentralized IDs will have an incremental role in identifying users and authenticating these to take part in various kinds of Web3 native transactions.
Advantages of blockchain-based digital IDs
While blockchain’s elevator pitch is heavily inclined toward immutability, we’ve got the technology boasts multiple advantages over traditional software and paper-based systems. The opinions regarding the advantages of blockchain boil lower towards the control of private information.
Self-sovereignty stands among the greatest advantages of blockchain-based digital IDs, based on Martis. Which means that blockchain empowers users to talk about partial or selective information using their providers rather of paying their complete identity.
With blockchain-based IDs eradicating any susipicious activity regarding information, experts picture the birth of the truly trustless system with no participation of organizations. Gentry, too, reiterated verifiability, traceability and uniqueness as a few of the major benefits introduced about by blockchain, as she highlighted that blockchain IDs can’t be duplicated since it is around the distributed ledger. “All digital ID could be verified around the blockchain and could be tracked to the owners’ account which may also be used for Know Your Customer,” she added.
Limitations of blockchain-based digital IDs
Mainstream acceptance of blockchain-based digital IDs may ultimately need to mean overcoming probably the most pressing challenges that threaten to hinder its adoption. A few of the roadblocks that stick out in the present landscape include too little education one of the masses along with a supportive regulatory atmosphere.
Around the education front, Gentry has observed a quick-altering scenario introduced about by mainstream discussions and prevalent adoption from the technology. However, the development of pro-crypto rules will require greater intervention from industry players to assist countries and institutions get onboarded to the blockchain network.
Martis agreed with Gentry’s ideas on rules because he highlighted that blockchain IDs, regardless of how decentralized, will require attestation or recognition through the issuing government bodies. He added: “if the issuing government bodies don’t recognize the validity from the blockchain IDs, then your same can’t be employed for availing most public services. This for me may be the greatest limitation.”
Blockchain preferred by ID-ing people
Given that the majority of real-world identity systems they are under the purview of governments and sovereigns, Martis envisions greater adoption of permissioned distributed ledger systems for issuing Identities that need government services.
Gentry noted that selecting the right blockchain for IDing people or goods will need weighing the initial advantages and limitations of the several blockchain environments. While highlighting the present concerns for example Ethereum’s gas charges or Solana’s infamous outages, the blockchain consultant recommended that Binance’s BNB Chain is the best selection of blockchain due to its high transactions per second and occasional latency and charges.
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Speaking from general observations, Gupta shared that Indian condition governments have a tendency to select a middle ground in which rather of merely one authority fully in charge of citizen identities, several independent departments will share a typical distributed ledger that hosts citizen identities, moored periodically on the public blockchain.
The Maharashtra government is presently trying to deploy a scalable blockchain-based ID system for any tribal population of just one.two million. Martis explains the IDs produced will be utilised by various departments to do analytics and find out the right beneficiaries for a number of national schemes.
Whatever the challenges that slow lower blockchain adoption across business verticals, the benefits of we’ve got the technology make its dominance inevitable. Government organizations and entities have amped up efforts in uncovering futureproof fintech solutions via blockchain innovations. Blockchain disruptions which are well-positioned to visit mainstream additionally to identity management include localized CBDCs, logistics solutions and mix-border settlements.
Decentralized identities or DIDs (decentralized identifiers) haven’t yet see wide-scale implementation. Based on Martis, they must be settled or from highly decentralized public blockchains which are outdoors condition control, adding that “Bitcoin and Ethereum stick out because the apparent choices in connection with this.”
