There have been several industries and sectors that have benefited from blockchain technology. Adding transparency, security, and immutability to businesses is very beneficial. By introducing and adopting blockchain-based identity management, businesses can transform completely. Currently, identity management systems do not work reliably. Data breaches and leaks are common among them. We will therefore explore in this article how blockchain-based identity management can provide high-level security. Blockchain-based identity and management will be covered in this guide.
Identity management is what it sounds like.
Identity management involves the process of generating and maintaining user accounts in online services. Providing access to online services to the rightful users requires identity management. Traditionally, identity management systems have four phases in their life cycle:
Typically there are two types of identities:
- Self-Sovereign Identity – This is a type of identity where the user is in control of their data. As a result, it increases transparency and trust among those interested in using that online service. However, users must follow certain rules in order to control the network. In this case, the user takes control of the data based on the “need-to-know” and “need-to-retain” criteria, which avoid data theft or misuse.
- Central identity – This entity holds the central power and is the central service provider. This identity accepts user credentials and validates them for storage. Online services can be accessed using the stored and validated credentials. It is also possible to validate a User’s identity using DLT, which stores information about the User.
- Federal Identity – As a service provider, this entity is responsible for separating enrollment entities from those that rely on authentication to verify digital identities. For various online service providers, they are responsible for managing user data.
Basics of Blockchain
In its early stages, blockchains were peer-to-peer networks that provided transparency related to all transactions done on them. Because blockchains are immutable and consensus-based, no central authority is required to oversee all transactions because of their immutability. In addition to anonymity, decentralization, and transparency, data is the most valuable asset in a blockchain.
In order to manage identities, cryptography is required
The public key infrastructure is crucial to the management of public keys. Users’ public keys need to be correctly mapped using PKI. Public key infrastructure (PKI) can be accessed in two different ways:
- Centralized approach – To ensure secure authentication, the central authority issues, revokes, or holds digital certificates as needed.
- Decentralized approach – These certificates can be verified and issued by other trustworthy nodes. The decentralized network relies entirely on trust between users. Web of Trust (WOT) refers to this trust mechanism. The certificate signed by the individual can be used for further verification of the individual.
During bi-directional verification of these data, many Sybil nodes can be eliminated completely. By combining cryptographic functions such as encryption, attribute signatures, and authentication codes, blockchain-based authentication provides more privacy and security.
What is the process of managing identities on a blockchain?
Blockchain technology can be employed to solve digital identity problems. Checked reported attributes must be trustworthy for the consensus mechanism to work. Due to blockchain’s tamper-resistant nature, statements can be persistent. Users have complete control over their data with the SSI approach. In a chain structure where a chain per identity is provided, such as The Tangle or the Trust chain, complete control is enabled. Chain structures of this type may also allow users to abdicate their right to be forgotten. As a result of claim blocks and claim authentication, personal information is kept private and data minimization is ensured. Blocks can be shared with other platforms, allowing for portability and interoperability
Regulations and solutions for personal data security are currently being developed. Data sharing between communication agents can be ambiguous, so it can be difficult to determine what data is shared and what access is actually granted. Identity anonymity is affected by the degree to which personal data can be linked . To protect personal data privacy, we need to be able to selectively disclose and track personal information. Identification information, such as a driver’s license, address, passport, name, birthday, and other information, is considered PII.
A complete identity includes all attributes associated with it, such as the bank name, part of the email, religion, part of the name, etc..
As PII, potential PII, and non-PII are segmented into different contexts within a digital identity. The situation and role determine the activation of identity properties in various settings.
OAuth is the protocol used by many businesses for their proprietary authentication mechanisms. Currently, all over the world, standard body regulations govern data management and privacy.
By restoring control over personal data to identity holders, the European Union enforces GDPR to protect consumers. By combining GDPR-compliant digital rights with user-centric identity SSI, we acknowledge the right of the individual to manage their own data. There are five main topics addressed in the document: access, consent, minimization of data, portability, and erasure of data (right to be forgotten).
Identity management with blockchain: benefits
In terms of identity management, blockchain offers four main benefits
- Blockchain ecosystem – Any person in the world can access a blockchain-based ecosystem. Users are not required to verify their identity or to adhere to geographical boundaries.
- Decentralized – Decentralized data storage is possible on blockchain identity management systems. Data breaches or Sybil attacks are not likely to occur if information is not centralized at one server.
- Consent – The data of users is not centralized in blockchain-based identity management. As a result, data breaches and Sybil attacks are less likely to occur in this system. It is determined whether someone can access certain information using smart contracts in blockchain ID management systems. A blockchain cannot be manipulated in this way. Due to the highly secure and hidden nature of the network, it builds users’ trust. System failures are not common in decentralized systems. In other words, the system wouldn’t shut down in the event of an attack on a node.
- Unique Identity – Users who register on the blockchain and join the network are given a unique ID number. Users have unique user IDs, which contain information related to them in an encrypted format. A third party will only need to know the user’s unique ID to authenticate them.
Businesses can benefit from blockchain identity management
Identifying people using blockchains has had a significant impact on these companies
- Privacy – A blockchain network ensures that all transactions are private. Anonymous transactions can be made, and details of these transactions are hidden.
- Transparent – The blockchain uses a distributed ledger for recording transactions. The details of transactions can be traced by anyone connected to the network.
- Decentralized – A decentralized system instead of a central server can be used to store all of the information. As a result, single points of failure and data loss are reduced.
- User-optimized – It is a very cost-effective and time-efficient system for managing identity in the blockchain. In both cases, identity verification incurs a low cost for the users and the business owners.
- Ecosystem – Organizations can verify users’ identities across borders upon request.
Identity management on blockchain: use-cases
The following three cases illustrate blockchain identity management:
- Travel and Immigration: It might take a lot of time for an individual to verify the documents, as we discussed in the previous example. Blockchain can easily be used for background checks and ID verifications related to travel and immigration. Using a blockchain identity management system, travelers will be able to verify their identities seamlessly. As a result, travelers and authorities will be able to complete the process more quickly.
- Legal – It is common for people to be required to present their identity proofs to the legal system, such as proof of age, proof of address, and proof of occupation. People will no longer have to carry these documents everywhere during legal proceedings when using blockchain identity management systems. A decentralized storage solution can be created by government and legal bodies to store this information. It is possible to access this information whenever needed. It would not be necessary to conduct comprehensive background checks or to present proof of identity.
Lending or borrowing money(Loan) – It can be complicated for an individual to get a loan approved and to file for it. Documents proving our identity and legality must be submitted in multiple copies. It takes weeks to verify these documents. Fake documents can always be used to commit fraud. Legal documents can be organized and stored via blockchain identity management systems in such cases. Blockchain stores these documents after they have been verified. As a result, the verification process is drastically reduced.