The Idea of a Blockchain-based Digital Identity System

One of the most promising applications of blockchain that is currently in development is digital identity. According to a new report by Grand View Research, the identity management market is expected to reach USD 24.12 billion by 2025, at a CAGR of 13.1% over the forecast period. The report notes that the proliferation of web-based applications, coupled with an increasing demand for more efficient risk and audit management systems are key factors driving growth in the sector. Moreover, the growing use of connected devices and IoT in industry makes secure digital identity management essential.

A number of innovative blockchain startups, such as the Sovrin Foundation, Bloom and Civic, are all vying to provide individuals with a platform to securely manage their digital identity. The hype of the last two years is now bearing fruit, as an increasing number of major corporations show interest in such services. Indeed, many private and public institutions are planning to build blockchain-based identity systems of their own — including Microsoft. The tech giant is seeking to build a decentralised identity (DID) network on top of the Bitcoin blockchain in order to bypass the need for a centralised ID database when verifying identity. The prototype — which is running on Microsoft Azure — enables users to own and control their own digital identity using private keys accessible only to the individual.

Samsung is working on a similar service — the tech multinational has teamed up with three financial services firms and three mobile carriers to launch a blockchain-based mobile identification system in 2020. The consortium will develop a mobile system to help establish a so-called “self-sovereign identity”.

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Giving the power back to individuals — Self-sovereign identity

Existing models of digital identity rely on centralised authorities, like Google and Facebook. These tech giants manage people’s digital identities centrally and can use this power to pass information to third parties. Of course, this is all supposed to be regulated by user licence agreements and data privacy legislation. In reality, however, very few users read these agreements, while both Facebook and Google have breached US and EU privacy laws in the recent past.

Centralised digital identity management systems also pose a more fundamental problem: their vulnerability to data breaches. Facebook suffered a massive data breach last year which gave hackers the ability to take over the accounts of 50 million users. And other tech giants haven’t fared much better — in 2018, Twitter revealed that it had been accidentally sending users’ private direct messages to external developers due to an API bug. Inevitably, the seemingly endless drip feed of articles about privacy breaches is beginning to take its toll in terms of consumer confidence. Facebook, for example, is the least-trusted major tech company according to a survey published last year, followed by Google and Uber.

This lack of trust in the status quo has led to a growing demand for decentralised, blockchain-based ID solutions. Blockchain gives rise to the concept of self-sovereign digital identity, whereby centralised organisations are no longer in control of the identities of individuals.

In principle, self-sovereign identity can allow users to manage their identities, access and update information, and transfer data to other organisations, all while keeping chosen information private. Furthermore, the solution allows anonymous authentication, whereby the use of unique attributes for identification negates the need for a public key, ensuring privacy for the individual.

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“Self-sovereign digital identity will grow similar to other platforms with large network effects: slowly at first and then all at once.” — Sovrin Foundation’s chair, Dr. Phillip Windley, said. He explains that self-sovereign digital identity refers to ID credentials that are held and controlled by the person they identify. In Sovrin’s case — which was one of the first companies to work towards blockchain-based digital identities — these credentials are collated from multiple sources, meaning that there is no single centralised source.

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Supporting the Innovative Ones — With the Right Marketing

Many of the most innovative approaches to digital identity have been launched by blockchain startups. The importance of innovative startups for the future of the global economy is often underestimated — in 1998, Google was a scrappy upstart trying to chip away at the dominance of Microsoft. But in order for blockchain-based digital identity to achieve widespread adoption, people need to trust the technology. Thus, blockchain startups need to effectively communicate their business model by developing a thoughtful marketing strategy. In contrast to traditional companies, blockchain companies have an additional challenge: making people believe in the potential of a technology which is still in its infancy and is not easy to understand. Then, and only then, will these startups have a chance to gain a solid foothold in the market.

At THE RELEVANCE HOUSE we support startups operating in the blockchain and emerging technology sector. We believe in the potential and relevance of these sectors and want to build confidence and trust. We do this by helping blockchain firms develop a relevant marketing strategy, make their brand visible to the world, and meet their funding goals.

Photo credits:

Photo 1 by rawpixel.com on Freepik
‍Photo 2 by rawpixel.com on Freepik