The Future of Digital Identity on Blockchain

Every action on the internet leaves behind trails of information about the user. Therefore, managing digital identity is becoming increasingly critical in light of the proliferation of always-connected electronic gadgets because of the associated hazards to privacy.

The controls and accountability that come with digital identity management provide a safe and reliable method for preventing sensitive personal information from falling into the hands of cybercriminals.

Today, the world is also embracing blockchain-based technology digital identity solutions, which have the potential to transform conventional methods of privacy. The following article looks at the advantages, challenges, and constraints of the numerous ways blockchain-based technology solutions influence digital identity development.

What Is Digital Identity?

Digital identity is a compilation of personally identifiable information, including name, age, gender, address, email address, and phone number. Additionally, more information pertinent to constructing an online identification profile can be identified as part of digital identity. It also comprises digital assets, such as webpages and profiles on various social media platforms.

Digital identity allows us to communicate with one another in a manner that is both safe and effective within the context of the internet world. Innovative digital identity methods such as blockchain-based solutions are gaining more popularity today than conventional methods because of their effectiveness.

Traditional Approaches to Digital Identity and Their Drawbacks

The conventional methods of establishing a digital identity entail using usernames, passwords, and several other types of authentication. Some of these approaches, however, become exceedingly challenging to use as the number of data breaches that occur and the level of sophistication of fraud technologies increases.

Vulnerabilities of Authentication Methods

These authentication methods are not only simple to forget but also susceptible to theft, making users vulnerable to cyberattacks. In addition, they frequently do not offer a level of security sufficient for particular transactions and procedures that call for even more strict verification steps.

Knowledge-based Authentication

The knowledge-based authentication is a good demonstration of a traditional digital identity method. Depending on the situation, you need to identify yourself by giving details such as your first pet’s or your mother’s maiden name. Using two-factor authentication based on SMS is another common way more up-to-date than its counterparts.

These verification methods have flaws that make it easy for fraudsters to exploit them. It only takes a few clicks to find the answers. Also, easy to find ostensibly hidden questions on social media, and it’s not difficult to steal the 4- and 6-digit numbers used by SMS-based two-factor authentication.

The dark web and illegal online activities have advanced to a far higher level of sophistication, which traditional authentication systems cannot handle effectively. Formerly reliable and capable of ensuring that the person who logs into their online account is the actual account owner, conventional methods can no longer provide this level of assurance.

Due to the worldwide nature of cybercrime, the dark web, and online fraud, modern enterprises are abandoning antiquated, insecure, and undependable authentication procedures. Instead, they favor more cutting-edge, current solutions, such as blockchain-based digital identity solutions.

Blockchain-Based Digital Identity Solutions and Their Key Features

Blockchain is a distributed, cryptographically secured database of transactions used for asset tracking and permanent record keeping. It opens the door to various applications with more robust privacy safeguards, such as digital identity verification and smart contracts. An increasing number of people and organizations are using blockchain-based technology solutions to establish unique digital identities. The key features of this technology include the following:

Decentralization

In contrast to the centralized model, the blockchain does not require the participation of any third parties. Data in blockchain networks are secured through agreement calculations.

Integrity

Blockchain-based solutions feature constant data reconciliation, which helps to keep it, updated.

Privacy

Combining digital signatures with blockchain encryption provides an inherent level of anonymity.

Security

Blockchain secure design stores information in an encrypted, unalterable format.

Simplicity

Blockchain technology for identity management uses simplicity, leading to increased clarity and conciseness of procedures for all parties and participants involved.

Trustworthy

Blockchain network employs consensus processes to check the integrity and validity of data through trustworthy nodes.

With these features, users can keep track of important documents, including medical histories, school transcripts, and voter registration cards, in a secure digital wallet stored on their devices. Organizations can issue verified digital certificates, identities, and licenses to their customers to deter identity theft and protect financial transactions.

Benefits of Blockchain-Based Digital Identity Solutions

The advantages of blockchain-based digital identity solutions are apparent, particularly in how they modify traditional identity management and addresses existing identity concerns. Below are some of the benefits of using blockchain digital identity solutions.

Paper-Less Identification

Many businesses still rely on paper documents and require in-person signatures. Although this serves as an aspect of the Know Your Client (KYC) procedure, it is not very practical in today’s highly competitive business world. Blockchain and digital signatures work together to make paperless documentation safer and more convenient.

Improved Authentication of Personal Information

Identity verification systems may be subject to the weight of complexities because of the existence of numerous divisions and preceding manual procedures. Identity management systems powered by blockchain technology offer a means around these obstacles.

Management of User Identities on IoT Systems

Identity management for IoT devices powered by blockchain gives users the peace of mind that comes with knowing they have complete authority over the data gathered by those devices. Blockchain-based identity management systems for IoT devices can stop hackers from accessing private data as it traverses between gadgets.

Identity as Sovereignty of One’s Self (SSI)

The Cambridge Analytica data scandal exposed the extent to which tech giants like Facebook and Google govern and control their users’ online identities. And the potential risks associated with this. Identity management on the blockchain is complex. Internet users are often left to fend for themselves in the face of security threats due to the employment of antiquated tools.

Non-Custodial Login Solutions

Custodial login solutions are the centralized servers your firm or a third-party service provider keeps to protect your credentials. It’s possible to hack these just like any other centralized system. Rather than relying on centralized servers for identification, blockchain-based services involve the use of both public and personal keychains as decentralized identifiers.

Challenges and Limitations of Blockchain-Based Digital Identity Solutions

Decentralization, data security, integrity, and persistence are the defining qualities of Blockchain technology. The features are appealing, but technological advances need some time to develop and stabilize before they can be considered complete. Digital identity management solutions based on blockchain technology offer many benefits. However, like any other technical advancement, it is also subject to obstacles and limitations.

Usability Challenges

Developing user-friendly program modules while still protecting user privacy is a difficult task to accomplish. Implementations such as Smart Contracts are progressively using Blockchain technology. This is due to its ability to simplify trade and commerce across anonymous and identifiable participants without jeopardizing the validity or legitimacy of the transactions.

Nevertheless, blockchain technology is highly complex, and several parties are involved in each implementation. Although developers concentrate on creating programs that are easy to use, compromising user standards might be possible.

Inability to Scale up Effectively

The structural scalability of the network is one of the most significant challenges that blockchain technology faces, and it can make the adoption process more difficult.

Inadequate Standardization Leads to Reduced Levels of Connectedness

Blockchain technology has no set standard to make it possible for different networks to communicate with each other, which might cause the disorder. The lack of standardization across blockchain protocols may also result in a lack of consistency in essential activities such as security, making widespread deployment extremely difficult.

Integration with Existing Hardware and Software

The problem that corporations have is figuring out how to incorporate blockchain technology into their existing systems. If an organization wants to use blockchain, it will usually need to entirely reorganize its current system or devise a mechanism to merge the two technologies.

One of the issues is that firms do not have exposure to the essential pool of blockchain expertise required to participate in this approach because there is a shortage of skilled experts.

Wrapping Up

Identity is a critical and mandatory element for ensuring a society’s functionalities and economy. With an appropriate method for self-identification and asset ownership, digital identity could improve growth in organizations and global markets. Blockchain identity-based technology resolves conventional digital identity issues such as inaccessibility and data security. Although it has a few constraints, blockchain technology also helps fight against the problem of fraudulent identities and makes digital browsing safer.