Decentralized Identity 101: What It Is and Why It Matters

Guest Author: Vinny Lingham, CEO, Civic Technologies

Bitcoin. Blockchain. Crypto. Decentralization. Tokens. A lot of buzzwords have emerged alongside the rise of blockchain technology. Yet, there is often a lack of context about what those terms actually mean and the impact they will have.

Decentralized identity re-envisions the way people share access, control, and share their personal information. It gives people power back over their identity.

Current identity challenges all tie back to the way we collect and store data. The world has evolved from floppy disks to the Cloud, but now, every single time that data is collected, processed, or stored, security and privacy concerns emerge. With the rise of the digital economy, consumers have unintentionally turned banks, governments, and stores into identity management organizations, responsible for the storage and protection of an unprecedented amount of personal data. Unfortunately, as recent hacks have shown, not all of them were ready to deal with this new role.

Decentralized identity puts that power and responsibility back in the hands of the individual, giving them the ability to control and protection their own personal information. This concept is made possible by the decentralized nature of blockchain and the trust created by consensus algorithms.

How Blockchain Creates Trust

The most prominent blockchain application to date is Bitcoin, a technology that emerged following the U.S. financial crisis of 2008 when trust in institutions was at an all-time low. Blockchain technology, specifically the public blockchain, has several unique characteristics that solve problems of trust and make it a great fit for identity solutions.

First, blockchain is immutable, or unchangeable. Blockchain transactions are processed by a network. Computers work together to confirm a transaction, and every computer in the network must eventually confirm every transaction in the chain. These transactions are processed in blocks, and each block is linked to the preceding block. This structure makes it reasonably impossible to go back and alter a transaction. Additionally, blockchain is transparent. Every computer in the network has a record of every transaction that occurred.

Decentralization is the essence of blockchain: no one party control the data, so there is no single point of failure or someone who can override a transaction. Second, it is reasonably impossible to alter blockchain transactions. And this is how blockchain builds trust: when data cannot be modified and is independently verifiable, it can be trusted.

How Blockchain Helps Decentralized Identity

Currently, there is a presumption that knowledge of information is identity. If a person knows a social security number or password, they are presumed to be the person who that information represents. And if a person knows your personal information, they can impersonate you.

Using blockchain technology to decentralize identity is about digital validation and keys. For example, a digital wallet with cryptographic keys that cannot be recreated. You must have physical access to a device to validate identity. With a decentralized identity system, a remote hacker might have access to pieces of personal information but being able to prove an actual identity would require physical possession of that person’s device. Decentralized identity is literally putting the power back in the hands of the people.

Why It Matters

In 2017, Equifax became one of the worst data breaches in corporate history, exposing personal information of over 147 million people, including Social Security numbers, dates of birth, home addresses, driver’s license numbers, and credit card numbers.

In 2018, the Cambridge Analytica scandal about user data misuse has continued to unfold, as the F.B.I and Justice Department are investigating Facebook for failing to safeguard 87 million user profiles.

Equifax and Cambridge Analytica are two prime examples of how current systems for sharing and storing personal information have proven to be not as safe, secure, or trustworthy as previously thought.

And everyone feels this impact.

Governments are implementing more stringent laws and regulations for consumer protection. In May, the General Data Protection Regulation (GDPR), a standard for data collection and storage, went into effect. In July, California passed the California Consumer Protection Act enacting similar standards. And this is probably the first in a wave of consumer protection and privacy policies that will come to life.

Consumers are concerned as well. In a recent Deloitte study, 81 percent of U.S. respondents feel they have lost control over the way their personal data are collected and used. 

The ability to prove you are who you say you are is critical to engaging with the world and being a part of the economy. Decentralized identity gives that control back to people. 

Get to know more about Blockchain and listen to my Keynote "Practical Examples of Decentralized ID's in the Real World" at the Consumer Identity World USA in Seattle in September.

For a deep dive into the Blockchain topic please find the following blog posts:


Consumer Identity World USA 2018

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Consumer Identity World USA 2018

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