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Decentralizing digital identities with blockchain technology

By Megha
Published on March 15, 2022

Every time we access the internet, we unknowingly leave a data trail that contributes to our digital footprint. Besides regular users, organizations have digital footprints made up of company data and employee activity. The rising number of cyberattacks has shown us how this information can be exposed or exploited.

What is a digital identity?

A digital identity is created by an individual’s actions on the web. Data points that constitute digital identities typically include usernames, passwords, date of birth, driver’s license numbers, and behavioral patterns like buying history and browsing history.

However, users don’t have ownership over their digital identities saved on social media tools and other communicative tools. Instead, these identities are tracked and leveraged by organizations. Imagine the sheer number of data points related to our personal, professional, and financial information we are leaving behind every time we're on the web. Unfortunately, this data is scrutinized and accordingly used for advertisement purposes and also for forecasting our future behaviors.

What are decentralized identities?

Decentralization of identities is the ability to shift control of user identities from a centralized authority to a distributed network where the final authority is the user, that is, each user has the power to control who gets access to their data.

What is blockchain’s role in identity management?

Blockchain technology provides users with the means to control how their data is stored and shared. Blockchain represents a digital ledger that holds every user activity along with the time stamp with cryptographic protection. A decentralized identifier (DID) is a unique identifier controlled by a private key for verifying digital identities for a person or organization and is independent of identity providers.

The private key owner can have many DIDs linked to different activities that are completely segregated. Thus, blockchain serves as the foundation of a decentralized identity management system, addressing the shortcomings of native identity management systems that lack proper data storage, data sharing, and access control practices.

Benefits of blockchain in IAM

Traditional IAM systems are a challenge for large organizations because as data trails grow, so does vulnerability to scams. Blockchain technology is suitable to facilitate secure data transfer, tracing the path of information and ensuring interoperability across data repositories.

With digital identities linked to each individual, organizations can increase dexterity while boosting security in collaboration. Since the personal data of the individual is encrypted and stored in the user’s device instead of a common database, it can prevent forgery and theft by entities other than the user. As blockchain records cannot be interfered with, they don't face the same privacy and surveillance concerns that a centralized database does. It is essential for organizations to understand that balancing convenient access to information with stringent security measures requires a dynamic role that blockchain can fill.

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