For any business or social transaction between people, the most critical component is trust. This trust is channeled across business systems in the form of a Digital Identity. This digital identity is the key enabler for billions of users to transact in the digital world. These people are at the center of every business or public service and any lapse in identifying the correct stakeholder for a transaction can prove to be costly. This is why financial institutions and government organizations across the world stress on KYC (Know Your Customer) requirements to ascertain the identity of people they interact with.
Management of digital identity has always been a concern area for enterprises and government bodies. Identity fraud cost around USD 16 billion in 2016 which is 1 Billion more than the 2015 figure of USD 15 billion. Traditional identity management systems are expensive, disjointed and offered considerable hindrance to innovations that enterprises experiment from time to time to improve customer experiences. Customers are forced to supply personal data repeatedly at multiple business and government entities and they have limited control over the utilization of this data. There is a rising demand for using a technology that supports transparent identity management. Blockchain is the forerunner today in terms of competitors for the honors.
Blockchain technology offers a model of distributed trust to manage digital identity. It enables consumers to have absolute control over their identity and transparently delegate consent to institutions that request information access. No single entity can cause an identity fraud in a blockchain centric identity management system.
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By using blockchain technology, we can achieve Self-sovereign identity. Self-sovereign identity is the concept of storing identity data on personal devices and offering permission controlled access efficiently to agents that request identity validation for any service. It eliminates the need for a centralized data repository for storing identity information.
Let us look at how the concept of identity management in Blockchain (IIB) works
The user submits required details like their personal details, any supporting documents and legal collateral, attestations, proof of authenticity or any relevant information. This information would then be subjected to algorithmic processing to generate a unique identification number that is cryptographically hashed to ensure protection from unauthorized access. Once the number is generated, the information submitted initially would be erased from the system and only the hashed and signed identification number would be recorded on the blockchain. The user gets the number on their personal device for any future use. They have options to create a password-protected access for the number on their device. The users can self-certify their identity or use any other third party applications to validate any request.
The applications which require the identity of a user can make a request for the same on blockchain based identity management systems. The blockchain based systems would be devised to easily integrate with such identity requesting applications. The user will submit the identity upon request from the blockchain system. Both parties have to agree to share the data as well as they have to confirm their identity. Thus the decentralized system can be utilized to manage identity. Thus we can achieve self-sovereign using Blockchain technology.
This method has advantages for Consumers, Enterprises as well as Regulatory and Government bodies.
The next generation of business and citizen information management systems will rely on blockchain-based applications for transactions in future.
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