How a Blockchain-Based Identity Will Underpin Everything

July 2018
In the beginning, Satoshi Nakamoto created bitcoin. The crypto-world was without form, and void of direction; and its users were shrouded in darkness. The founders of other blockchains moved into these muddy waters, and the community said, Let there be hype: and there was hype.

It may have taken a few years rather than six days but the development of blockchain technology has nevertheless been remarkable in its rapid rise and the opportunities it presents. Soon after its inception, there was a rush of development and hype around the technology, giving rise to hundreds of blockchains - many developed by people looking to leverage the distributed, decentralised nature to provide revolutionary new solutions. These ranged in application from the financial sector which was initially targeted to just about every other sector with innovation outpacing regulation and solutions being proposed that lacked an important ability - the ability to identify people, companies, devices and objects, without which many possibilities were not able to be implemented. After all, without an identity, it’s difficult to assign ownership or trade, and it’s not legal when it comes to regulations.

Partially as a result of this issue, into the midst of all this hype came a new concept; one that initially was not at all popular with the original cryptocurrency crowd: private blockchains. The idea for private blockchains was mainly driven by banks who wanted to gain the benefits of a distributed ledger solution whilst also maintaining a measure of control and compliance over the system by being able to allow or deny access their services. This would negate some of the benefits of blockchain technology but was much more attractive to existing companies who had the finances available to invest in R&D for blockchain solutions in their businesses. Although the idea of private blockchains was treated with contempt by many who had been excited for the open, global, nature of public blockchains, the pseudo-anonymity that they offered made them difficult to work with for regulated industries. Without being able to determine who was involved with their services, banks could not legally become a part of this new blockchain revolution and benefit from the huge advantages it offered. This split between public and private blockchains divided investment and focus, slowing down the rate of meaningful innovation that could have been achieved with a unified effort.

What would have been particularly useful at the time, and indeed is still much sought-after, is a secure, blockchain-based identity. If done properly, the identity would put the original crypto-enthusiasts’ privacy at its heart (thereby satisfying their wish for confidentiality) whilst also allowing businesses to place restrictions on those able to access their platforms, ensure their financing was from legitimate sources, provide relevant services, or otherwise comply with regulations. Whilst some would still be disappointed that the original anarchic blockchain ideal would be altered, in order to reach the general public and prevent illicit activity, being able to prove identity is necessary. A blockchain-compatible identity solution would also remove a large part of the argument for private blockchains, as access to platforms or services could be restricted, so public blockchains could once more be the focus for development and improvement.

Financial services, being the initial focus for distributed ledger technology, would be one area which would immediately benefit hugely from blockchain identities. Start-ups offering financial services of any kind become legally required to carry out KYC checks on those who fund or use their platforms - DApps could be gated using the blockchain ID eligibility. ICOs in particular are currently struggling to find suitable KYC options for their campaigns. However, the potential of identity reaches beyond this into every conceivable industry that would be involved with blockchain technology.

One example of the necessity of blockchain identity could be in the gambling industry, where only identities of a certain age would be allowed access to blockchain-based gambling platforms. Another example could be in healthcare where a patient’s records would need to be tied to their identity, or education where certificates would require the same. These examples are just a few applications of where a human identity would be required, but identity also stretches to non-human elements that may be involved in the blockchain ecosystem such as companies, devices and objects. An application of this could be in supply chains - where objects (e.g. books, fish or houses) or devices (such as sensors or remote controls) could be assigned ownership to a human or company and then traded, have ownership temporarily transferred, or otherwise interact. As the Internet of Things becomes a reality, this level of secure identity will become vital.

In order for a human blockchain identity to be suitable, it needs to have a number of features. Firstly, it needs to put the privacy and security of the user’s data first. One of the key factors that people will want to be assured of when making use of a transparent, immutable ledger is that their personal information is not going to be accessible to everyone else. Privacy drew the initial blockchain users and it remains a huge priority for the distributed ledger ecosystem. Secondly, the idea of self-sovereignty (linked to privacy), needs to be the goal of any blockchain identity solution. In order to get away from the current paradigm of companies owning, using and monetising their customers data, a method which gives the user total control over their data is the ideal that identity solutions can provide. Also important for an identity solution in the blockchain world is that it should be blockchain agnostic, and not tie itself to applications or the success of a single platform. With regards to the actual adoption of the solution, it’s important that the users do not have to pay to have their identity verified and that the merchants using the system find it more affordable than the current methods of regulatory compliance such as KYC and that it meets regulatory standards. When considering device, object and company identity, similar factors of privacy, security, compliance etc. exist.

When the aforementioned features come together in one place, blockchain companies - along with off-chain companies - will have the ability to anonymously verify users for a fraction of the cost, and in a fraction of the time, that it currently takes to do so currently. Mainstream, regulated blockchain solutions will be able to be offered as the legitimacy of users could be verified and therefore comply with regulations that many at the moment are not able to meet. To achieve the ideals of blockchain - and the connected Internet of Things applications that would follow, an identity verification solution needs to be available for everyone - or everything - in the network.

At Blockpass, this is exactly what we are working on providing: self-sovereign identity to enable privacy and security when verifying identity whilst also fitting regulation. Initially focussing on human identity in the blockchain space, the platform will be expanded in the suture to encompass all forms of identity for human, device, object, company etc. The second version of the Blockpass app is due to be released in the next week. You can find it in the App Store and on Google Play.