The Blockchain and Digital Identity Part 4

How Blockchain Could Change The Management of Identities and Passwords and Prevent Occupational Fraud.  Storage of identity information. Blockchain as a solution.


The current problem with identities is that their storage and use are extremely fragmented. This is the exact same problem that stands behind much of occupational fraud. Just like with occupational fraud where different parts of organization may not be aware about what is happening elsewhere, your identity documents are stored in different databases that may not communicate with each other. For example, the Social Security Administration has your Social Security records. The Department of Motor Vehicles has data about your driving license. Your employer has information about your employment. Currently, the disjoined structure of identity storage and management forces every organization to engage in protection of the information simply to know who the organization is dealing with. Accessing and storing multiple identities is problematic both from security and management standpoints.

As a practical example applicable to the everyday life, imagine having to use a different identity as you go through your day with every person or entity you interact with. You go to a coffee shop in the morning to grab a cup of coffee and you need to submit proof of identity A. To get into the building at work, you need to submit proof of identity B. To log into a website to read the news, you need proof of identity C. To drive a car, you need proof of identity D and none of these identities are connected with each other, meaning that you need a separate identity for all of these instances and getting such an identity is a long and complex process.

This is exactly what happens today. The identity checkpoints in the modern world function by asking you to provide “shared secret” information such as a password, keyword, PIN number, your fingerprints and so on, assuming that you and only you can provide this information and if you are indeed providing the information, then you are who you are claiming to be.

There are a number of issues with this approach. It is risky, complex, and unfriendly. Criminals keep finding new ways to break into electronic systems and gain access to the data. To get an identification document you often need to go through a long and complex process. Finally, people or systems at checkpoints often assume that you are not who you claim to be and you need to prove otherwise, which can cause negative emotions to appear on both sides.

At the same time, this is how things have been done in the society for many years and this is what most people are now used to. Prior to blockchain, nobody could figure out a way to easily recognize parties in case of a relationship that has existed for some time. The self-sovereign identity is exactly such a way of recognition. The concept of SSI does not only apply to people. It also applies to devices and can be an integral part of the Internet of Things (IoT).

The main difference between an SSI and a regular identification is that the SSI does not require a third party. It is a two-party relationship model. Just like when you transact in cryptocurrencies you don’t need a bank, when you prove your identity using the SSI model you do not need the government or any other third party, which is exactly what happens when you currently prove your identity by showing a document such as a passport or a driver’s license.

Just like a wallet on the Bitcoin blockchain contains information about your coins, a wallet on a SSI blockchain contain information about your digital credentials. Such a blockchain can either contain the credentials themselves or it can contain a signature that such credentials do exist.

For example, during the summer of 2017, 111 graduates of the Massachusetts Institute of Technology had an option to receive not just a paper diploma, but also a diploma on Blockcerts wallet, which is an application developed as a result of collaboration between MIT and Learning Machine, a company based in Cambridge, Massachusetts. After a person downloads the app, the app takes care of generating both private and public keys. Next, the app sends the public key to MIT. The school does not store diplomas on blockchain for privacy reasons. Instead, it creates a record about the creation of a digital record with a diploma. Finally, the school emails the diploma and encrypts the public key into it, so that students can prove ownership by matching the public key encrypted into the diploma with the private key that they have in the app on their phone.