Blockchain & Identity

Edson Souza | January 18, 2023

The Web 3.0 Revolution 

Blockchain is a technology designed for the exchange of value or goods without the need for a trusted intermediary, providing all the parties that make up the network with a copy of the record of the transaction or exchange that is carried out, to be distributed among all the members. Any change, manipulation or deletion of these transactions also implies the conviction of the majority of the participants to validate this alteration, and a computing power of such magnitude that to date has not been achieved. 

 

How Is Blockchain Related to Identity? 

The identity of an individual has a fairly close relationship with the government agencies. These agencies frequently confirm vital facts about a person in order to deliver services, and when in doubt, validate the legality/authenticity of this data. 

Who certifies my nationality? Who certifies the ownership of my real estate? Who certifies my marital status? Among many other things, the state is in charge of validating this information. 

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Visual Communication Design and Wireless Data Transmission Technology for Blockchain Big Data Information - Guan-Chen Liu / Chih-Hsiang Ko 

 

Blockchain offers important features that allow adding information security and guaranteeing the integrity of this data. Among these, some features/concepts related to cryptography are: 

 

Public Key Cryptography 

Public key encryption uses a mathematically related key pair, in which a message is encrypted with the first key and must be decrypted with the second, or vice versa. 

This process guarantees simplicity in its use due to the following characteristics: 

  • Only 2 keys are required per participant. 
  • The cryptographic secret is more easily maintained by having a private key. 
  • The public key can be shared with everyone and serves as the basis for communication. 

To guarantee the complete validation of public keys and guarantee the integrity of these security mechanisms, there is complementarity with certificates and digital signatures. 

 

Digital Signature 

A digital signature establishes the validation of the following characteristics: 

  • Integrity: Was the message or document modified after it was signed? 
  • Identity: Was the message or document signed by the person who said they signed it? 

 

Decentralized Identifier (DID) 

Decentralized identifiers enter as a verifiable cryptographic alternative that does not need a centralized authority. These identifiers can be used by people, organizations, and devices (IoT) among others, and allow the users control and power to generate a verifiable unique identifier through cryptographic evidence such as a digital signature. 

DID also guarantees the secure exchange of information by storing it in a private wallet. For example, certificates issued by the government, educational documents, tax documents, or personal information are managed by each individual.  

DID also presents the advantage of sharing parts of your identity with various services, restricting the information shared only to what the user wishes to share, all from a decentralized framework where the entities requesting information can corroborate it through a blockchain. 

Blockchain takes these characteristics of cryptography to guarantee the integrity of the data, the people involved in its issuance/validation, and verifies that this data has not been altered since its creation. All within the context of the identity. In this article, we concentrate on the current use of blockchain in identity management: 

 

Notary 

There are experimental examples of this trend in Argentina, where the government of Bahía Blanca uses this process for the certification of subsidies within the municipality. The same occurs with the Argentine National Government which uses the Bitcoin network as a notary service digital.  

 

Document Digitalization 

Regarding the digitization of official state documents, the Government of Singapore created a wallet that allows having a digital identity where this type of document is in the possession of citizens under a common standard represented by their digital wallet.  

 

Tokenization 

This train has been amplified over the last 2 years with the purchase and sale of NFTs. The recording of metadata on a blockchain guarantees that the piece cannot be duplicated. 

Estonia, Singapore, Canada, and the United States are experimenting with digital identity in property titles based on blockchain. Where the process of transferring these assets can be reduced to a simple transaction visible to all business actors; reducing associated bureaucratic processes, and interoperability problems between government agencies. 

 

Web 3.0: towards a Decentralized Identity 

Web 2.0 brought with it new technologies to establish a more open relationship with citizens, forcing governments to carry out and develop online services. Changing the mentality of government portals and driving a 2-way communication with citizens. 

 

Allende López, Marcos (Sep. 2020) 

However, despite this transformation, the citizens are still a passive beneficiary of the government's digitization process, and it must once again adapt to the requirements, norms, and rules imposed by the public institution. 

Identity refers to the set of characteristics of an individual that differentiates them from peers. The government grants these credentials, centralizes the identity of an individual within its bureaucratic apparatus, and this is where blockchain can make an impact by allowing individuals to assume control of their identity. 

The decentralized identity has emerged and gained strength largely due to 2 recent crises: , the refugee crisis in Europe and the COVID-19 pandemic. The first, leading to the realization that many people lacked a recognizable identity, and the second, that verifying their identities during a period of turmoil is usually impossible. 

 

Decentralized identity can have at least 2 main uses: 

Verifiable Credentials 

They combine the security of cryptography and privacy preservation techniques, being able to atomize the components of identity to show only the data required for its validation without exposing other data. However, it is important to identify that these credentials cannot be transferred since their value lies in their immutability. 

 

La era de la Auto-Identidad Soberana - https://www.chakray.com 

Tokenization 

Citizens that have verifiable credentials in hand can use these to carry tokens. NFT tokens can be an ideal use case applied to documents that can represent property. These tokens could be transferable, so a house title or the ownership of a vehicle embodied in a token can be transferred with the security that blockchain provides. 

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Tokenization - https://academy.bit2me.com 

 

Blockchain offers multiple possibilities towards a web 3.0 and the trend of decentralization of an identity in which the citizen can be the owner of their data and manage their idenity in a sovereign manner. 

 

About Encora 

Fast-growing tech companies partner with Encora to outsource product development and drive growth. Contact us to learn more about our software engineering capabilities. 

 

References 

  • Jolías, Lucas ; Cepeda, Jesús ; Castro, Ana (2022) Identidad Digital Descentralizada, Una guía de implementación de blockchain en Gobierno. 
  • Jolías, Lucas (2019): Four Lessons Learned from Building Blockchain Applications for Social Impact - https://www. engineeringforchange.org/news/four-lessons-blockchain-socialimpact/ 
  • Nakamoto, Satoshi (2008): Bitcoin: A Peer-to-Peer Electronic Cash System, mimeo. 
  • World Economic Forum (2017): Realizing the Potential of Blockchain. A Multistakeholder Approach to the Stewardship of Blockchain and Cryptocurrencies. 
  • https://www.chakray.com 

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