Blockchain Identity: The Promise and Complexity
If digital identity management is all about appropriately understanding, empowering and connecting individuals, blockchain may bring its greatest future breakthrough. Today’s digital identity methods simply can’t keep pace with the growth of digital commerce, resulting in steady growth of fraud and related issues. New commerce, payment, financial and health management systems are significantly limited by a lack of certainty over the identity and preferences of all parties involved–certainly identity-holders and all other parties as well. Even when the authenticity of an identity is not a concern, everyone suffers from today’s pervasive unintentional inaccuracies–such as the widespread disparity in credit reporting information. identity-holders have never had less control over their PII (personally identifiable information), and big data and the Internet of Things are sure to exacerbate the loss of control.
Blockchain can bring a digital commerce and services breakthrough by once again giving individuals an appropriate awareness and voice. Just as a touch to one’s abdomen immediately heightens awareness, individuals sharing blockchain-based identity ledger updates could choose when and how significant ‘touches’ to their identity records result in a similar personal reaction. The real-time and immutability of blockchain can also re-balance identity-record power, while promising substantive rewards for commercial or other entities who make this new order possible. Individuals who seek an improved (and consistent) credit rating will do more than just game the system by tracking how desirable behavior populates all aspects of the shared ledger, they’ll also pinpoint inaccuracies that also represent sub-part commercial decision-making. Service companies, merchants, banks and processors will no longer struggle to quickly approve or deny transaction requests (often with over-reliance on risk-based scoring methods), because today’s systems will be replaced with immutable identity-holder input related to relationships, location, authorized preferences, and more. Blockchain-based identity records can enable individuals to have immediate awareness –or intervention–when others attempt to change the status of their ID record. Goodbye fraud, hello control, and its time to talk about important new services to make this latest deluge of new information somehow manageable.
The shift to blockchain-based identity will be anything but easy, and the amount of upfront effort could be compared to that of building an all new mass transit system. Certainly much technology will be involved; from software, hardware and firmware; to multiple methods of identification, authentication, permissioning, and federated interaction. As we’re learning with the shift to chip-based payment cards in the U.S., entrenched systems can be the most difficult to upgrade. To make blockchain identity pervasive and efficient, new processes and rules may prove to be the most daunting need of all, to ensure that the new system doesn’t bog down before the rails are even laid. Individuals will need a simple way to appropriately update their identity records, which in turn will require significantly new or redefined rules for service providers such as banks, healthcare or telco firms. Transaction costs will eventually plummet or shift as unauthorized or otherwise undesirable activity and waste is squeezed from the system. Meanwhile, new business opportunities will be created from giving individuals access to individualized services like never before.