How to ensure greater control and security of digital identities through regulated blockchain

Posted by L3COS Jul 06, 2020

digital identity

From health records to online shopping, digital identities play an important role in various aspects of our lives. Having access to digital identities makes it easier to verify and authenticate an individual’s data during transactions.

However, this amount of information in different central databases and servers has led to problems such as data theft and fraud. These are problems that will likely continue in the future.

Fortunately, digital identities based on regulated blockchain have all the benefits and none of the problems that come with traditional digital identities. In this article, we’ll see how regulated blockchain can provide a platform for ideal digital identities.

Issues with traditional digital identities

Digital identities have many benefits, such as easier transactions, but are also lacking in many ways. Whether a digital identity is used for insurance records or making payments, the data is usually stored in centralized servers and databases. 

This means there’s a single point of failure and the data is compromised if the database is compromised. This puts users’ data at risk. 

Another issue is that entities in charge of centralized databases can mishandle data and companies can misuse it for illegal purposes. 

In 2014–2015, Cambridge Analytica had access to Facebook user data through the “This Is Your Digital Life” app that was connected to Facebook. This happened without users’ knowledge or permission. As a result, up to 87 million Facebook users had their private information stolen and misused for political purposes.

facebook analytics

Another issue with traditional digital identities is identity theft that’s allowed by hacked centralized databases. According to Forgerock, personally identifiable information is the most targeted data for breaches, accounting for 97% of all breaches in 2018. For instance, in 2017 hackers spent three months compromising the Equifax database, resulting in 143 million Americans, almost half of the population, who had their data stolen.

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So what’s the solution to these issues? 

How regulated blockchain can host digital identities

A regulated blockchain can eliminate all the privacy issues that currently plague the implementation of digital identities. Blockchain-based identity systems provide a platform to issue, exchange and securely verify digital identities.

With this system, an individual will have access to a decentralized identifier (DID), which is secured by a private key. Regulated blockchain’s consensus mechanism allows authorized agencies and government institutions to be the node of the blockchain network, which can confirm the authenticity of an individual’s data.

For example, L3COS has three consensus levels, one for each of government, business and society. This allows the right organization or institution to authenticate an individual’s data in applications such as health or banking services.

Once an individual’s data is authenticated, they get a public key that is used for transactions. Businesses, organizations, and the government will only have access to an individual’s public key, rather than their private data, which will be protected by their private key and available only to them.

The good thing is that individuals can have many DIDs, depending on where they want to use them. For instance, a user can have one identifier to access their health services and another one for online gaming.

Once an individual’s data goes into a block, it’s almost impossible to tamper with it, as it’s replicated in the next block. This ensures data security for information stored on the blockchain.

Another feature of blockchain that makes tampering difficult is decentralization. All parties in a blockchain can observe the changes that are made. If hackers were to try to tamper with an individual’s digital identity, relevant parties such as the government, businesses and the individual would immediately detect such attempts.

Use cases of blockchain-powered digital identities

Digital identities are already used in various aspects of people’s lives. As explained earlier, blockchain can improve digital identities for these applications.

What are some use cases of blockchain-powered digital identities? Here are six of them:

  1. Public transportation: It’s easy to track an individual’s behavior through their movements in the city they live in. A blockchain-based identity system will ensure individuals can have access to public transport through a public key while keeping their travel history private. 
  2. International travel: Through a public key, travel agencies and airlines can verify if an individual is fit to travel out of the country. Travelers’ privacy is better protected, as they won’t have to provide agencies/airlines with their travel history. 
  3. Access to public health services: A blockchain-powered public key can verify if an individual is qualified to access healthcare services. Does their insurance cover it? Are they paying themselves? They can be authenticated without revealing information that needs to be kept private. 
  4. Shopping: Shoppers can use their blockchain public keys to pay for shopping rather than enter their credit card details, which reveals more financial information. 
  5. Investing: A potential investor’s public key can verify whether they’re a reliable investor. This is more secure for investors than divulging their investing records. 
  6. Data monetization: An individual can decide to sell their data to organizations or projects they think are worthwhile. 

There are many more use cases of blockchain-based digital identities that individuals and society can exploit.

Conclusion

Digital identities have made transactions in various aspects of our lives easier. But with ease comes danger: many people have had their private data taken by organizations that are selling it to the highest bidder. 

Regulated blockchain-based digital identities are the solution to this problem. Individuals can make transactions and access services without revealing their private information. 

With features such as three consensus levels, smart contracts and more, L3COS can host digital identities that foster faster and more secure transactions for individuals, businesses and governments.

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