Blockchain technology has benefited several industries and sectors. Properties like transparency, security, and immutable nature, add a lot of value to businesses. Current business can completely transform with the introduction and adoption of blockchain-based identity management. We know that the existing identity management systems are not reliable. They are prone to data breaches and leaks. So, in this article, we will explore how blockchain-based identity management can provide us a highly secure system. This is going to be a complete guide on blockchain-based identity and management. 

What is Identity management?

The administrative process to generate and maintain user accounts for identification and authentication in an online service is called identity management. Identity management is important to ensure rightful users have the access to the online service. Commonly life cycle of an Identity management system comprises of four phases:

• Enrollment
• Authentication
• Issuance
• Verification

Typically there are two types of identities: 

1. Central identity – This entity is the central service provider who holds the central power. This identity is responsible for accepting the user credentials/data and validating them to store. The stored and validated credentials can be used to access online services on a digital platform. Another approach is a DLT based one, where the User identity is validated through information stored in the DLT layer.
2. Federal Identity – This service provider is responsible to separate the enrollment entity and other entities which rely on authentication to verify the digital identity. They are responsible to maintain the user data and play the main role for various online service providers. 
3. Self-Sovereign Identity – This is a type of identity where the user has the ownership to control their data. This idea promotes transparency and trust among the users interested in that online service. Still, to control the network there are certain rules that the users have to abide by. These are “need-to-know” and “need-to-retain”, where the user can control the information without the need of a middle-men to avoid data theft or potential misuse of sensitive user data.

Basics of Blockchain 

The concept of blockchain was first introduced as the peer-to-peer network, which provides transparency related to all the transactions done on the network. Blockchain is preferred because of its immutable nature and consensus to eliminate the role of a central authority to look over all the transactions. Data being the most valuable asset, users can leverage special features of blockchain-like anonymity, decentralization, and transparency. 

The need for cryptography in the identity management system

Public key infrastructure is essential for public key management. PKI is required to correctly map the keys between users and their public keys. We can follow two different approaches for authentication under the public key infrastructure(PKI) :

1. Centralized approach – The central authority controls the digital certificates and holds the power to issue, revoke or hold the certificate at any time to maintain a secure authentication.
2. Decentralized approach – Users can designate other trustworthy nodes to verify and issue these certificates. This approach is completely based on trust among the users in the decentralized network. This trust mechanism is referred to as Web of Trust(WOT). Further verification of the person can be done with the provided certificate with the individual’s signature.  

The bi-directional method of verification of these data is more secure and can completely eliminate many Sybil nodes. Blockchain-based authentication provides more privacy and security by integrating cryptographic functions such as encryption, attribute signature, and authentication code.

How does the blockchain identity management system work? 

To resolve digital identity problems, the ten commandments of self-governed identity can be accomplished by leveraging the blockchain. The consensus mechanism satisfies the need for checked reported attributes to be trustworthy. The persistence of statements can be achieved because blockchain is a tamper-resistant ledger. The SSI approach is user-centric, requiring the user to have complete control over their own data. The chain structure that provides a chain per identity, such as the Trust chain or The Tangle, provides complete control. This type of chain structure may also determine the presence of a concept that allows users to give up their right to be forgotten. Claim Blocks keep personal information private and claim authentication guarantees data security and minimization. The blocks can be shared with other platforms, allowing for interoperability and portability.

Personal data security solutions and regulations are being developed and are already in place. The exchange of information between communication agents is ambiguous, making it difficult to keep track of what data is shared versus what access is actually granted. The degree of linkability of personal data affects identity anonymity [18].To address personal data privacy concerns, it is critical to provide selective disclosure of PII and track PII. PII is defined as a subset of information sufficient to identify the identity holder within a set of subjects such as a driver’s license, address, passport, name, date of birth, and so on.

 “PPII is the subset of all complete identity attributes, where complete identity is the union of all attribute values such as bank name, part of the email, religion, partial name, and so on.”

Because the digital identity is segmented into different contexts based on personal information, such as PII, potential PII, and non-PII. In various settings, the activation of identity properties for identification and user authentication is dominated by the situation and role.

Many businesses have created their own proprietary authentication mechanism based on the OAuth protocol. Standard body regulations are currently used for data privacy and management all over the world.

The European Union is enforcing GDPR to protect consumers by restoring control of their identity data to identity holders. In recognition of the need for an individual to manage and control his or her own data, GDPR-compliant digital rights are combined with the SSI principle of user-centric identity. It covers the following topics: access, consent, data minimization, portability, and existence (right to be forgotten).

Benefits of using blockchain identity management 

There are four main benefits of using blockchain for identity management : 

1. Unique Identity – Each user that joins the network and registers on the blockchain will get a unique ID number. This unique user ID is personal and unique to each user, and it contains personal information against the user which is stored in an encrypted format. Users just need to share their unique user IDs to authenticate themselves with a third party on the blockchain ID management.
2. Decentralized – Data stored on the blockchain identity management system is completely decentralized. Information is not present at one centralized server, which might be prone to data breaches or Sybil attacks. 
3. Consent – Blockchain-based identity management does not store user data in a centralized way. So, this system is less prone to data breaches or Sybil attacks. Blockchain ID management systems use smart contracts, to decide whether someone can access certain information or not. This way, it is impossible to manipulate data on a blockchain. It builds trust for the users on the network as their information is highly secure and hidden. There is no single point of failure as the system is decentralized. It means that the system would not shut down if one of the nodes in the blockchain undergoes any type of attack.
4. Blockchain ecosystem – Blockchain-based ecosystem can be accessed by anyone from any part of the world. There are no geographical boundaries or any need for the users to verify their identity.

Impact of using blockchain identity management on businesses 

We will discuss some of the ways that blockchain identity management has had a major impact on companies :

1. User-optimized – Blockchain identity management system is very low cost and time-efficient. Both, the users and business owners incur low-cost identity verification.
2. Transparent – Transactions made on a public blockchain are recorded using a distributed ledger. Anyone can connect to the network to trace the transaction details.
3. Decentralized – Instead of storing all the information at one central server, information can be stored in a decentralized way. This reduces the chances of data loss and single points of failure.
4. Ecosystem – Users are allowed to ask the organization to verify its identity across borders.
5. Privacy – It ensures the privacy of all the transactions carried out on a blockchain network. Details of these transactions are hidden, and users are allowed to make transactions anonymously.

Use-cases of blockchain identity management

We will discuss three of the most popular use cases of blockchain identity management :

1. Lending or borrowing money(Loan) – We are aware of how an individual has to go through a complex process of filing for a loan and getting it sanctioned. We need to submit multiple identity proofs and legal documents. These documents take weeks to get verified. There’s always a risk that someone might try to commit fraud by using fake documents. In such cases, blockchain identity management systems can help in organizing and storing legal documents. These documents are verified before they are stored on the blockchain. So this drastically removes the need to go through the verification process. 

2. Travel and Immigration: As we discussed in the previous example, an individual might spend a lot of time getting the documents verified. If this process is related to travel and immigration then background checks and ID verifications can be easily done using blockchain. We can store the user data on the blockchain identity management system for a seamless verification process for travelers. It will make the process more streamlined for both travelers and authorities. 

3. Legal – When someone undergoes the legal process, then they may be asked to submit their identity proofs such as Proof of age, address proof, or proof of occupation. With blockchain identity management systems, people won’t need to carry these documents everywhere during a legal proceeding. Government and legal bodies can create a decentralized data storage solution where this information is stored. This information can be accessed whenever there is a need. Thus, comprehensive background checks and ID proofs would not be required.