Integrating blockchain-based digital IDs into daily life

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The past 13 years have seen blockchain technology evolve into many use cases — finance, data, logistics, and security, among others. However, the idea of ​​using immutable blockchain capabilities to identify humans took on new life when Changpeng “CZ” Zhao visited the island nation of Palau to start his digital residency program.

The blockchain identity management market is estimated to grow by $3.58 billion in the five-year period from 2021 to 2025. Key factors include the growing demand for digitalization and privacy-respecting identity solutions. As a result, a myriad of solutions have penetrated the market serving this need in the form of non-perishable tokens (NFT), distributed ledger technology (DLT) and naked blockchain technology.

Given the large number of use cases that blockchain can serve on a daily basis, many government organizations are beginning to experiment with the technology – severely impacting Central Bank Digital Currencies (CBDC) and user identity that can be verified and immutable.

Traditional identifier problems
Correctly identifying – or identifying – an individual has always been critical for governments to ensure targeted delivery of services and allowances, among other requirements, and it is true to this day. However, continuous advances in technology have made it possible for the general public to use tools to create identifiers that are visually identical to the original. Given the ability of the blockchain to store immutable records, authorities see the technology as an opportunity to combat fraud related to identity theft and forgery.

Traditional paper IDs come with the difficulty of confirming their legitimacy across different systems. History has shown how people have successfully used fake ID cards to claim unauthorized access to a myriad of benefits. However, technological advancements such as blockchain have given authorities the opportunity to issue verifiable certificates and identifiers while ensuring the scalability, speed and security of the identity management system.

Efforts on this front have seen the emergence of a new ecosystem of several blockchain-based digital identity offerings. For example, Shubham Gupta, an Indian Administrative Services (IAS) officer, recently spearheaded the launch of a Polygon-based system to issue verifiable caste certificates on behalf of the Maharashtra government.

Speaking to Cointelegraph, he said, “If identity management systems had to be ranked on a scale of 0 to 1 based on decentralization and individual control, then traditional centralized identity systems would be on the far left and entirely self-hosted, and based on the public blockchain. Identifiers on the far right. “.

Blockchain-based digital identifiers
While blockchain technology can be used as is to maintain immutable records online, innovations over the past decade have given birth to sub-ecosystems around the use of blockchain technology.

“The idea of ​​blockchain-based digital IDs has been around for a long time but it came into the spotlight with the recent NFT boom,” Brenda Gentry, a blockchain consultant and CEO of Bundlesbets.com, told Cointelegraph.

Italian electronic identity document.
While NFTs were first marketed as a tool for representing real-world objects including intellectual and physical assets, the technology has found itself well-suited to a variety of applications. Recently, government organizations have begun testing NFTs for the identity of citizens as a way to reduce operational costs.

“Large-scale implementation of blockchain-based digital identifiers – such as the issuance of national identity cards such as passports and driver’s licenses – takes time, but I strongly believe that this is where the world must go,” Gentry added. In addition to helping authenticate people, blockchain technology discourages attempts at fraud, manipulation, or identity theft.

Citing the participation of luxury brands and artists who have promoted the use of NFTs to certify the legitimacy and ownership of a product or art, Gentry opined that “their authenticity can be checked on the chain which completely eliminates the chance of owning a counterfeit product.”

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