In everyday life, we often have to identify ourselves in order to gain access to various activities, services or products.
A complete lack of identity identification will make it difficult for governments to enforce laws. In addition, it can lead to a significant increase in criminal activity. This also applies to digital services.
One of the areas in which blockchain can become an extremely promising and convenient solution is the digital identification of users. In the era of digital society, in some cases, the mandatory entry of their personal data and their storage on a PC, the presence of hacker attacks pose a serious threat to the confidentiality of users' personal data and their theft.
Even on the other hand, thanks to the development of different platforms, the presence of plagiarism and theft of other people's creativity shows that the data is not protected.
Centralized data processing networks face such a threat. And it is the blockchain, with its decentralized system, that can solve the problem.
What is a digital identifier?
A digital identifier is information used by computer systems and network services to identify a person, organization, or application.
Blockchain and Digital Identification
In fact, the blockchain is a database that contains information about all transactions carried out by the participants of the system. In each block of this handguard, information about everything is stored. This technology is an unbreakable digital record of actions. The reliability of this system made it possible to use it to improve the efficiency of monetary transactions and the exchange of information among individuals, corporations and even the public sector.
Blockchain has changed many areas, solving the most important problems that market participants have been facing for a long time. Traditional solutions are expensive and highly fragmented, they cannot provide security for market participants and universal access for residents of any country.
Blockchain completely changes the way digital identity data is managed. Their decentralized architecture gives individuals full control over their personal information with excellent privacy capabilities, and also makes authentication more convenient for users with significantly lower operating costs. Cyber attacks can be prevented and data privacy rules can be better enforced.
Therefore, blockchain-based digital identification systems have great potential.
Advantages:
Increased privacy
Users manage their decentralized identity data and control it. Individuals can control their personal data and distribute which data each web service can use and for what purposes. That’s why it makes the system much safer than others are.
Increased security
Since customer information is stored on the blockchain and not on servers, organizations can keep a limited amount of data with less sensitive records in their ecosystems. Therefore, it is very difficult for hackers to crack it, and even in the case of a successful attack, attackers can extract only a small part of the data.
Cost reduction
All companies and organizations are responsible for verifying the collected user data. Financial institutions are forced to manually check their customers for compliance with regulatory requirements and ensure their security by performing checks on their customers' knowledge (Know Your Customer, KYC) and anti-Money Laundering (AML).
This involves high costs and leads to a decrease in the quality of user service due to the slow procedure. Traditional systems still have a number of vulnerabilities that attackers can exploit using fake credentials. Digital identification protocols on the blockchain are much cheaper for organizations.
Companies and blockchain
Since the blockchain stores all data invariably, this technology can be indispensable for detecting counterfeit products and goods. Most often, luxury goods manufacturers, for example, fashion designers, suffer from such a problem. The consumer is also not always sure of the authenticity of the product.
Authentication of the product using blockchain protects both the brand and the buyer. This solution was used by LVMH (French concern Louis Vuitton), Microsoft and Consensys to create the Aurora platform that helps the luxury industry in monitoring and tracking goods.
LVMH Group uses blockchain technology in almost 60 of its brands and plans to expand the functionality of the blockchain by protecting intellectual property and preventing advertising fraud. Many other luxury brands followed suit, providing their products with proof of authenticity, which allowed them to be quickly identified. Thus, the sales sphere can promote and verify ethical production, while proving its sustainability.
However, the blockchain and decentralized system is not without its drawbacks, everything has pros and cons. Compared to a traditional centralized database, it has limited performance and requires much more memory to work properly. The inability to modify data, which on the one hand is a huge advantage of blockchain, can be a disadvantage in certain situations.
