10 Impact of Blockchain on Digital Identity

IMPACT OF BLOCKCHAIN
TCS BaNCS Research Journal

ON DIGITAL IDENTITY
BUILDING TRUST IN THE CYBERWORLD

Background cyber world has gained paramount Union defines Digital Identity as
importance. In this digital age, “a digital representation of the
The fourth industrial revolution or when consumers are increasingly information known about a specific
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Industry 4.0 has the world gearing embracing the Internet to perform individual, group or organization”.
up for intelligent and autonomous online transactions—both for Digital identity consists of all of
systems driven by data and buying goods and services as well the individual’s personal data
Machine Learning. As technology for banking—and across multiple that is available online. It can be
becomes more intertwined with devices, the concept of “Digital all encompassing — not just an
cyber-physical systems, data Identity” comes to the forefront. The e-mail or physical address, but also
privacy and digital identity in the International Telecommunications pictures, bank account information,
 Impact of Blockchain on Digital Identity 11

TCS BaNCS Research Journal

DIGITAL IDENTITY
MANAGEMENT AIMS
TO STANDARDIZE AND
STREAMLINE CITIZEN
SERVICES PROVIDED
BY NATIONS. HENCE,
A STRONG DIGITAL
IDENTITY PLATFORM
CAN HELP DELIVER
MULTIPLE SERVICES,
Figure 1: Mounting Menace of Identity Theft
TOUCHING OUR LIVES IN
shopping preferences and also Across the world, many VARIOUS WAYS
physical identity information. This organizations and nations have rung
identity is not uniform, and can alarm bells on identity theft and
vary across platforms like banking are reiterating the importance of
systems, telecom and social media protecting “digital identity”.
platforms, including Facebook and
LinkedIn, among others. The objective of this paper is to
discuss the importance of digital
Digital identity is a convergence identity, as well as to explore how
of offline and online identities, blockchain can help protect this
where the latter refer to those sensitive information.
stored or used by computer systems
Why is Digital Identity important?
and embedded software (IoT). A
digital identity can be assigned A crucial aspect of online financial
to an individual, a legal entity or transactions, Digital Identity
companies and even assets. ensures accuracy while expediting

BLOCKCHAIN
SOLUTIONS ARE
INCREASINGLY BEING
EXPLORED, GIVEN
THEIR INHERENT
Providing Secured Enforcement Efficient Prevention
Citizen Payments of Border Workforce of Tax CHARACTERISTICS OF
Welfare for Goods & Control Management Evasion ENGENDERING TRUST
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Measures Services
AND TRANSPARENCY
Digital Identity AND USER CONTROL
ALL KEY FACTORS
FOR DIGITAL IDENTITY
Figure 2: Why Digital Identity Matters MANAGEMENT
12 Impact of Blockchain on Digital Identity

the customer on-boarding process Regulatory Angle to Identity Machine Learning and Robotic
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and preventing Anti Money Protection Process Automation, multiple

Laundering (AML) and fraudulent methods are being evaluated for
General Data Protection Regulation
activities. Digital identity digital identity protection.
(GDPR), an EU wide mandate that
Management aims to standardize
went operational on May 25, 2018, Effective though they are, when
and streamline citizen services
aims to strengthen protection applied on a Centralized Digital
provided by nations. Hence, a
measures impacting EU citizens’ Identity Management system,
strong digital identity platform
can help deliver multiple services, personal data and privacy, and lays these solutions prove costly and
touching our lives in various down rules covering aspects such as sometimes not as effective. One
ways as depicted in the graphic processing of and restricting the free of the main drawbacks of such
(Figure 2). movement of personal data. It also a centralized system is that the
addresses considerations related to control of data remains with one
An important area where digital export of personal data outside the entity. Tampering with and the loss
identity is being leveraged to truly EU. A whole set of data subject rights of data is easy, with identification
bring about social transformation including the “Right to be forgotten” taking time. Estimates peg
and economic upliftment of are in the gamut of this regulation. identification of data breaches
communities is in the delivery of Needless to say, any breach of data to seven months. And, this is
citizen welfare measures and some privacy will be treated severely with where blockchain solutions are
examples include: large penalties. Data authentication, increasingly being explored, given
encryption and pseudonymization are their inherent characteristics of
• The National Digital Identity
all part of its ramparts, thus reiterating engendering trust and transparency
(NDI) system, a part of the Smart
the importance of protection of and user control, all key factors
Nation initiative in Singapore,
Identity information. for digital identity management.
which when completed is
The 5 pillars of a blockchain based
expected to help citizens with Similarly in the USA, the California solution for digital identity are:
access to e-government services Consumer Privacy Act, A.B. 375
more securely. provides residents with equivalent • Trust - In blockchain-based
provisions for data privacy and systems, the metadata
• In India, more than 1 billion
identity protection. used for communications is
Indians today have an Aadhaar
maintained in the distributed
ID, a digital identity that is In South Africa, the Protection of ledger. The authenticity of
getting linked to all the social Personal Information Act (PoPI), covers the data is verified through
schemes and has transformed the data protection rights of subjects multiple nodes, through a
the way subsidies are being and puts forth conditions for its usage consensus mechanism. This
paid out to economically weaker once collected from customers. It decentralization is useful in the
sections of society. also impacts the technical, process context of Digital Identities,
• Smart cards were issued as early and operational aspects related to especially when National
as 2014 in Nigeria, enhancing access of personal data and identity Identifiers are used across
security and public services in information. multiple agencies.
the country.
Data privacy and the need for digital • Security – Blockchain
• Kenya followed suit with a identity protection is therefore technology has been designed
digital ID that has also reduced resonating with law makers in to maintain data in an
multiple continents. encrypted and immutable
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social crimes.
manner, and secured through
Digital Identity Management –
The responsible use of digital cryptography, thereby,
Leveraging the power of blockchain
identity is not only about keeping the ID protected and
authentication, but also its capture Starting from plain vanilla guidelines traceable. Moreover, blockchain
in a tamper-proof form that can be of security such as using a complex based systems removes the
securely transmitted and used by password to deploying cutting-edge vulnerability associated with
multiple systems on a need basis. technologies such as Biometrics, password protection.
 Impact of Blockchain on Digital Identity 13

• Integrity - The advantage of this identity – reduces time and privacy of citizen’s personal and

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kind of identity system over manual interventions. sensitive information. Blockchain
traditional ones is the ability to encryption combined with
maintain each identity across o Identity verifiers: Customer the digital signature ensures
all the nodes in the network. onboarding and data “Privacy by Design” through
Though the data is distributed verification is simpler and pseudonymization. Affixing
across peer-to-peer networks, cost effective. the digital signature to all
it is continuously reconciled transactions carried out by the
o Identity Owners: Blockchain
and kept up to date. Also, the user makes it foolproof as well.
moves away from centralized
blockchain network does not
data management, giving Permissioned blockchain systems
have a single point of failure,
users control over their where government organizations
making it difficult for hackers to
identity. It is also possible maintain digital identities
break the integrity of the data set.
for users to create their seamlessly are emerging as
• Simplicity - A blockchain own identity data for social the platform of choice across
framework simplifies the media/payment transactions. countries. A few real life examples
process for each stakeholder This is referred to as a “Self- of how blockchain technology
involved: Sovereign Digital Identity”. is being used for Digital Identity
Management are:
o Identity issuers: Automation • Privacy - Regulators across
of the issuance of digital the world are clamoring for • Since 2012, blockchain has
been used in Estonia to maintain
national data and services
both in the public and private
sector. Estonia maintains the
multi-purpose digital ID card
on blockchain and makes sure
Security Integrity Trust that every change in data is
immediately detected based on
Encrypted, Data is Decentralized, audit trails left by the “digital
Immutable and Continuously Kept Consensus driven defense dust” that covers it.
Secured through Reconciled across – Data Authenticity
Cryptography Peer-to-Peer Verified via • The city of Zug in Switzerland
Networks Multiple Nodes is exploring a self-sovereign
government issued identity on
Ethereum, enabling access to a
Protecting Digital Identity with Blockchain suite of e-government services
in a convenient and secure
manner. This eliminates the
need of a user id/password to
access government services.

• “ID2020” is a global alliance

Privacy Simplicity
across governments, public,
private and non-government
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Privacy by Reduces Time

Design and and Manual organizations to accelerate
Pseudonymization Interventions the process of assigning
digital identity to those
who are ‘invisible’ to the
society. To address this goal,
blockchain-based solutions and
Figure 3: Five Pillars of a Blockchain Based Digital Identity System interoperability across multiple
14 Impact of Blockchain on Digital Identity

geographies and the reuse/ benefits; nevertheless, like every • https://www.iii.org/fact-statistic/

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integration/connectivity for system it comes with its own pros facts-statistics-identity-theft-and-

existing frameworks is being and cons. One being the evolving cybercrime
worked out. nature of the technology itself, and
• https://e-estonia.com/solutions/e-
two, the lack of standardization of
• A digital identity network being data exchanges. Many institutions identity/id-card/
built on the Hyperledger fabric are invested in the technology and • https://id2020.org/
in Canada will facilitate citizens continuous efforts are on to make
to privately maintain their digital blockchain-based systems fool proof. • http://www.coincatalyst.com/
identity credentials, and to only using-blockchain-for-identity-
share information as needed to Leveraging the benefits of
management-five-compelling-
service providers based on the transparency and trust provided
examples/
access to the service that they by blockchain frameworks,
apply for. many organizations and nations
are joining hands to ensure
• BanQu is a proprietary platform interoperability across their borders.
that captures a “Self-Sovereign Siloed personal identity systems
digital identity”, allowing farmers are giving way to decentralized
to set up a unique digital profile digital identity systems that are
and then help them connect transcending borders. Therefore,
with peers, aid organizations, National Digital Identities are
governments, banks, and payment expected to lead to “Global
companies to help accumulate Identifiers” thereby helping
data from a variety of personal combat cyber terrorism and money
and financial transactions. The laundering.
objective is to connect needy
farmers with the global financial While it goes without saying
economy. This initiative has had that no mechanism can be
early success in Asia. completely foolproof and devoid of
vulnerabilities, continuous technical
The Road Ahead innovation and awareness can
significantly help in bringing down
Digital identity is associated with
the risk and help us move towards a
the socio-economic wellbeing V Anjana
safer world. Consultant
of citizens, and slowly becoming
TCS Financial Solutions (TCS BaNCS)
essential to them getting the right References
to vote, open a bank account,
and gain access to healthcare • https://www.forbes.com/sites/
and education. A World Economic forbestechcouncil/2018/07/27/
Forum published report in 2016 how-blockchain-can-solve-
titled “A Blueprint for Digital identity-management-
Identity”, outlining the need for problems/#a734f7f13f56
the creation of digital identity
• https://sovrin.org/wp-content/
systems and associated benefits for
uploads/Sovrin-Protocol-and-Token-
stakeholders, also reiterates why
White-Paper.pdf
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blockchain is best suited for digital

identity systems. • https://www.javelinstrategy.com/
coverage-area/2018-identity-fraud-
Having said this, it is also important
fraud-enters-new-era-complexity
to note that blockchain cannot be
viewed as the panacea for digital • https://www.comparitech.com/
Malini Raman
identity issues. It does provide identity-theft-protection/identity- Senior consultant and Product Head
the framework and accompanying theft-statistics/#gref Quartz Blockchain Solutions
 Impact of Blockchain on Digital Identity 15

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Tower Bridge London, UK