The Future of Identity Management using Blockchain

Remember that episode from The Office where Jim pranks Dwight by dressing up as him and copying his mannerisms? Remember how Dwight retorts “Identity theft is not a joke, Jim! Millions of families suffer every year.” We viewers had possibly taken this dialogue in jest back then. The grim reality, however, is that identity theft is indeed an extremely serious concerns today.

According to available data, 16.7 million people fell victim to identity fraud in 2017 in the United States alone, and the total financial losses amounted to a staggering $16.8 billion! For the uninitiated, identity theft refers to the unauthorized use of someone’s personal information for any sort of illicit gain, usually monetary. It is carried out in different ways, ranging from large scale data breaches to personalized phishing attacks, to cruder means like theft of credit cards. The Equifax data hack is a good example of how improper data safeguarding procedures can lead to the theft of millions of users’ personal data.

Identity theft isn’t the only way our personal data can be compromised. The information that we provide to various social media websites
is basically free for them to distribute to whoever they want to. How many
times do we actually read the terms and conditions before granting wholesale permission to these apps? In the wrong hands, this user data can have far reaching consequences. The recent Facebook-Cambridge Analytica data scandal is claimed to have even influenced the US elections!

It’s not just identity theft, but even loss of personal identity data can have a severe impact on an individual’s life. Typically during times of war or strife, inhabitants of a city might be forced to flee leaving all important documents behind. The absence of any sort of tangible identity proof (such as passport or driving license) can compound the already existing problems in the lives of these refugees, as we have seen in the Syrian and Rohingya Muslim crises recently. In the north-eastern state of Assam in India, thousands of people are at risk of losing their citizenship today due to the absence of any verifiable citizenship document.

Blockchain technology is well known for its tamper-proof nature. Since there is no central repository from which hackers can steal data, information stored on the blockchain is safe from data breaches that centralized databases frequently suffer from. Moreover, all transactions that happen between the identity holders and the companies are recorded on the blockchain, ensuring complete transparency.

Decentralized digital ledger technology also allows people the flexibility to create encrypted digital identities, which can be easily accessed through mobile applications, and be used to verify identity as and when required. This is a much more secure way as compared to carrying around traditional identity documents in wallets and bags. It’s no surprise that blockchain is being used in various identity management and verification in a wide variety of applications today, ranging from humanitarian efforts to financial sectors.

The civil war in Syria began in 2011, and has seen around 6.7 million Syrians become refugees. This is undoubtedly the worst humanitarian
crisis of our times. Millions of people have been rendered not only home-less, but also identity-less. In the absence of any sort of identity information, distribution of humanitarian aid (be it cash or kind) becomes extremely difficult.

In one of the refugee camps in Jordan, blockchain technology is being used to establish and verify the identity of the inhabitants. This is part of project Building Blocks, which was started in 2017 as an initiative of the United Nation’s World Food Program (WFP). Under this program, money is transferred to the bank accounts of people who need food, instead of transporting food directly. In this blockchain refugee camp, the WFP account details of the inhabitants are kept on a permissioned version of the Ethereum blockchain. When someone makes a purchase at a WFP camp supermarket, his retina scans are matched with the UN database in order to validate identity. Thereafter, the bill amount is directly deducted from his WFP wallet through the use of smart contacts.

Use of blockchain technology has guaranteed that the refugees’ personal information is securely stored on the blockchain, and also made the process of distributing money 98% cheaper. Use of such a digital wallet would help refugees establish a credible source of identity and a verifiable credit history. The Building Blocks program has been estimated to help at least half a million refugees in Jordan, and its success would speed up the adoption of blockchain technology in other UN initiatives. 

Sneak peek into the WFP supermarket in Jordan's refugee camp

South-East Asian countries like Indonesia, Singapore and Malaysia are slated to become major players in the global economy within the next decade or so. A significant portion of their economies are made up of micro, small and medium scale enterprises, or MSMEs. Unfortunately, MSMEs are finding it extremely difficult to survive in the battle against large corporations today. Most of the MSMEs are located in rural sectors, and their owners do not possess proper legal documentation or long term credit history. This makes banks extremely reluctant to loan money to them. In fact, according to The World Bank, as much as 70% of MSMEs in
emerging markets lack access to credit!

The MSME sector in Indonesia is crucial to its GDP. As per this 2018 report, MSMEs here contribute towards 99% of all business and 89% of all private sector employment. The situation of MSMEs, sadly, remains as woeful as
elsewhere. However, there seems to be hope on the horizon, as different
institutions of the Indonesian government have recently signed partnerships with blockchain startup Tokoin. Based in Indonesia, Tokoin is creating an Ethereum-based digital platform to establish verifiable digital identities for these MSMEs.

MSMEs would first have to upload their basic KYC information on Tokoin’s platform, which would create digital identities for them on the Ethereum blockchain. Thereafter, every financial transaction that they are involved in would get associated with their digital identities on the blockchain. This would help establish verifiable and tamper-proof trust scores for these enterprises. Banks would be able to analyze these records and assess the credibility of these enterprises when it comes to providing loans. Third party vendors (such as warehouses, raw material suppliers, etc.) would also be able to access this data. Depending on their performance in Indonesia, Tokoin plans to extend their services to other South-East Asian countries in the near future.

Identity verification has become an integral part of our daily lives today. Travelling abroad, purchasing a new car, buying a pint of beer – everything requires some sort of identity verification. Even opening a new Facebook account requires email authentication! Carrying around important documents might not always be feasible or even safe. On the other hand, once we provide any sort of data to any of these apps, we really have no idea how it might be used or abused. This is when the strict privacy control that blockchain provides comes into the picture.

Civic is one of the foremost blockchain projects working in the identity management and verification sector. Civic’s mobile app uses a combination of the in-built biometric feature of the smartphone and blockchain technology to create digital identities for the users. No KYC or identity documents are stored on the blockchain, neither is there a necessity to carry them along as long as one can use Civic’s app. While Civic’s solution as it is might not be an exceptional achievement, what is noteworthy is that it has started to attract institutional adoption. International leader in manufacturing HVAC equipment Johnson Controls has partnered with Civic to utilize blockchain technology in controlling the access management systems inside their buildings. Moreover, Civic has recently inked deals with 12 major automated retail companies in order to provide blockchain-based identity verification to vending machines. These partnerships are expected to extend blockchain technology to at least 1,000 vending machines by the end of 2019.

Vending machine powered using Civic’s technology

Blockchain based identity verification provides security, transparency and ease-of-use. There are several other projects working in this segment –TheKey, Remme and SelfKey to name a few. And while we are still heavily relying on the traditional methods of identity management, every small step that a Tokoin or a Civic takes is a big step towards blockchain adoption.