July 18, 2023


Eduardo Suárez – Open Canarias

In the digital age, the secure and efficient management of identity has become a critical challenge. Blockchain technology, with its features of security, transparency, and decentralization, presents a potentially transformative solution to this problem. This article explores the functionality of blockchain-based digital identity, the challenges facing this innovative technology, and how recent advances such as Decentralized Identifiers (DIDs) and Verifiable Credentials (VCs) are shaping the future of digital identity.

How does blockchain-based digital identity work?

A blockchain-based digital identity is created using a pair of cryptographic keys: a public key and a private key. This key pair constitutes a unique “fingerprint” for each user on the blockchain network. This form of identification helps avoid the need for validation by a central authority.

The public key is used as a user-identifying address on the blockchain network and is visible to everyone. On the other hand, the private key is kept secret by the user and is used to sign and authenticate actions performed on the network. Every time a user performs an action, such as a transaction, it is recorded on the blockchain. The resulting digital signature provides secure authentication and traceability, establishing a transparent and immutable record of the user’s activities on the blockchain.

Challenges of Identity Fragmentation

Despite its potential, blockchain-based digital identity faces significant challenges, one of which is identity fragmentation. With countless blockchains in existence, each with its own set of rules and protocols, a user’s identity can become fragmented across these different chains. This fragmentation can complicate authentication and verification processes, in addition to raising security and privacy concerns. It’s crucial to find solutions that allow for consistent and secure identity management across multiple blockchains.

Decentralized Identifiers (DIDs) and Blockchain-Based Digital Identity

This is where Decentralized Identifiers (DIDs) come into play. DIDs are unique identifiers that can be independently verified. They operate on decentralized networks, like blockchains, which means they don’t depend on a central authority for validation. Each DID is linked to a public key on the blockchain, and exclusive control of that DID falls on the owner of the corresponding private key.

DIDs are portable, which means they can be used across different blockchains and systems. This prevents identity fragmentation, allowing for interoperability and ensuring that the user’s identity remains consistent and secure.

Verifiable Credentials in Blockchain-Based Digital Identity

In addition to DIDs, Verifiable Credentials (VCs) are another critical advancement in the infrastructure of blockchain-based digital identity. VCs are digital assertions that confirm the possession of a specific identity or attribute and are issued by a trusted entity.

In the blockchain context, VCs can be digitally signed using DIDs, ensuring the authenticity of the information and the verifiability of the issuer’s identity. Control over the VCs rests with the owner of the DID, who can manage and share their credentials as they see fit, giving individuals greater control over their personal information and sensitive data.

The Future of Blockchain-Based Digital Identity

The future of blockchain-based digital identity, driven by technologies like DIDs and VCs, promises a transformation in identity management in the digital world. Even so, the adoption and effectiveness of this technology are strongly influenced by the policies and regulations of each country.

Firstly, to enable interoperability between different blockchains and systems, it’s essential to establish common standards and protocols. However, the adoption of such standards can vary according to the laws and regulations of different countries, which can pose a challenge to the uniform global implementation of these technologies. Moreover, the legality and recognition of blockchain-based digital identities, DIDs, and VCs largely depend on local policies and regulations. For example, some countries may legally accept and recognize these forms of digital identity, while others may not. This disparity in policies can complicate the use and acceptance of blockchain-based digital identity internationally.

Furthermore, user privacy and data security is another critical challenge that needs to be addressed. Since digital identity involves the management of personal and sensitive data, it’s crucial to establish solid regulations that protect user privacy and data security. Again, these regulations can vary from one country to another, which can impact the implementation and adoption of these technologies. In the European Union, the fact that information is recorded and cannot have all of its traces erased directly clashes with data protection laws, though there are solutions to solve this.

In conclusion, despite significant advances in blockchain-based digital identity technology, its adoption and effectiveness largely depend on local policies and regulations. Although there are challenges to overcome, the potential of these technologies to provide a more secure, private, and user-controlled identity system is undeniable. The widespread adoption of blockchain-based digital identity could be just around the corner as more countries recognize and regulate this promising technology.