How Can Blockchain Technology Protect Digital Identities? ⋆ MAXBIT


How Can Blockchain Technology Protect Digital Identities?

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The internet has given rise to a new era of data security and privacy predicaments. As more people continue transitioning to digital technologies, issues relating to digital security, privacy, and data integrity have taken center stage. To illustrate the scope of these issues, the 2021 Javelin Strategy & Research Identity Fraud Study reveals that identity fraud losses topped $56 billion in 2020.

Traditional identity management systems of today are heavily centralized, resulting in several third-party service providers controlling your data. This problem can be clearly seen across several existing social media and eCommerce platforms where users no longer have sole control over their personal information, resulting in their confidential data often being leaked and misused.

The Current Scenario

Currently, every online platform requires users to provide verifiable credentials for accessing products and services. This ‘digital identity’ contains all the relevant information pertaining to an individual. 

Centralized platforms often collect sensitive and personal data related to ‘digital identity’ about their users, then store them alongside regular data in centralized servers. By design, the centralized ecosystem is fragmented, offering minimal transparency for users, and is becoming increasingly insecure. 

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Additionally, centralized identity management systems lack the feature of self-sovereign identity management, resulting in redundant processes to verify, validate, and manage a user’s digital identity throughout their lifecycle. These operations quickly become excessively expensive, repetitive, and tedious, needing manual data reconciliation and validation.

Therefore, we need a trustworthy and reliable solution that enables users and businesses to interact digitally with each other while preserving data privacy and security.

Blockchain To The Rescue

Blockchain-powered identity management solutions have the potential to eradicate problems clouding digital identity. 

Inherently, blockchain guarantees security and immutability across distributed networks. Harnessing the power of blockchain’s distributed ledger technology (DLT), decentralized identity management solutions will not only give users full control over their data once more but also prevent data leakage and misuse. 

Decentralized identity management enables anonymous transactions that are transparent and unchangeable. It also reduces transaction costs and increases process efficiency, as the lifecycle management of digital identities is managed according to pre-set rules by decentralized smart contracts.

Using blockchain technology, users (and enterprises) can create and manage their decentralized identities. A decentralized identifier (DID), a pseudonymous profile linked to the user’s IP address can be generated for a person, an entity, and even an object. A single user can have several DIDs to further limit the amount of privacy they require. For instance, you can have a DID for a gaming platform and a different one for a financial platform. Throughout this process, cryptography plays a key role in ensuring data security, privacy, and immutability. DIDs are private keys, meaning that only the key owner can prove that they own or control the identity.

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As the need for end-to-end data privacy is on the rise, the term “self-sovereign identity” has become a hot topic in recent years. In its simplest form, self-sovereign identity means that end-users must have full control over their personal information across devices (and services) that they use. At the same time, users will also have the option to provide only the required information to third parties, and at their own discretion. 

KILT Protocol is one such platform that leverages the potential of blockchain technology to address issues in the current digital identity management system. KILT Protocol, created by BOTLabs GmbH, allows users to verify their identity without providing personal information. While keeping the user’s data private and secure, KILT introduces the traditional method of establishing trust via verified credentials (passport, driver’s license, certificates) to the digital ecosystem.

KILT’s open-source, decentralized technology allows for revocable and verifiable credential management. As a result, users can authenticate their identity online without providing classified information. The DID alongside the public key is stored on-chain, enabling applications to access the shared information without having to ask the user again. 

Spearheading the concept of self-sovereign identity management, the KILT Protocol team has recently launched SocialKYC, a decentralized identity verification service that replaces existing KYC verification processes for Twitter and email services. 

Decentralization will undoubtedly play a key role in shaping the future of the internet. The Web 3.0 revolution has already begun and the demand for decentralized identity management solutions that transfer the power back to the users is at an all-time high. With platforms such as KILT Protocol at the center, data privacy and security are posed for drastic changes that will ultimately benefit the global community.


Disclaimer: The ‘Crypto Cable’ section features insights by crypto industry players and is not part of MAXBIT’s editorial content. MAXBIT does not endorse any company or project on this page. Readers should conduct their own independent research before taking any actions related to the company, product, or project mentioned in this piece.


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