A Blockchain Identity Solution Set to Change the Internet

Microsoft, IBM, Accenture and more than 70 other technology companies are working on a blockchain identity project set refurbish the Internet for the 21st century.

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Blockchain Identity Solutions
Image by Gerd Altmann from Pixabay

The way people, devices, applications, websites and even email addresses are identified on the Internet is on the verge of being disrupted in a significant way.

You could say the biggest ever change to the architecture of the World Wide Web is about to happen, and it is all thanks to Bitcoin.

In May 2017 Decentralized Identity Foundation (DIF), a consortium to explore ways of using blockchain for identity management on the Internet was founded. The membership has since grown to over 70 technology companies and startups. Some of the most active members include Microsoft, IBM, Accenture, Hyperledger and MasterCard.

For the last two years, a DIF technical team has been working on a protocol dubbed Sidetree, a second layer scaling solution on the Bitcoin network. When implemented, this protocol will enable Internet users to create decentralized identifiers (DID) on the Bitcoin blockchain with little technical hindrance or transaction throughput limitations.

This is turning out to be the most ambitious of the blockchain identity projects. Indeed, several startups that have been working on blockchain identity solutions of their own such as Civic, Identos and DIID are members of the consortium.

On May 13, 2019, the team made a major announcement concerning the development of the protocol. Stakeholders, as well as other interested parties, now have access to the early preview of the Identity Overlay Network (ION), a critical protocol interface between DID and the Bitcoin network.

“We’re announcing an early preview of a Sidetree-based DID network, called ION (Identity Overlay Network) which runs atop the Bitcoin blockchain ……. This approach greatly improves the throughput of DID systems to achieve tens-of-thousands of operations per second.”

But why is this a significant development?

At the moment, almost all identity management systems on the Internet, such as domain name and email address registries, are centralized. This goes against the spirit of Internet decentralization.

Identities are assigned, stored and updated on servers and data centers owned and controlled by mostly private companies and organizations. When you create a website, its ID is registered and accessed on domain nameserver, a database that a centralized third party maintains.

These entities, while striving to do a great job, are major single points of weaknesses.

The risk of massive data theft always exists as all it often takes to get control of the identity details of millions of users is to compromise single access points. With centralized data points, it is easier to carry out targeted sabotage attacks.

Indeed, the current architecture is designed in a way that the security of the system depends on being successful at blocking bad actors from accessing it.

What are the advantages of using blockchain for identity management?

Meanwhile, using blockchain for identity what Decentralized Identity Foundation is offering are identities that are not only secure, verifiable and censorship-resistant but also self-sovereign. What that means is that the identity can stand by itself with no need of it being referenced on a centralized registry, but even more, the user can carry it across platforms without the need to get permission from anyone.

The technology offers true ownership of identity on the Internet. Through public-private key cryptography, users have full control and can decide who to share details of their identities with.

The technology offers true ownership of identity on the Internet. Through public-private key cryptography, users have full control and can decide who to share details of their identities with.

In addition to a user not needing permission to create, update, share or move an identity, no one has the power to take it away from them. The current identity systems, it is possible to arbitrary remove users from registries, and that opens a window for censorship if the authorities in charge feel compelled to.

The security of each identity on the bitcoin network supported identity management systems is achieved through high-level cryptography. While it is possible to compromise access to a particular identity primarily through phishing, an attacker has to attempt a single identity at a time. There are no admin credentials one can steal to get access to multiple accounts or massive user data like it is the case with centralized systems.   

The Bitcoin network will provide the decentralized identity system with a ledger on which to create and secure user identity. It will also make the data related to identities immutable through the mining process or timestamping.

This is a powerful feature as even if users have full control of their identities, they are not able to go back in history to arbitrary make changes to suit particular current contexts. In other words, identity on the blockchain becomes verifiable even when it is the owner who controls its accessibility.

What this means for the Bitcoin network

With the decentralized identifiers system on top of its network, the value of Bitcoin is going to increase significantly, and I mean more than in terms of the price of its native coin (bitcoins) at the marketplace. The decentralized identity system is going to make Bitcoin even more powerful and useful.

In the previous post, we looked at how Bitcoin gets its value. Perhaps the most important takeaway from it is that the value of anything is considered to come from its usefulness in satisfying our needs.

And that is according to Carl Menger, who was a professor of political economy at the University of Vienna in the late 19th century and the founder of the Austrian School of economics.

If you haven’t read the post, take a moment to go through it.

After its launch, for a while, the general understanding was that Bitcoin’s best application is online money to be used in the place of fiat currencies like the US dollar. In particular, the kind that those who have something to hide can use to escape surveillance.

It turns out Bitcoin and the technology that powers it can do more than a digital currency for the dark web. Every sector you look at right now there is a startup building a robust and needed solution using the technology behind Bitcoin.

Why the Bitcoin blockchain?

With that said, there has been another misconception. And that is while the blockchain technology that Bitcoin introduced to the world can be applied in multiple use-cases, Bitcoin itself is rigid, and little innovation can be done on it to support more applications.

The Bitcoin network is now considered the world’s most powerful computer. In fact, it is more powerful than the world’s top 500 supercomputers.

The most cited weakness is its low transaction throughput. It is the reason the likes of Ethereum, NEO and EOS blockchains came into being. They were meant to overcome the shortcomings of the Bitcoin blockchain and make more decentralized applications possible.

However, Bitcoin remains the most secure blockchain owing to the amount of hashing (computer) power its network provides. The Bitcoin network is now considered the world’s most powerful computer. In fact, it is more powerful than the world’s top 500 supercomputers.

It is probably with this particular reason that the Decentralized Identity Foundation choose to use it instead of the others or to build a completely new one. The Identity Overlay Network that is out for early preview is meant to overcome the challenges of capacity and interoperability of the Bitcoin network.  

 

Why North Dakota Has to Embrace the Blockchain

blockChain
blockChain

Blockchain is a buzzword. In time, it will fizzle out just like others have.

If that is what you think, I bet you are wrong.

It is seven years since Satoshi Nakamoto published the Bitcoin whitepaper. Investors have so far put a little over $1 billion into blockchain related startups. And the graph is upward looking. About $200 million of that investment has flowed in during the first half of 2016.

What’s more, every sector you focus on, there is a startup working on a blockchain solution. That ranges from finance, health, asset management, agriculture to public administration.

What exactly is special about blockchain?

Blockchain renders trust unnecessary in human interactions.

That is a new reality. It is because of trust that merchants have always shipped from one corner of the globe to the other. It is because of trust that we’ve achieved law and order in our societies. And indeed it is because of trust that civilizations have flourished.

For the most part, however, we’ve exercised that trust through intermediaries. Thus, financial institutions have been the intermediaries between lenders and creditors. Insurance companies are the intermediaries amongst those seeking to pull risks together.

And the government is the intermediary amongst the citizenry of a country.

In turn, the selling of trust has been a very lucrative enterprise. A glimpse at the books of account of financial institutions, for example, will attest to this fact.

But the intermediaries have also often betrayed this trust they hold on behalf of others. For example, the collapse of the banking industry in 2008 was a result of bad investment decisions that bank executives made.

And that led to close to 9.3 million families losing their homes and investments. Unfortunately, in the past, societies haven’t had options to replace the centralized management of the trust.

But that is changing now.

The blockchain is heralding an age when, for example, a small trader in Africa can borrow credit directly from a fellow entrepreneur in the US. And you can purchase a property from a stranger without notaries and lawyers. And all that is possible with little scam risk.

What is the impact of that?

The cost of doing business will go down significantly. That is because the cut that the middle person has been taking isn’t on the budget.

What is the blockchain?

Blockchain is the technology beneath bitcoin. That is the first ever successful decentralized digital currency. But the easiest way to make sense of it is to think of it as a ledger. A continuous record of transactions.

Just like what the commercial banks keep.

Every time you withdraw from your account, the bank makes a debit entry on a ledger. Every time you deposit, the bank makes a credit entry on the ledger. It does the same every time you use your card or take a loan.

And part of this ledger is what you receive as a bank statement. The blockchain is the same in many aspects.

Just like with the bank’s ledger, when you send bitcoins, an entry is made on the blockchain against your public address (a string of alphanumeric). When you receive bitcoins, an entry is also rendered on the blockchain. Thus the blockchain is a ledger that shows who owns what at what time.

But there are major differences between the bank’s ledger and the blockchain.

First, the bank’s ledger is centralized. It is only the bank that creates, maintains and stores it. On the other hand, the blockchain is decentralized. No one entity owns it. It is a property of a network of nodes.

Every node in the network keeps a copy of this ledger. What’s more, all the copies are synchronized in real time.

Secondly, it is accessible for anyone to read and write on the blockchain (especially the public blockchain). But far from what you might think, this doesn’t affect the credibility of the records.

And how does that work?

That is possible because for you to write on the blockchain, you must follow rules entrenched in its core software. You must also do energy intensive work with your computer, which makes it costly to write bad data. Lastly, the entire network must approve your entries.  

Bitcoin is on a public blockchain. Another public blockchain that has grabbed the attention of many is Ethereum.

Satoshi Nakamoto designed the bitcoin blockchain with currency in mind as the primary application. On its part, Ethereum aims to support a broad range of applications.

In May 2016, a Decentralized Anonymous Organization (DAO) on the Ethereum blockchain raised close to $160 million from investors. The DAO is a company with no offices, CEO nor a board of directors. A code guides all its processes, and all shareholders get to vote on every decision.

The other type of blockchains that showed up in the recent past is private blockchains. As the name suggests, you can only read or write on the private blockchain with permission from the owner. It is the opposite of the public blockchain.  

The third type is the consortium blockchain. This is where different players come together and build a blockchain to which each of them becomes an equal node. One of the consortium blockchains is R3Cev, which is a project by over 40 major financial institutions.

Some of the commercial banks behind R3Cev include JP Morgan, Barclays Bank, and Goldman Sachs.

Another blockchain consortium is the Hyperledger. This is a project that Linux Foundation is leading with the support of close to 50 financial institutions and major technology companies. Some of the names supporting that project include IBM, Intel, and Hitachi.

Why should North Dakota care?

Already several states are embracing the blockchain technology. For instance, on 6th July 2016, North Carolina Governor Pat McCrory signed House Bill 289 into law. The new law gives clarity to bitcoin and blockchain businesses.

On 2nd May 2016 Delaware Governor, Jack Markell unveiled a plan to embrace the blockchain. By providing an enabling regulatory and legal environment, the state seeks to attract blockchain companies.

It is the right time to get involved. The world is waking up to the realization that the blockchain should fuel our social, economic and political relationships.

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