Use cases for blockchain-based digital IDs

Technological advancements in the digital world have revolutionized every aspect of our lives, from shopping to communicating with colleagues to keeping in touch with family members to entertainment to using our finances.

Since the introduction of the internet, identity management has been a significant concern, with governments spending billions of money on usability, security, and privacy. The identity and access management market is projected to grow from $8.09 billion in 2016 to $14.82 billion by 2021, representing a 12.9% CAGR.

Despite this significant investment, managing digital identities continues to be adversely affected by three C’s — cumbersome, costly, and challenging.

With data driving the world today, digital identity is essential to many businesses and social transactions. In other words, digital identity governs the interaction of people in the digital space.

However, traditional identity systems continue to be highly vulnerable, with their centralized nature, attracting continual attempts to gain access to the complete repository of high-value data. Yet, businesses are still prioritizing cybersecurity, identity protection and compliance management, while user experience is significantly compromised.

As internet users, we shoulder the burden of managing multiple online IDs and passwords, while also handling a host of documents, including passwords, driving licenses, social security cards, and medical insurance cards. In this article, we are going to learn about the blockchain solution to digital identity management, the use cases of blockchain in identity management, and the benefits of decentralized identity.

The blockchain solution to digital identity management

Blockchain has evolved from the distributed ledger technology designed to track bitcoin ownership to highly trusted mechanisms of managing digital identities. The technology has replaced traditional systems of data management and is empowering people to have greater control of their identity.

Companies can use the information only with users’ consent, and no central entity would be able to compromise a consumer’s identity.

Blockchain has brought self-sovereign identity, which is characteristically immutable and more secure than traditional identity systems. Self-sovereignty has the potential to change the way we use identities to access various online services. People would use their self-sovereign identity for verification purposes, eliminating the use of passwords.

As with every life-changing innovation, there has been an extended period of evolution, with professionals incubating ideas and consensus on what self-sovereign identity is. It is a concept that arises from the belief that people should have control over the administration of their identity.

Consumers’ IDs should not be locked in a single site, and there should be interoperability of IDs across multiple platforms, with user consent. Experts have been thinking about the summation of various identifying information like demographic and employment-related data, and even information about the person revealed by other people.

In principle, self-sovereign ID would allow consumers to:

  • Control their identities
  • Access and update information
  • Choose the information that they want to privatize.
  • Transfer data
  • Delete their identity at their wish

More power to people

Blockchain-based identity gives people total privacy and control of their personal information while making data shareable on a trusted network, and ensuring the security of identity transactions.

Managing multiple identities

A person may have a single ID across various platforms or may want several IDs supporting different ’personas’ for the workplace, friends, family, and many more.

Blockchain can support this flexibility and provide a key for each of these identities, giving the user the power to choose which persona to use in a particular situation.

Anonymous authentication

Blockchain-based identity applies an anonymous identity to ensure maximum security. If a public key is required to access one’s digital identity, the key is vulnerable to cyber-attacks. Anonymous identification allows people to use unique attributes that identify them, eliminating the use of public keys.

Use cases for blockchain in identity management

Decentralized and digital identity can be used in several ways. Here are some of the common applications that we have identified for you:

  • Self-sovereign identity
  • Data monetization
  • Data portability

Self-sovereign ID

Self-sovereign identity (SSI) is the idea that individuals and companies can keep their identity data on their devices; deciding which information to share to validators without depending on a central repository of identity data. Such identities could be created independent of geographical locations, corporations, or global organizations.


MetaMask is an Ethereum identity on your browser. It allows users to run Ethereum dapps on their browsers with a secure identity vault. MetaMask offers a user interface to manage identities on various sites and perform blockchain transactions, making Ethereum dapps more accessible and easier to use for all.

Data monetization

As the world begins to evaluate who owns and should profit from user-generated data, blockchain-based self-sovereign IDs and decentralized systems give users control and create a path to data monetization.

Data monetization is the use of personal data for quantifiable economic gains. Data on its own is valuable, but insights obtained from personally identifiable data significantly increases the value of the underlying information. There is quintillion of data created every day, by the 4.39 billion internet users. More than 60% of the global DGP is expected to be digitized by 2022 , implying that personal data will continue to gain value.

Currently, the internet data we generate is intangible, invisible, and complex. Attribution is essential in the processes of ownership, and SSI makes it possible to attribute your online information to your decentralized identifier (DID).

From there, people could monetize their data, for instance, by leasing it to AI training algorithms or selling it to advertisers. Besides, users would also exercise the right to keep their information secret and protected from regulatory agencies.

Data portability

Article 20 of the European Union General Data Protection Regulation (EU GDPR) gives users the right to data portability, which involves the data subject’s right to have their data transferred directly from one controller to another, when technically feasible. The right has the potential to improve user experience, cutting down on the need to re-verify their identity across different services and platforms.

With DIDs and valid credentials, it is possible to move identifies that were anchored on one central system to another easily. Data portability minimizes friction for users while simplifying the sign-up process, increasing user adoption.

DID data portability also facilitates the use of reusable credentials, where customers can quickly re-verify themselves while observing the mandatory Know Your Customer (KYC) requirements. This is particularly useful to minimize customer on-boarding time that avoids drop-out rates and cut costs in the financial industry by skipping the cumbersome identity verification process where several documents are needed for validation.

How blockchain enables increased economic contribution

Digital identity is projected to contribute significantly to economic growth globally over the next ten years. It is regarded as inclusive because it benefits individuals mostly while stirring economic activity for the international market. For instance, a McKinsey study revealed that serving the unbanked population in the Association of Southeast Asian Nations (ASEAN) could increase the economic contribution of the region from $17 billion to $52 billion by 2030.

In addition, the reported value attributed to digital identities is expected to increase by 22% annually , with economic benefits of almost €330 billion for European businesses and governments by the end of this year, and nearly twice as much value for consumers- €670 billion. Blockchain identity systems allow users to unlock this value, which will, in turn, drive the global economy.

What are the benefits of blockchain-based identity?

Decentralized public key infrastructure (DPKI)

DPKI is the main feature of decentralized identity. Blockchain facilitates DPKI by creating a tamper-proof and trusted medium to dispense the asymmetric verification and encryption keys of the identity holders. DPKI allows everyone to create or anchor cryptographic keys on the blockchain in a tamper-proof and chronologically ordered manner. These keys are used to validate digital signatures or encrypt data to the respective identity holder.

Decentralized storage

Identities anchored on blockchain networks are fundamentally more secure than identities stored on centralized servers. By utilizing the cryptographically secure Ethereum network, in combination with distributed data storage systems such as InterPlanetary FileSystem (IPFS) or OrbitDB, it is possible to disintermediate existing centralized data storage systems while still maintaining trust and data integrity.

Decentralized storage solutions, which are naturally tamper-proof, reduce the probability of hackers gaining authorized access to data to exploit or monetize a user’s personal information.

Decentralized storage is one of the primary elements of secure identity data management. In a blockchain network, credentials are typically kept directly on the user’s device or securely held by private identity stores.

Such private identity stores are known as identity hubs, like uPort’s TrustGraph. When held only under the control of the user, identities are considered self-sovereign. This, in turn, implies that users can both full access and control their data without having to worry about their access being revoked.

Data under the user’s control makes the information more interoperable, allowing people to use data on different platforms, use the information for several purposes, and protect the user from being locked in one platform.

Manageability and control

In centralized identity systems, the body offering the identity is generally responsible for the security of the identity data. Contrary to that, in a decentralized identity network, security becomes the responsibility of the user, who may choose to implement his or her security measures. Besides, blockchain-based identity solutions compel hackers to attack individual data stores, which is expensive and generally unprofitable.


Blockchain-based digital IDs could revolutionize many of the services we use on a daily basis. Cryptographically secure information could extend many of the technology’s benefits to more people. For more on how to create digital IDs and implement them in your blockchain project, feel free to give us a call.

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