Integrating blockchain-based digital IDs into daily life

The last 13 years have seen blockchain technology evolve into numerous use cases — finance, data, logistics and security, among others. However, the idea of using blockchain’s immutable capabilities to ID humans got new life when Changpeng “CZ” Zhao visited the island country of Palau to kick off its digital residency program. 

The blockchain identity management market is estimated to grow by $3.58 billion in the span of five years from 2021 to 2025. Key factors include the rising demand for digitalization and privacy-respecting identity solutions. As a result, a myriad of solutions breached the market serving this need in the form of nonfungible tokens (NFT), distributed ledger technology (DLT) and barebone blockchain technology.

Considering the plethora of use cases that blockchain can serve on a day-to-day basis, numerous government organizations began experimenting with the technology — weighing heavily on central bank digital currencies (CBDC) and verifiable and immutable user identity.

Problems with traditional IDs

Correctly identifying — or ID-ing — an individual has always been paramount to governments to ensure targeted delivery of services and allowances, among other requirements, which holds true to this day. However, ongoing advancements in technology empowered the general public with tools to create IDs visually identical to the original. Given blockchain’s capability to store immutable records, authorities see the technology as a fighting chance against fraud related to ID theft and fakes. 

With traditional paper-based IDs comes the difficulty of confirming their legitimacy across different systems. History has shown how people successfully use fake ID cards to claim unauthorized access to a myriad of benefits. However, technological advancements such as blockchain have provided authorities with the opportunity to issue verifiable certificates and IDs while ensuring scalability, speed and security of the identity management system.

Efforts on this front saw the rise of a new ecosystem comprising various blockchain-based digital ID offerings. For example, Shubham Gupta, an Indian Administrative Service (IAS) officer, recently spearheaded the launch of a Polygon-based system for issuing verifiable caste certificates on behalf of the government of Maharashtra.

Speaking to Cointelegraph, he said, “if identity management systems have to be rated on a scale of 0 to 1 based on decentralization and individual control, traditional centralized ID systems will be on the far left and fully self-hosted, public blockchain-based IDs on the extreme right.”

Forms of blockchain-based digital IDs

While blockchain technology can and has been used as-is for maintaining immutable records over the internet, innovations spanning over the last decade resulted in the birth of sub ecosystems around the use of blockchain technology. 

“The idea of blockchain-based digital IDs has been floating around for quite a while but came into the limelight with the recent NFT boom,” blockchain adviser and Bundlesbets.com CEO Brenda Gentry told Cointelegraph.

While NFTs were first marketed as a tool to represent real-world objects including intellectual and physical assets, the technology found itself well-suited for a variety of applications. Recently, government organizations have begun testing NFTs for ID-ing citizens as means to reduce operational costs.

“Wide-scale implementation of blockchain-based digital IDs — like issuance of national identity cards such as passports and driving licenses — takes time but I strongly believe that is the destination that the world should move toward,” Gentry added. In addition to helping authenticate people, blockchain technology discourages counterfeiting, tampering or identity theft attempts.

Citing the involvement of luxury brands and artists that promoted the use of NFTs to authenticate the legitimacy and ownership of a product or art, Gentry…