Many transactions, whether business or social, rely on understanding identity in context. As the number of these transactions pile up, so too do vulnerabilities. Can you trust the person is who they say they are – or are they impersonating someone else? Can you trust not just the person but also all of the data that characterizes them? Is the information you have accurate or has it been tampered with? Is it up to date? The current model for managing identity is quickly becoming unsustainable – costly, disjointed and too imperfect.
Blockchain, the technology core is distributed ledgers shared across a scalable group of individuals. Data associated with every event or transaction is timestamped, appended to the record preceding it and available to authorized participants in real time. Individuals can’t tamper with records after the fact; records can be amended only by agreement among participants. In this way, data becomes part of a reliable, unbreakable chain of trust.
Blockchain shifts from disparate bits of information held by different people to an always up-to-date history of data related to a person, place or thing. In effect, data tracked on a Blockchain becomes a single source of fact. How should organizations approach this new opportunity? Our view encompasses three practices: to design, evolve and adapt.
The World Economic Forum recognized that personal data had become an important new asset class.2 this data, however, is at risk of remaining a surplus resource. Privacy and security concerns curb consumer trust and constrain the sharing of data. The result? While organizations spend money chasing down and trying to make sense of the digital breadcrumbs left by consumers, attributed personal data remains grossly underutilized.
Blockchain technology is particularly well suited to managing both consent and control of personally identifiable information, because it can be self-managed without relying on a centralized control authority. On Blockchains, smart contracts can embed rules that efficiently automate the opt-in process. They can define both who has the right to collect identity-related data as well as who has access to that data and to what level of detail. For example, Blockchains can verify identity without revealing details behind that identity. In short, necessary data can be widely shared in a transparent manner and protected at the same time.
Future-proof the platform
As business rules and contracts can be created into a Blockchain platform at any time, they can be extended beyond their original purpose across an end-to-end business process and a wide range of activities in a business network. Unlike a fixed, centralized database, Blockchains are inherently flexible – not vulnerable to a single point of failure and easily expanded and adapted for future use.
Building better Blockchain standards
Not all Blockchain implementations are equal. Ultimately, strong and trusted protocols for integrity of data will win. Industry consortia are likely to provide the best means for achieving these robust standards.
A wider circle of trust
Few attributes are more important to identity and trust than reputation. Data tracked on a Blockchain could be used to measure an individual’s or an institution’s propensity to do what they promise, whether that’s making a payment or delivering a shipment on time.
Access to data on past performance tracked on a Blockchain becomes a new verifiable basis for reputation. Start-ups and smaller enterprises, whose identities and reputations have been established on a Blockchain, could be more reliably accepted by trusted business networks, rather than relying on traditional measures such as brand recognition. Peer-to-peer business models, such as those for lending or insurance, could become more viable.
Blockchain-based business networks could leverage new approaches to reputation management to open up new markets. As of 2014, two billion individuals, primarily in the emerging markets, were cut off from financial services, in part because they lacked identification or didn’t have bank accounts. On Blockchains, a combination of social, community and reputation identifiers could more quickly establish verifiable identity and creditworthiness.
Reputations substantiated on a Blockchain could strengthen the brand identities for those who market sustainable goods, and assure the safety of foods, medications, electronic goods and similar products.