Many transactions, whether business or social, rely on understanding identity in context. As the number of these transactions pile up, so 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: a digital ledger in which transactions made in cryptocurrency are recorded chronologically and publicly. 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 authorization; records can be amended only by agreement among participants. In this way data not only becomes reliable but also an unbreakable chain of trust.
Blockchain shifts from disparate bits of information held by different people to an 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 has become an important new advantage, however, it is now at risk of remaining a surplus resource. Privacy and security concerns curb consumer trust and constrain the sharing of data. What is the result? Organizations spending money and chasing down 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 have 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
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
Although, not all Blockchain implementations are equal. Strong and trusted protocols for integrity of data always 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 than identity, trust, and reputation. Data tracked on a blockchain can 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, can 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 because they lacked identification or didn’t have bank accounts. On blockchain a combination of social, community, and reputation identifiers can more quickly establish verifiable identity and creditworthiness.
Reputations substantiated on a blockchain can strengthen the brand identities for those who market sustainable goods and also assure the safety of foods, medications, electronic goods, and other products.