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What is Blockchain-Based Digital Identity?

What Is Blockchain-Based Identity Management?

The Identity and Access Management (IAM) industry has a lot of potential since blockchain identity verification is founded on distributed ledger technology that allows secure storage and maintenance of digital IDs for both corporations and end users. The technology could be able to prevent large-scale data breaches and give individuals control over their digital identities (known as self-sovereign identity). Blockchain ID systems require the preservation of digital identities.

The crucial elements like identity management, decentralized identifiers, and integrated encryption are highlighted in the concept of digital identity with blockchain technology on Ethereum. To create and register a decentralized identifier, or DID, users must sign up for a self-sovereign identity and data platform. During the whole process, a public-private pair of keys is created, and users can maintain the public keys on-chain or recycle their storage to decrease security problems.

How Important Is Digital Identity?

It is critical for ensuring accuracy while also speeding the customer onboarding process. Likewise, protecting one’s digital identity is crucial to preventing fraud and money laundering. Refinement and standardizing the services provided to citizens by countries could be facilitated with digital identity management.

The ability of social transformation initiatives and the guarantee of economic benefits for various communities by citizen welfare measures both highlight the relevance of digital identity. The National Digital Identity, or NDI, system of Singapore’s Smart Nation plan is one example of such a use for digital identity. Citizens would have secure access to e-government services because of the NDI system.

Issues with Digital Identity

1. Safety of Data: Due to their legacy software and various single points of failure, centralized government databases containing personally identifiable information (PII) are prone to security breaches. According to surveys, PII accounts for a major portion of targeted data, with breaches costing companies more than $654 billion in 2018.

2. Failure to Access Digital Identity: Identity digital Blockchain solutions are critical because around 1.1 billion individuals lack evidence of identity due to difficult bureaucratic processes, restricted access, and a lack of private data. Blockchain-based identification can gain traction as more individuals get access to financial services, social services, and government services through mobile phones.

3. Identity Theft: Blockchain digital identity companies can revolutionize user access to digital identity by tackling the issue of managing many identities and improving flexibility when creating false identities. Blockchain can tackle these difficulties and enhance the user experience on a variety of platforms by leveraging advances in cryptography and establishing new identity management systems with decentralized identities.

Current Digital Identity Position in IoT Devices, Individuals, and Organizations 

1. Organizations 

When organizations retain sensitive user data, obey privacy laws, and use data that is kept in safes, they encounter issues with digital identity management. This limits their capacity to make the most of their powers.

2. Individuals 

As it permits self-identification and asset ownership, blockchain technology has gained popularity in transforming digital identity. The challenge of claiming ownership of one’s identity is increased by the fact that 1.1 billion people worldwide lack physical credentials.

3. IoT Devices 

Identification should not be a difficult concept to understand for businesses, individuals, or Internet of Things (IoT) devices. There were about 10 billion internet-connected devices on the earth in 2020, and that figure rose to 22 billion by 2025. How can blockchain technology for digital identities apply to IoT devices? The bulk of IoT technologies lack proper access and identity management capabilities. As a result of introducing fundamental management features into IoT devices, security began to suffer.

Examples of Digital Identity on the Blockchain

Blockchain identity firms like BanQu and ID2020 provide decentralized platforms for self-sovereign digital identities that connect farmers with their peers, governments, financial services, banks, and humanitarian groups.


Digital identity is crucial for global welfare since it allows individuals to vote, acquire an education, and access financial services. There is a need for improvements in the latest generation of identity management systems. By establishing decentralized identifiers and linking digital identities to verified credentials, blockchain initiatives provide a framework for changing digital identity management. This enables the consolidation of digital identities from several platforms into a single one that is within one’s control and ownership.