There is a buzz in the online world about the addition of the blockchain and its technologies. It only seems logical that we consider it to solve one of the biggest challenges of the space: identity management.

Can identity management using blockchain help to stop fraud? What unique features does it offer? How has it been tested?

Let’s take a deep dive into the pros and cons of using the blockchain identity management tools are in today’s market.

What Is the Blockchain?

It is likely you’ve heard this phrase, but are you completely familiar with its term and what it means? Blockchain technology is a popular concept used most often today in the world of cryptocurrency and NFTs. These processes made possible by the tech itself have created an entirely new source for financial gain, investing, and securing data.

As the ever-challenging and ever-changing world of identity management solutions remains a sticking point for so much of this digital space, it is no wonder some would like to test the capabilities of the blockchain’s technology against the challenges in identity management solution arena.

Traditionally, and in most current platforms for storing data, the technology relies on centralized servers. Data security becomes an utmost priority for nearly any business as more and more of an individual’s sensitive data is stored online. From a bank account to a private key, your social security number, to your first pet’s name, there is a constant ocean of information out on the world wide web.

Identity solutions are needed at nearly every level of business, as access to a personal identity on something as simple as a social media platform can lead to a person’s identity information being leaked in a multitude of ways. Identity management has become a crucial need in all businesses due to this struggle.

To understand how the blockchain and its unique features can assist in this challenge, it is first crucial to understand what it is and what it can do.

Blockchain Technology

Blockchain technology is often, in its simplest terms, broken down and described as a distributed ledger technology. In terms of cryptocurrency especially, this makes ideal sense. A blockchain itself is a series of data bundles (blocks) chronologically strung together (chain) into a unit that is transparent, visible by all users, and stored on multiple devices throughout a peer-to-peer network.

In other words, when dealing with the ownership of an NFT or the history of a cryptocurrency, it is easy to track all of the comings and goings of the item through this distributed ledger technology. Any transaction made with the token is tracked. It is monitored. It is transcribed.

Key Features of the Blockchain

Some of the key features of the blockchain are what make its technology so unique. Understanding its capabilities, and thusly how it may be applied to identity management, requires a comprehension of its parts.


The blockchain is touted as being an open and transparent space. There is “nothing to hide” so to speak, as all transactions are visible. There is no data that is private in the blockchain (the transactions, updates, changes, etc.). Only a network user’s private keys are kept secret to that user. All other details are open to the peer-to-peer network.

This transparency leads us to another feature: checks and balances.

Checks and Balances

With the connection of peers through a multitude of unique devices across spaces spanning the globe, it is ideal that such transparency exists because it allows for a system of checks and balances.

Firstly, the peers are able to monitor one another. If all comings and goings must be recorded, there is no room for error. Every network user can see each data block in the chain.

Secondly, the use of a technology called smart contracts creates another checkpoint for accuracy. Smart contracts operate on an “If/Then” concept, meaning that if “X” occurs, then “Y” can happen.

This creates a built-in fact-checking system, again balancing the blockchain itself.


A secure network is obtained in a number of ways via the blockchain. Firstly, the aforementioned peer-to-peer network and actual distribution of the data means that the information is stored in multiple spaces.

Additionally, blocks in the chain are immutable. They cannot be changed by any person or program. Once locked into the chain series, these data blocks are there for good.

Another feature of security is afforded by the blockchain in its features listed above: transparency and checks and balances. Those crucial features don’t just mean that there are fewer errors (thanks to an automated smart contract), but also mean that it is nearly impossible to take over the decentralized data.

In terms of a blockchain identity management system, this would create a robust security feature, as the data is no longer stored in centralized databases, but instead is sprinkled across the globe. Identity verification could then take place in any number of physical locations, allowing for a very secure blockchain identity management system.

No Central Authority

Another feature of blockchain tech is that there is no central power or authority. Because the network is distributed among its users, there is no “leader” or organization at its helm. Instead, the space is a self-governing network.

This can be a pro and a con in terms of decentralized identity solutions. Since big business is not likely to want to give up its power, revenue stream, or massive databases of information, some in the business may see it as a negative. Independent developers or those seeking to bring the “power back to the people,” enjoy the feature. Taking a step away from centralized authority often means lowering costs such as transaction and storage fees. It also means accessibility for all, where a major authority cannot turn away a user.

Additionally, users enjoy a lack of central authority when it comes to freedoms on the blockchain network. Without a “boss” in control, things like free speech, the flexibility to develop new and exciting applications and programs, and, perhaps most importantly, the ability for creators to profit and take ownership of their work, make it an appealing feature to many a free spirit.

Blockchain Values

It isn’t just the enhancements to the digital world that back blockchain tech. It also comes alongside a system of concepts.

Core Concepts

It is worth mentioning that blockchain technologies are not just an advancement in the computer age, but also a value system with goals to support it. In addition to the technical side, the blockchain and its applications are often associated with a core value to move away from big business and allow users to govern themselves.

The concept of no central authority serves logistical purposes, but it also allows for there to be less control from major corporations, conglomerates, and monopolies. Users appreciate being able to control their own destiny, from creation and development perspectives to the concept of freedom.

A Potential Clash of Concepts

This pillar of the blockchain community, to move away from big business, allow for anonymity, and yet ownership of what you produce is a potential conflict for those in the identity management business.

A digital identity is something some prefer to have kept secret. Some creators of NFTs use unique names or use tags to keep their own personally identifiable information on the down low. Some do it for privacy, and some do it more as in a digital signature manner, but no matter their reasoning, the concept of identity management solutions takes a step back from user control and may limit user access.

Decentralized networks have worked hard from an ethical standpoint to become a home, not just for digital currency, but for a space of digital assets, digital art, digital identities, and peer-to-peer networking. Governing and overseeing themselves, developers enjoy the decentralized framework that allows space for anonymity if one so chooses.

Opening up personally identifiable information or personal data often required in an identity management solution means such “digital credentials” may fall by the wayside. There is a legitimate concern and many questions about how personal data works on a distributed ledger network.

Who will have access? Who will be “in control” of the sensitive information stored in a decentralized web? There are many questions about the value system established by the concept of a decentralized identifier. Few want to return to the centralized server feel. Yet blockchain solutions may offer the tech necessary to determine true digital identities where necessary.

Smart Contracts

Some would argue that the application of smart contracts could be the bridging solution to blockchain identity management. Such tech would allow for not only the automation, error-free, and seamless movement of business, but would also mean that a digital identity could remain largely anonymous to other users.

Because few would argue, there are times when a true identity management solution is required, such as the opening of a new bank account or applications for key benefits. A true identity must be established, and the blockchain network may have solutions that make sense. But, when applying automated computer systems, one could argue that no human eyes need to see the true digital ids of the system’s users.

This would allow for applications of blockchain for identity management, but still also keep private and personal information in an encrypted format, leaving digital identity management human-free.

An Example of Use

The idea that tech could be the bridge to such identity management solutions has already been put into action by some. For example, smart contract developers have created programming that generates a “trust score” for a user.

Taking into account factors such as location, IP address, mobile phone authentication, email verification, or even real-world identity documents, a smart contract can generate said trust score and determine if a user is to be permitted or not.

Creating a self-sovereign identity in this manner would automate your system. If the user has a score of X or higher, then the sovereign identity would be allowed access. Access management performed through self-sovereign identity would again be human-free, and still, allow the worlds of blockchain and identity management to mesh.

Identity Management Solutions

Traditional identity management system solutions often revolve around identity documents. If you have had to apply for an ID, you are likely familiar with the process. Tactile papers such as birth certificates, a social security cards, and even passports and driver’s licenses are frequently used as identity documents used in a non-digital setting.

These identity documents are commonly used in the non-digital world for identity and access management. For example, you cannot enter certain bars or clubs if you are under 21 in the United States. To prove this, you must show an ID or driver’s license at the door. Albeit very simplified, the same process is necessary in the digital world at times to ensure the proper users are permitted access to the proper spaces.

A Digital Identity

Intentional or not, nearly every human is somehow tracked in a digital sense. This digital identity will follow you through life. Despite name changes and relocations, digital identity or “DID” will carry metadata about you from birth to death.

In the United States, citizens are required to obtain a birth certificate the moment they enter the world. This document denotes the child’s name, its parents, and place of birth along with the date that they were born.

Likewise, at death, American citizens are issued a death certificate denoting such a date that they passed away. It is documents like this that allow the government not only the ability to offer verifiable credentials, but also to record, track, and follow its residents.

The Uses of Digital Identities

Similar information used in the tactile, “real” world is also of course carried over into the digital realm. Your digital identity contains many of the same “documentation,” facts, and figures that your real-world, non-digital version does.

A digital identity arises organically from the use of personal information on the web. What sites you visit, what devices you use, and what programs you download are all logged into a mega file of information on you, your habits, and your personal data.

Additionally, what many refer to as “shadow data” is also created by your actions online. A digital identity may be a pseudonymous profile linked to the device’s IP address, for example, a randomly-generated unique ID.

Data points that can help form a digital identity include usernames and passwords, driver’s license number, online purchasing history, date of birth, online search activities, medical history, etc.

These facts and figures are generally sorted into three main categories:

  • Biometrics
  • Behavioral
  • Biographic

or the “Three Bs” that are the models that make up a person’s online identity.

Fraudulent Identities

The main reason and necessity for such secure methods of identity verification, especially online, is the rampant world of identity theft. With so many versions of the crime out there today, it is not a wonder that there is a need for more and more technology to secure personal information.

Let’s break down some of the common issues around identity, and why it can make it so important for the right securities to be put into place for all users.

Phishing for Identities

Many users are aware of phishing for information. The word, altered in the digital era with a “ph,” changed its meaning for the next generation. Stemming from the origination of the word (fishing, as in to cast a reel and attempt to catch a swimming fish), the concept is still very similar.

To “phish” for an identity, cybercriminals will often attempt to reach you through various means. From scanning social media posts to attempting email contact or even texts or instant messages, criminals can attempt to gain personal information directly from its source: you.

Trying to “phish” information from the owner of the identity, these criminals will attempt to then use that data to open new lines of credit, gain access to bank accounts, or steal/hack current digital assets.

Preventing phishing often comes down to educating the users directly. However, increase the security of blockchain technology, coupled with automated systems requiring complicated computations to gain access can decrease the phishing risks for users, sometimes without their input or knowledge.

Malware and Ransomware

Another frequently used and sophisticated tech of the cyber criminal is the use of mal- or ransomware. There are typically programs attached to a link or an email attachment that, once launched on your device, will crawl for data, oftentimes without you knowing it.

These programmed hacks can then find your personal information, log-ins, and passwords for users to take your identity. These thieves can also use such programs in order to gain access to your employer’s databases or your own businesses.

They can attempt to reach your friends or connections, disguised as you, to continue the ruse. It is a destructive and dangerous attempt that can cause the exposure of many users’ data, not just the initially hacked individual.

Synthetic Identity

A “newer” form of cybercrime is popping up involving what the industry has dubbed “synthetic identities.” In these cases, criminals use the technology against the system, creating from “thin air” a new and fake identity.

By using the organic methods previously mentioned for creating a digital identity, some hackers are able to create nonexistent people and gain access to systems based on the falsely created new DID.

Identity Management Using Blockchain

Now that you have a clear understanding of both entities, it is possible to weigh the pros and cons involved in using the two concepts to help one another. Blockchain technology has its own pros and cons, as we reviewed above. Can it truly help the identity management challenges?

How to Apply the Blockchain to ID Management

With a clear need to have secure and functional identifiers in the online space, it is no wonder there is a rush to apply new tech. Decentralized identifiers are already being put to use in the online world today. There are a few core concepts that utilize the tools of the blockchain to ensure a person is who they say they are.

Self Sovereign Identity

One proposed use of blockchain identity management is to allow for self-sovereign identity creation. Such a concept would mean that the blockchain’s secure distributed ledger capability would be used to allow a user to be put in charge of their own identity.

This process would give the user complete control over their identity. On the one hand, it would mean that the concerns presented by a centralized authority would be quashed, as the power would truly lie in the hands of the people.

However, some fear that without rules and regulations, or more to the point someone to oversee the rules, it will become a lawless “wild west” of chaos. Blockchain identity management would give users the power to control a decentralized identity system, meaning that, once locked into place via the block concept, that data would also be immutable.

Is the world ready for blockchain identity management to be put into the hands of its users? Or should the continued method of verifiable credentials be left in the hands of “the powers that be,” whether that means the government, big business, or corporations charged with such duties?

A blockchain-based identity might mean more users can access services more easily. It also may create a higher level of fraud. To decide if the benefits outweigh the risks, it is crucial to analyze the pros and cons of the concept.

Data Monetization

Your digital identity, whether you know it or not, is already used countless times on each and every interaction you have with the Internet. From personalizing your advertisement exposure to tracking your shopping habits, the online world is designed to keep tabs on each user.

With decentralized identity systems, this concept can be focused to further the concept of data monetization, or using information for financial gain. Currently, big business like Google already does their own tracking of your habits.

However, with decentralized identity solutions, a person would have control over his or her own DID. They could choose to lend it to testing programs or decide who can and cannot see their personal information. Again putting the power in the hands of the individual, and not big business, would give a chance for users to own their identity and take charge of how it is used.

Data Portability

Another key use of decentralized identifiers is in data portability. As more and more technologies begin to accept the DID concept, the user would not only have ownership and control but be able to take that DID along with them, anywhere they go.

From global travel to the use of different public blockchain networks, the decentralized identifiers make it easier for a user to access necessary spaces. If the DID is secure, and user adoption becomes more mainstream, such proof of identity would become more easily obtained, used, and accepted.

Pros of Identity Management Using Blockchain

Is the world ready for blockchain-based identity management? Some say yes, and cite the many benefits of the current technology.

Blockchain solutions can mean benefits such as:

  • More access for more users
  • The self-control of your own identity
  • Remove the power from big business
  • Create secure, distributed databases
  • Remove centralized server managers and their risks
  • Increase portability and movement
  • Potential monetization for use

With its unique tech, the blockchain certainly brings a lot to the table in terms of identity management. It is estimated that 1.1 billion people on this planet have no access to identification. With the use of user-controlled blockchain identity management, that problem could be reduced.

Personally, identifiable information would be kept more secure, as it would be locked with cryptographic keys only a DID owner could verify. Instead of the currently projected 97 percent of data breaches that occurred in 2018 is credited to the exposure of such private information, the blockchain and its following components (noted above) could allow for additional privacy and self-control.

Cons of Identity Management Using Blockchain

Of course, nothing in this world is perfect, and where there is an up there is often a down. In terms of using a blockchain in identity management solutions, there are still many concerns. Those that work and profit from the current model of major corporations and big businesses running online identities certainly do not look forward to a system that allows self-control.

Others fear that, left to their own devices, monitoring, tracking, and verifying information could become very difficult. Permitted to access and alter their own information, would users be truthful and honest.

No matter the system, there will always be bad doers that wish to corrupt it. Identity theft is a major problem both in tactile, documented identity and in the digital realm. Regardless of the rules, in other words, there will be rule breakers.

Many see the adoption of such decentralized programs concerning in spaces such as law enforcement. If personal data is kept confidential and in the control of the owner of such DID, would governments be able to access the data?

While the gain of control supports core values of the “power to the people” shift, it does not yet address if or if there should be any oversight. No single entity “owns” the digital space, and controlling it, even today, is a challenge. Would putting more power in the users’ hands make tracking and enforcing criminal behaviors impossible?

The Solution?

As oftentimes is the case, the solution to the identity verification process is likely somewhere in between two extremes. Clearly, the blockchain and its capabilities offer plenty of unique and helpful features to ensure security, fairness, and beneficial outcomes for the masses. Alternatively, the documented paper world in which governments are permitted to track citizens isn’t likely to diminish anytime soon.

In some ways, such collections of data are necessary. If someone has been murdered, for example, few would argue that the killer has a right to privacy, blocking his or her identity in terms of tracking a phone, last used credit cards, mobile phone use, etc.

At the same time, most users would agree that they don’t want to be monitored 24/7 by the government, big business, or any other entity. Instead, many would likely prefer a world in which they have more control over their own destiny (or minimally identity).

The Future of Blockchain and ID Management

As it is commonly said, no one can tell the future for certain. There is a limitless amount of possible outcomes when combining any two concepts, and the addition of blockchain technologies to the challenges of identity management solutions will certainly remain to be seen in full.

There are many applications to any new tech, and aiming its powers at digital identity surely has its ups and downs. Identity theft is not likely to become obsolete anytime soon, so surely answers to this question will remain important.

Stay Informed

The world’s population isn’t going down anytime soon and coupled with the creation of synthetic identities, there is an endless supply of “prey” for would-be hackers. As long as there is a need to verify a user’s identity, so too will there be an entire process revolving around such authentication.

How to protect such sensitive information will be an ongoing discussion for years to come. As the world becomes more and more digital, so too do its challenges. Personal data is always likely to e at risk on some level. To protect data, identity holders will need to become vigilant and our technologies will need to catch up to the ever-evolving thieves.

Can a person’s identity truly be kept secure through the blockchain? It is likely we have years of identity data to review before the answer is clear. And, as is likely, the application of this tech is likely to be more successful in some areas over others.

The one thing that is for sure is that you should stay informed of these changes. From advancements in identity theft to digital identity management, it is important to be informed of the latest and greatest.

A Trusted Resource

Ultimately, the best defense against data breaches, identity fraud, and staying on top of your own user identity is to be informed. Through trusted resources like FLOLiO, you can be sure to stay updated with the latest developments, advancements, and changes in the industry.

There will always be challenges in an online world, but by staying informed through resources you can trust, you can be a diligent and smart consumer, keeping your information safe in the process.

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