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In the previous post, we talked about how blockchain can be used to provide an identity for almost a billion people who currently don’t have official documents. With that, my purpose for today’s post is to demonstrate how digital identities not only benefit these people but can also bring benefits to the rest of the population. Let’s go?

Second level: identity and access to the digital economy

Currently, 3.4 billion people worldwide have an official identity document but do not have access to the digital economy, and the 3.2 billion that participate in it continue to take risks related to their online identification, authentication, and privacy.

The famous New Yorker cartoon reads “on the Internet, nobody knows you’re a dog.” The joke is as current in 2019 as it was in 1993 when it was first released. This is because, with very few exceptions, our identity is not verified when we navigate the cyberspace.

The problem is that when it comes to acts that have a legal (such as signing a contract or document) or financial effect (such as buying a product or service), identifying who is behind the screen is essential. You need to know if, for example, that person is who she says she is and if she is indeed authorized to sign that document, or if the potential buyer of a product is not committing any fraud at the time of payment.

The uncertainty and insecurity in these and many other scenarios of online life makes it so that even people who already have official IDs and access to the digital world can benefit from having a digital identity.

In the Digital ID: Key to Inclusive Growth report of the McKinsey Global Institute, some of these potential benefits are presented. According to it, implementing an appropriate digital identity scheme would mean a global economy, by 2030, of 110 billion hours through better access to digital government services and 1.3 trillion dollars with reduced payroll fraud. In Brazil only it would be possible to save 90 billion dollars by reducing fraud in the distribution of public sector benefits. In addition, companies could reduce KYC (Know Your Customer) costs and new customer onboarding by up to 90%!

The numbers presented are so high that they can often seem even hard to believe. I don’t know about you, but for me, the idea of saving 13% of our country’s GDP by 2030 by increasing efficiency and reducing online fraud sounds extremely tempting…

The importance of privacy by design

However, while the implementation of a digital identity can bring numerous benefits, be it for individuals, companies or governments, the potential issues with such a system also need to be taken into account, so that we can work to minimize them.

One of the main concerns is related to data privacy. Companies such as Facebook and Google are involved in frequent scandals for unlawfully collecting data from their users, marketing that information and using it to manipulate consumer patterns and even influence the political life of countries.

Governments aren’t that much better when it comes to violating citizens’ right to privacy. Although 1984’s Big Brother hasn’t happened, a number of countries carry out large-scale surveillance, such as the social credit system in China and the work of the National Security Agency (NSA), made public by whistleblower Edward Snowden in the United States. With this, more than ever, giving the user control over their data is crucial, and blockchain-based identities can be an interesting way to make that happen.

To explain how this works, imagine your wallet, the one you carry in your pocket. In it you keep various types of documents that identify you, like your national ID and bank cards, right? With blockchain, one can do something very similar. Each identity can be structured to function as a wallet that contains several documents related to its holder, such as social security numbers, pictures, address, bank details, among others. In the future, we can even think about storing in them our health records, school certificates, the properties we own…

The key point is that with blockchain, the identity holder can control who has access to their data, giving their consent or not each time a third party needs information. With this, your data will no longer be stored in various companies and government agencies databases, but only with you.

Conclusion

Blockchain technology has enormous potential when it comes to digital identity, benefiting both people who do not have access to official documents and those active in the digital world.

The relevance of this can be seen in the number of initiatives currently being developed. The Sovrin network, for example, is an open source project of self-sovereign identities that connects companies, institutions, and governments around the world that function as stewards of validation. In Brazil, OriginalMy has been a pioneer in the country with the creation of the BlockchainID, which can be used to sign contracts and documents, authenticate yourself on websites, physical access controlled platforms and sites, and much more.

This post was originally featured in Portuguese at Criptomoedas Fácil.