The evolution of digital ID platforms: from passwords to blockchain

As digital ID platforms undergo transformations to meet new demands and regulations, both users and businesses are becoming more aware of their responsibilities. 

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igital ID platforms, defined as integrated sets of technologies, services, and protocols designed to manage and verify user identity in virtual environments, aim to provide a consistent and secure experience, adapting to continuous changes in regulations and security requirements. 

Username and password: limitations of digital identity verification 

With the rise of the internet, user authentication, rooted in physical documents, shifted to the virtual world, leading to the proliferation of usernames and passwords as the primary means of verifying users. Although initially effective, this method quickly revealed its limitations as users engaged in an increasing number of online services, making the management of multiple credentials a challenge. Individuals found themselves tasked with remembering dozens of combinations of username and password. 

User experiences began to suffer, and the vulnerability to cyberattacks, such as credential theft or data breaches, became evident, jeopardizing personal information security. This prompted the need to evolve towards more secure and intelligent methods. 

Biometrics: a step forward in online identity security 

Digital ID platforms have strengthened in recent years by integrating biometric identification methods. 

Biometrics use unique physical or behavioral characteristics to verify and authenticate a person’s identity. Applications range from unlocking devices, accessing buildings and facilities to making payments and transfers. From online health services to banking to airports to private security, biometric systems are being adapted to identify people. Various common methods of biometric identification include: 

• Facial recognition 
• Iris scanning 
• Signature or keystroke pattern analysis 
• Voice recognition 

However, legitimate concerns exist regarding the storage and potential misuse of biometric data. The sensitivity of these characteristics underscores the need to establish robust security measures and ethical practices to avoid potential risks such as identity theft or the exposure of confidential information. Contact our digital identity and fraud experts to prevent economic losses. 

Blockchain and decentralization: shifting the balance of power in identity management 

Blockchain-based platforms allow individuals to have complete control over their identity, reducing dependence on intermediaries and minimizing the risk of fraud. They introduce decentralization in various ways, supporting the concept of self-sovereign digital identity. 

• Enhanced security: Identity details stored on a blockchain are more resistant to manipulation and unauthorized access. 
• Authentication: Without relying on a central authority, users have greater control over their identity and how it is shared, reducing security risks. 
• Consent: Through smart contracts, platforms can implement systems requiring explicit user consent before accessing or sharing their identity data, reinforcing user autonomy. 
• Transactions: Identity-related transactions, such as verifications and information updates, are immutably recorded on the blockchain, creating a reliable and transparent history verified by all authorized parties. 
• Interoperability: Blockchain facilitates interoperability between different platforms and services, eliminating data silos for more efficient and secure identity management as users interact with various online applications and services. 
• Compliance: The immutability and transparency of blockchain features provide a pathway for compliance with privacy and data management regulations, such as the General Data Protection Regulation (GDPR) in the European Union. 
• Zero-Knowledge Proofs: These proofs allow platforms to verify identity without revealing sensitive information, enhancing user privacy. They are becoming popular in the cryptocurrency sector, used, for example, to demonstrate ownership of a balance without disclosing the specific amount. 

Digital wallets and new legislative frameworks 

The decentralization technology has given rise to phenomena like digital wallets, which store user identity-related information. These wallets can contain digital format official identification documents, verifiable credentials, and even biometric information. 

With a digital wallet, users can manage their identification information more securely, autonomously, and efficiently. They represent a natural evolution of strategies designed by large corporations, allowing selective sharing of attributes with services that require them. For instance, to access an age-restricted online gaming and betting platform, an applicant would only need to share their date of birth. 

• Europe 

The EUDI wallet, the European digital wallet, has taken new steps in the last months of 2023. Under the new framework, member states will offer citizens and businesses digital wallets that can link their national identities with proofs of other personal attributes (such as driver’s licenses, diplomas, bank accounts, etc.). The EUDI wallet will enable citizens to access online services with their national digital identification recognized throughout Europe without the need to unnecessarily share personal data. 

EUDI wallet promises to facilitate citizens’ interactions with businesses and public administrations. Very Large Online Platforms (VLOP) like Google, Amazon, Facebook, etc., will be obligated to apply and facilitate its use. 

• United States 

In the United States, digital wallets are primarily regulated at the federal level, with the Consumer Financial Protection Bureau (CFPB) overseeing their operations. The CFPB enforces various consumer protection laws, such as the Electronic Fund Transfer Act (EFTA) and the Truth in Lending Act (TILA), regulating electronic fund transfers and credit transactions, respectively. Additionally, digital wallet providers may be subject to the Bank Secrecy Act (BSA) and Anti-Money Laundering (AML) regulations, requiring financial institutions to implement programs to detect and prevent money laundering and terrorist financing. 

Constant adaptation to the latest regulations is essential to ensure legality and protect individuals’ rights in the use of their digital identities. Digital ID platforms must be designed and updated to comply with all standards, implementing robust security measures and respecting privacy principles. 

Artificial Intelligence shapes the future of verification strategies 

The future of digital ID platforms points towards the integration of advanced technologies such as artificial intelligence (AI) and machine learning (ML), alongside the adoption of new privacy regulatory frameworks that consider concepts like informed consent and the right to be forgotten. 

Artificial intelligence and machine learning can enhance identity verification, making processes more efficient and secure, while providing a more personalized experience and empowering individuals. 

Request advice now from our experts in digital identity and compliance