Recently I had the pleasure to moderate a panel on “Blockchain and Identity” at the KYC & Identity conference organised by ECN in London. It was a well-organised event with speakers and participants from major institutions such as the European Commission, Barclays, Open Identity Exchange (OIX) and such. The conference, excellently chaired by Jon Shamah (from EEMA, the European Association for e-Identity & Security), had an interactive and friendly format, very useful to facilitate discussion.
Our panel (with UBS and Zerado) was the only one dedicated specifically to Blockchain, but one could hear the word mentioned here and there: almost inevitably discussions of the problems and future of identity led to Blockchain. And this is not a surprise: Blockchain & Identity is a hot topic, which Consult Hyperion has been exploring for a while with our clients.
Let’s take two different approaches to thinking about importance of this topic: “Identity for Blockchain” and “Blockchain for Identity”.
First, “Identity for Blockchain”, assumes that if Blockchain platforms (developed for many different use cases) are to gain widespread adoption, we need to understand how the identity dimension for these systems would look like. It is quite obvious that existing ways to manage identity won’t work for “the new magic blockchain enabled world”. At the moment, dozens of major institutions are developing blockchain platforms (or more precisely, shared ledger technologies = SLT). Take R3CEV for example, a consortium of 40+ international banks such as Barclays and Goldman Sachs, that has recently announced “Corda” shared ledger protocol for financial use cases. Linux foundation, IBM, DAH and others work on the “Hyperledger” project – a multipurpose standardized blockchain software stack. Assuming these technologies gain adoption that is at least 10% as widespread as the industry’s attention to them today, there will be a need for a robust and reliable identity layer to manage KYC, AML, authentication and authorisation processes for shared ledger applications.
Second approach could be called “Blockchain for Identity” and it formulates a separate self-sustained class of use cases. It assumes that Blockchain technology can enable solutions to known identity problems and can solve them better than current models are able to do. This week, blogposts from my colleague Dave Birch (Director of Innovation at Consult Hyperion) have been focusing on this latter approach, which we will explore further here.
So what problems does a “blockchain for identity” solve?
I would argue that the one of two key problems at question is lack of interoperability of identity information across organisations and marketplaces, in each of the three domains: identification, authentication and authorisation (see the series of “Putting Identity on the Blockchain” from Dave this week). KYC-sharing use case falls under this umbrella, but KYC is just one bunch of the identity data that can be shared. Nathan Blecharczyk, a co-founder and CTO at Airbnb (who have recently hired a bunch of blockchain experts), talks about sharing user’s reputation:
“The question is whether there’s a way to export [a user’s reputation] and allow access elsewhere to help other sharing economy models really flourish.”
– Nathan Blecharczyk, a co-founder and CTO at Airbnb.
Isolated identity systems create silos of ID information. Such disparate systems and fragmentation of ID markets limits the ways in which useful identity information can be generated, derived and enriched (not just shared). Therefore an associated problem is poor quality and lack of meaningful identity data. One example of rich identity data is (or at least should be) credit ratings. Another interesting example that has just been mentioned in another context is reputation:
Within the context of Airbnb, your reputation is everything, and I can see it being even more so in the future, whereby you might need a certain reputation in order to have access to certain types of homes”
– Nathan Blecharczyk, a co-founder and CTO at Airbnb.
Why suggest that Blockchain can help with this? To answer this question, let’s look at one of the key characteristics of the Blockchain technology – the immutability (unchangeability) and transparency of historical transaction records. All the identity transactions executed on Blockchain remain in the history and cannot be deleted or altered. This means that history of identity transactions can be held in a sort of public registry (this does not imply that actual personal data is transparent – let’s put aside the privacy issues for a moment). And therefore the history of identity transactions across organisations can become a basis from which new identity information is derived (through aggregation, referencing & vouching, statistical analysis, cross-attestations etc).
I call reputation an identity derivative (because it is derived from the attributes of an identity, it is not an attribute itself) that can be dynamically changed and simultaneously used in a Blockchain environment. Another connected identity derivative is “provenance”. Proof of provenance shapes one of the promising business cases for Blockchain. For example, “provenance” attributes can be used by insurance companies as a source of reliable information about the history, reliability and origin of a document, a digital good or a physical good with digital representation. See our favourite example of Everledger, a Barclays accelerator startup that records provenance of diamonds on the blockchain.
Thus, the promise of “Blockchain for Identity” is to tackle the problems mentioned above: lack of interoperability and lack of meaningful identity data. Potential is – to enable sharing of identity information and to create enriched identity derivatives that could in turn open doors to new business cases in trade, commerce, capital markets – any area in which identity-based decisions are made on daily basis really.
Identity is fundamental to businesses and markets today – so changing how it works could drastically transform to the way businesses operate.
Big risk. And big opportunity.