Since its discovery, blockchain tech has continued to develop into numerous use cases, including identity management. Blockchain-backed ID is the new trend in ensuring verifiable identification of individuals. Earlier, governments and institutions relied on traditional-based IDs to authenticate the real identity of individuals in a given geographical location. However, this method has, over the years, been vulnerable to manipulations. This is because members of the public now have tools that can make them create fake IDs that will look exactly like the original. With these fake IDs, these criminals get to benefit from the dividends from the government and perpetuate fraud.
However, it is believed that the emergence of blockchain has been a game-changer due to its immutable ability. Therefore, governments across the world have started exploring blockchain’s capacity to issue legitimate IDs and identify fake ones. Recently, the Indian Administrative Service unveiled the integration of a Polygon-based system to issue authentic caste certificates. Apart from its ability to store immutable identity records, the tech also ensures the scalability and speed of the identity management system.
Is Blockchain-backed ID Important in banking the Unbanked?
Mainly, blockchain-backed ID is important in banking the “unbanked” due to how it provides a means of identification for individuals. Mostly, the “unbanked” lacked access to platforms, and enabling infrastructures that could help them verify their identity and explore the existing banking system. With a blockchain-backed ID, this category of individuals will have their identity captured and stored on a universally accepted platform. Therefore, giving them the opportunity to leverage the platform and become “banked.”
Meanwhile, it is worth mentioning that blockchain-based ID has some noticeable attributes that can help onboarding more people into a banking system. Foremost, it is cheap and more accessible compared to traditional data management platforms. The innovation under view provides users with a universal profile that’ll help onboard them to existing banking systems.
With blockchain-based ID, users can use a single profile on various banking platforms without having to go through the process of submitting documents all over again. Ultimately, relieving users and financial institutions the burden of submitting and gathering documents. Likewise, the innovation comes with a Self-Sovereign identity. Blockchain-based ID works on the principle of self-sovereign identity (SSI) which provides users full control over their data.
The SSI concept helps protect users’ data against centralized third parties as it only discloses a minimal aspect of their details. Consequently, safeguarding users from surrendering their details to third parties like governments and financial institutions. Similarly, blockchain-backed ID prevents users’ reliance on the aforementioned parties when making changes to their profiles. Thus, helping users to retain control and consent on how they share and access their data.
Other advantages of blockchain-backed ID
Additionally, it is easier and faster to verify profiles through blockchain-backed IDs than traditional systems. This is due to how users can use virtual signatures and private keys to confirm the authenticity of a profile. Therefore, eliminating the need for paper documents or third-party verification structures.
Blockchain systems are rigid and data recorded on them cannot be altered. This feature of the blockchain helps ensure the easy tracking of transactions during any fraud or theft case. Furthermore, the unbanked can as well enjoy an advanced level of data privacy and security with blockchain-backed ID.
Similarly, records on blockchain are immune to hacks or any means of alteration. This is due to how data is distributed across different nodes. It is worth noting that this is different from how data is recorded on central servers in most banking systems. Data on central servers are vulnerable to system malfunctioning, downtime, and hacking.
Conclusion
With the listed opportunities, blockchain-backed ID can help facilitate financial inclusion in various banking landscapes. With the benefits of the innovation, the “unbanked” will have new ways to access various opportunities in the banking sector. Basically, an unbanked individual can go through the rigorous process of verifying their data once. Then, leverage blockchain-supported ID to explore other services.
Above all, the adoption of virtual ID is beneficial to every party involved. For the service providers, it will help facilitate a wider and speedy coverage of their customers’ profiles. Ensuring that their database is intact and invulnerable to downtime. On the flip side, it will save the “unbanked” the stress of having to capture their data almost every time they attempt to explore available banking services.
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