Having a driver’s license or identity in your wallet is something normal in our Western society. It’s something everyone has as standard, so we hardly think about it. Whether you are rich or poor, young or old. From the moment the parents register a child with the Municipality, the official identity is recorded in the Personal Records Database and you will receive a Citizen Service Number. Will it soon be replaced by a digital identity, or a Self-Sovereign Identity? In this article I will tell you all the ins and outs about this new form of identity.

An official identity is important and necessary in arranging many things in life. From arranging a bank account and insurance, to obtaining a loan or mortgage. And for access to almost all government services and nowadays even buildings. The privacy laws and regulations have only made this more strict. As a result, more and more people are asked to identify themselves.

Lack of formal identity and identity fraud

But an identity is not so self-evident; more than 1 billion people worldwide have no official identity. As a result, they cannot open a bank account, set up a business, vote, receive healthcare or get an official job. One of the United Nations’ Sustainable Development Goals is that all people on our planet should have a formal identity by 2030. It has set up the ID2020 Alliance for this purpose.

But it is not only people who do not have a formal identity who experience major problems in their lives as a result. People with a formal identity in Western countries have problems with their formal identity due to large-scale fraud. In the Netherlands, 1 in 10 people is a victim of identity fraud, worldwide there were as many as there were people living in the Netherlands last year, and another victim is added every two seconds. Last year, the damage to consumers was $56 billion.

One of the most underexposed, but promising areas where blockchain technology will have a tremendous impact, is Self Sovereign Identity (SSI): a digital identity. You are back in control of your own identity. Not only physically, but also digitally. Control how your personal data is shared with other persons and/or parties, so that you only share the necessary data in a transaction or interaction.

One ID to rule them all

Just think in how many places your address details are known because of online shopping. What if you move? What if your password becomes known to hackers due to a data breach? Then you would rather update everything once from your ‘wallet app’ on the phone, than go through all parties one by one.

Storing and monitoring your identity on your own phone is not only much easier to use, but also much safer according to studies. The controlled sharing of your personal data also offers countless invaluable opportunities in terms of analysis, collaboration and predictions. Concrete proposals for this were already made in 1985 by the creator of one of Bitcoin’s predecessors, David Chaum, but it is now really starting to take shape.

Digital identity (SSI) in practice

The best example of the use of blockchain technology within the SSI movement, I continue to find the World Food Program of the United Nations in Jordan. Where 400,000 refugees have been given a digital ID on their mobile phone. By scanning the eye, for example, one can pay in a store without the need for money. Or conjure up your own current medical file with a healthcare provider. Refugees cannot be deprived of money they have received from the UN. And the UN can see perfectly real-time which goods it has to deliver to which stores and the medical file is always up-to-date and never lost again.

The largest democracy in the world, India, already works with a digital ID based on biometric data: Aadhaar. Today, 99% of adult residents have an Aadhaar ID, which is used in all interactions with the government. From paying taxes to enrolling in education. This makes the government a lot more efficient and less sensitive to fraud. The World Bank has already called it the most advanced ID system in the world.

Baby on the blockchain

Many governments are working on a digital identity in the background. From Tanzania, where the first baby has already been registered on the blockchain, to Dubai, which will copy the Indian Aadhaar 1–1. It is one of the fundamental building blocks of European governments for the European Union to focus on in the coming period. A start was made on this in 2014 with the electronic IDentification, Authentication and Trust Services (eIDAS) legislation. It was thoroughly reformed last year after many experiments and experiences from frontrunner Estonia and should really get fleshed out next October.

In our own country, Rabobank has been researching the use of SSI since 2016 and there are great startups like Tykn that offer turnkey SSI solutions. The Dutch Blockchain Coalition and Digicampus have been investigating concrete options for the Dutch government since last year.

DigiD already works well as a central ID solution for governments. So we have to wait for a decentralized SSI, with which you can also authenticate at companies. The corona pandemic has accelerated the urgency of an eID, because of the vaccination passport. All European governments are working individually and jointly on SSI. So we have to wait for the concrete translation, as with the Indian Aadhaar.

Concerns about privacy at SSI

The opponents mainly state their concerns about privacy with a digital identity. Blockchain is known for its immutable nature. While in Europe we know the ‘right to be forgotten’ within the GDPR legislation. Something the EU Blockchain Observatory is currently cracking its brains on. Nevertheless, India is also looking to put Aadhaar on the blockchain, because the system still centrally stores the data. Which of course creates a huge security risk.

In addition, the question arises; do you have to make the ID mandatory when, for example, creating a social media profile, so that you can never respond anonymously again? Fake news, hate speech and rigged elections could disappear like snow in the sun, but one of the most basic fundamental rights; freedom of expression can be seriously compromised.

The many hacks that we see in the news every day are creating more and more pressure to take concrete steps in the SSI field in the short term. The coming year will therefore be an interesting one within the European Union, because of all the concrete plans that will be unfolded. As with new technological developments such as autonomous driving and the CBDCs, the technology is already quite advanced. It is precisely the ethical dilemmas and practical implications that still prevent its introduction. In any case, we are well on our way. And I look forward to all the cool developments in the coming months.

Jan Scheele is active in the web3 (blockchain, crypto, NFTs, DeFi) industry since 2013. Besides (former) CEO of a web3 scaleup and founder of an advisory boutique (working for governments, family offices and several multinationals), he is Digital Leader at the World Economic Forum and Board Member at the Blockchain Netherlands Foundation (BCNL). He is writing, consulting, speaking and training regularly about everything web3, all over the world. Furthermore, he is currently finalizing his book about the rise and global impact of blockchain technology.