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Blockchain: A New World of Decentralized Identity

The views expressed are those of the author and do not necessarily reflect the views of ASPA as an organization.

By Patrick Mulhearn
April 14, 2022

All my apes are gone” rang out across social media—a clarion call announcing a new iteration of the travails of digital ownership. Who owns data? Can we own data?

Most people are aware of their online data and are perhaps vexed by the concept of ownership of our digital selves. The underlying technology of both non-fungible tokens—such as the apes and similar digital fundraising campaigns—and cryptocurrency suggests a new era in decentralized ownership. This concept is broadly known as web3 and is rooted in a technology called blockchain that encodes personal information in shareable addresses, rather than being warehoused by a central authority.

Blockchain—a peer-to-peer network that sits on top of the internet—was initially proposed for bitcoin, the virtual system that decentralizes issuing currency, transferring ownership and confirming transactions. Bitcoin was the first application of blockchain technology, but national and local governments across the world are exploring its potential now for uses ranging from identity to property records—even voting.

Blockchain for Neophytes

Blockchain is essentially a public ledger, where all transactions are stored in a chain of data packages (blocks) and distributed across a peer-to-peer network. The blocks form an unbroken “chain” that acts as a digital paper trail, with each chain comprising the history of every transaction for which it was used.

The ledgers are open for anyone to view and are distributed across the network, and update with every transaction so the provenance of the data is decentralized and comprehensive. The chains themselves serve as a sort of address that both identifies the object and every transaction related to the object. These chains are themselves cryptographically encoded and the actual owner possesses the only key, which is how ownership is asserted.

The core benefits of this technology are transparency and trust: blockchain’s unique combination of cryptography and distributed networking allows a tamper-resistant, immutable ledger “that contains confirmed and validated transactions and provides a foundation for governments, citizens and businesses to trust one another.” And for government applications, this makes the technology potentially potent.

Useful with Caveats

But blockchain should still be viewed as an emerging technology and is not without risks, especially if people are relying on their blockchain addresses for identity.

If, for example, a person loses their encryption key—which is usually stored in a protected digital application such as a wallet—they lose access to their blockchain. Governments can develop processes for verifying and certifying blockchain identity documents using biometrics, and such a hybrid approach is most likely the best system for end users as it minimizes individuals’ exposure to theft while providing a means of recovering data.

Another concern is what’s known as the Byzantine fault, which strikes at the distributed network blockchain uses for verification. If nodes in that network are compromised, then the verification of blockchain data can be compromised. This is of particular concern for online voting, one of the more controversial applications of this technology.

Ultimately the question for governments is whether blockchain represents the simplest solution available and if not, then who really needs it?

Governments Take the Leap

One use that seems particularly viable is the self-executing contract, which would remove the need for intermediaries such as notaries, brokers and attorneys to verify transactions. Transactions are managed directly by the buyer and seller with the history of ownership embedded directly in the transaction code.

A similar application is the smart contract, where ownership of some shareable asset—such as literature, music or a service—is encoded in blockchain and every sale of that asset automatically triggers payment to the owner or owners on the chain.

MIT has recently developed a standard for digital records called Blockcerts that are intended to give users the capability to share their official records in a way that is tamper-proof and internally verifiable. And using blockchain for identity documents, professional certifications and vital records is most likely the best use for government agencies, as blockchain can store all relevant identity data within the address. Switzerland is developing a system that uses a QR code to verify identity by matching it to a person’s private key, while Estonia is issuing identity cards with vital records embedded in the card using blockchain. In both cases, a central government does the initial verification of the person’s identity and is then a second point of verification should the user lose their blockchain key.

In the United States, the Department of Homeland Security is considering blockchain to replace paper identity documents and the State of California has created a blockchain working group which has proposed a series of pilot projects including a digital wallet for individual identification. And Santa Cruz County, California, has taken this recommendation one step further by developing a digital wallet using blockchain to encode credentials such as marriage licenses, birth certificates and other county documents. “Santa Cruz County is leading local governments in adopting blockchain technology for government services,” said Ian Calderon, former Majority Leader of the California State Assembly, and this initiative will “drastically improve the way governments provide services to their constituents.”

Author: Patrick Mulhearn, MPA, is the director of broadband policy for CTC Technology & Energy, a public sector broadband consultancy. Prior to his work in the private sector, he was the policy director for a local government elected official in Santa Cruz, CA, where he focused primarily on policies relating to telecommunications and transportation infrastructure. He can be reached at [email protected].

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