The quest for digital identity

Digital identity is one of the most potentially transformative applications of blockchain. Having an official identity is the gateway to everything we take for granted. Without one, we would struggle to access government services and education, jobs and financial services. As the paperwork for all of these moves inexorably online, the quest for reliable digital identity is underway. This brings with it an opportunity to establish an official identity for the estimated 1.5 billion people in the world who still don’t have one, but also exposes some real challenges.

Digital identity initiatives

The Recommendation on the Governance of Digital Identity, adopted by the OECD Council in June 2023, encourages countries to develop and govern digital identity systems as digital public infrastructure. There have been blockchain-based digital identity projects running for years among different countries and agencies, and some of these are being proven at extraordinary scale.

• In Estonia, the X-Road Data Exchange Layer has been managing all aspects of public life and identity almost since the inception of blockchain, including the e-Estonia ID. A number of other countries have adopted the X-Road ecosystem including Finland, Iceland, and parts of South America and Asia.
• The World Food Programme’s Building Blocks initiative was launched in 2017. It runs on a permissioned Ethereum chain adapted for humanitarian needs, including a zero-knowledge identity system. It’s processed over 25 million humanitarian transactions since its inception.
• India’s Aadhar decentralised identity system, run by the Unique Identification Authority of India, has issued around 1.3 billion cards to citizens to help them access online services. For some, this was their first identity card.

Stumbling blocks

Developing digital identities presents challenges, not least that systems are fragmented and therefore not interoperable on either technical and political levels. A refugee receiving a digital identity from Building Blocks cannot port this to the country in which they eventually settle. Technical complexity, cybersecurity risks, and concerns over data protection loom large. There are also cultural considerations – some countries have been comfortable with national identity cards for decades, while others recoil at the idea despite having to produce passports, driving licences and other evidence of identity at every turn.

Could private initiatives unite global citizens under a single identity? That is the vision of Sam Altman’s Worldcoin, aiming to “provide universal access to the global economy no matter your country or background”. The technology secures iris scans with Zero-Knowledge proofs (ZKP) that confirm a digital wallet is linked to an encrypted scan, but without identifying which scan that might be. Launched in July 2023, it claims to have registered four million ‘unique humans’ but its path has not been smooth. Data is a valuable resource and some countries including Hong Kong, Kenya, South Korea and more recently Spain and Portugal have banned data collection. Concerns include whether Worldcoin can resist leveraging its registry, and whether users have actively consented to the use of their data in different ways. More worryingly, with a financial incentive of 25 Worldcoins for an iris scan, there is an incentive to spoof the system. Videos have been found on Tiktok with full instructions on how to do this. The unique humans database may not be as reliable as Worldcoin might hope.

Digital identity is the holy grail of blockchain, and we are on the road to achieving it, but the journey is going to be long.

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