What Is the Role of Crypto in Blockchain Identity Management
Cryptocurrency is growing more and more each day, with many realizing its varied benefits and uses. With the modern world’s current interconnectivity, there is a higher demand for technologies of this nature. More specifically, the need for online safety and security through anonymity to mitigate cyber threats is at an all-time high.
The potential behind the decentralized nature of blockchain technology is a game-changer when it comes to the concept of identity management. As a result, crypto could play a pivotal role in encouraging users to make use of decentralized identity systems to help make the internet a safer place.
The Rise of New Cryptocurrency in Identity Management
With traditional identity management systems, there is the ever-looming threat of security vulnerabilities and a lack of user control. Naturally, this could prove to be off-putting for users who prioritize online safety and prefer multiple layers of security. In comparison, blockchain sports an array of characteristics that align with the current need for online safety.
This includes the fact that it is decentralized, there is added transparency for users, and it is immutable. In this context, the emergence of new crypto currency tokens constantly create new options for traders and users while providing both investment opportunities and room for industry expansion. This ecosystem can then directly influence whether this form of identity solution is able to successfully function. Many of these new currencies utilize the type of technology required to power and maintain the type of system that guarantees safety.
For one, SSI (Self-Sovereign Identity) is an inherent part of how blockchain allows users to break away from central authorities. Furthermore, it helps users to own and control their digital identities through the use of these new cryptocurrencies.
The use of SSI offers its users enhanced privacy, proving more advanced than other online alternatives. Additionally, there is less chance of fraud occurring as its seamless verification processes make it impossible for these assets to be infiltrated.
Crypto in Decentralized Identity Ecosystems
While it may not seem like it, cryptocurrency has many uses outside of just being a digital currency. For one, where transaction fees are involved, crypto covers the cost of recording data and identity verification within the blockchain. To further elaborate, this means any network participants are compensated for the action of storing, creating, or verifying an identity.
Additionally, users are provided staking and governance control wherein they can, in essence, facilitate the decision-making process of that particular network. In doing so, this ensures the decentralized platforms develop with users’ best interests at heart as they take a community-driven approach.
Decentralized identity systems cannot function without the help of third-party service providers or validators. These providers perform crucial tasks such as identity verification or maintaining network infrastructure. To incentivize providers and ensure high-quality and consistent services, they reward tokens in exchange for task completion.
Finally, there is the prospect of users being paid in exchange for their data instead of it being collected as a standard by centralized platforms. This new model lets users decide whether they want to grant access to their personal data (ranging anywhere between age, gender, and browsing patterns). If access is granted, a micro-payment is made in the specific platform’s cryptocurrency, which, in turn, gives users that much more control.
Emerging Tokens for Decentralized Identity
There are quite a few crypto tokens in development that can significantly help grow decentralized identity management systems. As this is an ever-growing and ever-changing space, there are constant changes communicated where these projects are concerned. Here are some examples of these new crypto token projects.
DOCK
Dock (DOCK), founded in 2017, is a verifiable credential platform that seeks to grow the decentralized identity space. It does so through the use of an ID wallet and a dedicated blockchain. Aiming to become an open-source, global protocol, both individuals and organizations can issue and manage cryptographically secure credentials.
CVC
Civic (CVC) is another platform that focuses on expanding decentralized identities through seamless user management and proof of personhood verification. The aim is for users to tokenize their identities, make them private, and reduce the risk of identity theft. Using blockchain tech and smart contracts significantly reduces the need for KYC processes.
KEY
Selfkey (KEY) is a digital wallet for users to store their identity data and documents. It is designed to give users full control over this information. The token, KEY, can be used within the Selfkey ecosystem to access (and pay for) various legal and financial (amongst many other) services. The added bonus of allowing user governance means token holders have a direct impact on how this project will develop going forward.
ONT
Ontology (ONT) is a Web3, high-speed data, and identity solution that also allows users full control of the ID data through their ONT ID framework. This development is unique in that it has a dual-token model that utilizes ONT and ONG for different functions.
ONG
For example, ONG (short for Ontology Gas) can be used to pay for transactions or services as these usually require an operational fee which it will cover. However, ONT will mainly be used for voting on platform developments as well as user staking.
Use Cases and Applications
While many of these new developments might sound great in the context of crypto-based activities, there is an array of practical uses to be explored. An easy (and obvious) example would, of course, be to use them as a digital wallet that goes beyond just storing money. In an age where everything is done digitally, it makes sense to keep your important documentation and information close to your person.
What better way to do this than to carry it in your digital wallet, which you have full control and access over? Furthermore, password management is another practical use of these platforms as you can store this data without the risk of it being stolen or hacked.
These platforms can significantly reduce verification periods when signing up for a service that requires personal information. As a result, KYC processes are sped up as you can instantly share certain data with specific services/service providers. For countries where voting can be done online, these tokens can offer quick and easy identity verification to reduce the risk of fraud, making these tasks seamless and efficient.
Finally, businesses can also benefit from this identity solution, especially where the supply chain is concerned. Therefore, it would be much easier for a company to use blockchain to keep track of where products originate from, how they were sourced, and who handled them.