Michael Mainelli at Harvard Business Review: “…numerous smaller countries, such as Singapore, are exploring national identity systems that span government and the private sector. One of the more successful stories of governments instituting an identity system is Estonia, with its ID-kaarts. Reacting to cyber-attacks against the nation, the Estonian government decided that it needed to become more digital, and even more secure. They decided to use a distributed ledger to build their system, rather than a traditional central database. Distributed ledgers are used in situations where multiple parties need to share authoritative information with each other without a central third party, such as for data-logging clinical assessments or storing data from commercial deals. These are multi-organization databases with a super audit trail. As a result, the Estonian system provides its citizens with an all-digital government experience, significantly reduced bureaucracy, and significantly high citizen satisfaction with their government dealings.
Cryptocurrencies such as Bitcoin have increased the awareness of distributed ledgers with their use of a particular type of ledger — blockchain — to hold the details of coin accounts among millions of users. Cryptocurrencies have certainly had their own problems with their wallets and exchanges — even ID-kaarts are not without their technical problems — but the distributed ledger technology holds firm for Estonia and for cryptocurrencies. These technologies have been working in hostile environments now for nearly a decade.
The problem with a central database like the ones used to house social security numbers, or credit reports, is that once it’s compromised, a thief has the ability to copy all of the information stored there. Hence the huge numbers of people that can be affected — more than 140 million people in the Equifax breach, and more than 50 million at Home Depot — though perhaps Yahoo takes the cake with more than three billion alleged customer accounts hacked. Of course, if you can find a distributed ledger online, you can copy it, too. However, a distributed ledger, while available to everyone, may be unreadable if its contents are encrypted. Bitcoin’s blockchain is readable to all, though you can encrypt things in comments. Most distributed ledgers outside cryptocurrencies are encrypted in whole or in part. The effect is that while you can have a copy of the database, you can’t actually read it.
This characteristic of encrypted distributed ledgers has big implications for identity systems. You can keep certified copies of identity documents, biometric test results, health data, or academic and training certificates online, available at all times, yet safe unless you give away your key. At a whole system level, the database is very secure. Each single ledger entry among billions would need to be found and then individually “cracked” at great expense in time and computing, making the database as a whole very safe.
Distributed ledgers seem ideal for private distributed identity systems, and many organizations are working to provide such systems to help people manage the huge amount of paperwork modern society requires to open accounts, validate yourself, or make payments. Taken a small step further, these systems can help you keep relevant health or qualification records at your fingertips. Using “smart” ledgers, you can forward your documentation to people who need to see it, while keeping control of access, including whether another party can forward the information. You can even revoke someone’s access to the information in the future….(More)”.