Regulation

Blockchain and identity: Five predictions – and how they fared

In 2017, One World Identity (OWI), an independent advisory firm focused on trust and the data economy, issued a report that sought to lay a foundation for understanding blockchain and identity. The report identified five primary conclusions on 2017’s blockchain and identity outlook:

  • Smart contracts are underexplored
  • Authorisation use cases have potential for growth
  • Blockchain has a problem with identity creation
  • The on-chain/off-chain pivot is a persistent challenge
  • Investors and entrepreneurs need to better align blockchain functionality with identity use cases

Earlier this month, OWI issued a new report addressing its 2017 conclusions titled, “Blockchain and Identity in 2018: A Year of Promise and Pilots.” The report explores whether last year’s five assertions have come to fruition and sets up five new predictions for 2018.

Summarised in the new report, OWI found that the market started addressing the questions critical to blockchain development in the identity space, with solutions forming around a defined set of identity use cases, and governance structures are designed with targeted functionalities and regulatory concerns in mind. Of OWI’s conclusions from 2017, here is how they fared:

Smart contracts are underexplored

A few early and established tools prove the viability of smart contracts for identity use cases. Smart contracts are central to the authentication architecture of the more established players in the space. The overall velocity of development in the smart contract space, both for identity and broader use cases, has increased. Security concerns are still a major factor, but smart contract technologies and the ability to troubleshoot them are maturing.

Authorisation use cases have potential for growth

While overall market adoption of blockchain-based authorisation solutions remains low in respect to other identity building blocks, OWI maintains its optimism about the potential of distributed ledgers for authorisations surrounding the identity of things (IDoT). Major platform players as well as enterprises have laid out plans for either experimentation or outright implementation of blockchain-based identity and authorisation, including Microsoft, Okta, IBM and major banks and financial institutions.

Blockchain has a problem with identity creation

Identity Creation for people, entities and other non-digitally-native things continues to be an enduring problem for blockchain-based identity technologies. To address the problem, organisations are combining real-world legacy identity credentials with blockchain-based security and transactability of digital identity manifestations. The technology to do this is in place today by some of the pioneers of blockchain-identity, but operational adoption at scale is still needed to properly gain grounds in this area.

The on-chain/off-chain pivot is a persistent challenge

The transfer point of identity data between a real-world person and an on-chain digital representation isn’t something a distributed ledger can solve, and translation errors are a long-term problem. Over the last year, OWI found organisations aimed to address this challenge by moving the point of physical creation and digital creation closer together.

Investors and entrepreneurs need to better align blockchain functionality with identity use cases

The past year was plagued by rampant fundraising fraud and outright scams surrounding blockchain technology – proving the need for a more critical approach for aligning existing identity issues with suitable blockchain solutions. However, the idea of “blockchain, not bitcoin” continues to gain traction, and boons the development of practical, innovative identity solutions.

Overall, many of OWI’s predictions were accurate, though the space is developing to address its most pressing challenges very quickly. The report highlights 18 companies and organisations – 13 featured companies and five up-and-coming companies to watch – at the forefront of the blockchain identity landscape. Each is shaping the development of the space and looking to address its challenges by building necessary infrastructure and developing and deploying identity-specific solutions. The future of blockchain and identity will be shaped by these players, so the infrastructure and solutions put forth in 2018, 2019 and beyond are crucial to watch.

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