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What You Need to Know

Blockchain technology is commonly touted as the next best thing for representing everything we have on the web, including our data, social media profiles, images, bank account info, shopping preferences, educational qualifications, and website usage behavior.

However, blockchain technology isn’t a perfect system for identity management. Here’s what you need to know about securing your identity on the blockchain.

Why Blockchain Is a Solid Online Identity Solution

Blockchain is a distributed—and, most times, decentralized—ledger that records data in a checkable and unchangeable way. These features make blockchain technology a good system for creating and managing digital IDs—all you need to do is create a decentralized identifier (DID). And there are several top decentralized identity protocols with which you can create a DID.

With blockchain-based digital IDs, you can eliminate centralized authorities, independently managing and verifying your identity across several domains and applications.

Blockchain IDs are possible because of public key infrastructure (PKI), a system of encryption and decryption that uses public and private keys. Public keys, like bank account numbers, serve as identifiers, while private keys, just like pins or passwords, establish ownership and enable access.

Challenges and Risks of Using Blockchain for Identity and Data Management

Despite all its promising potential, blockchain technology is riddled with challenges that must be addressed.

1. Scalability Challenges

Three animated characters holding the blockchain blocks
Image Credit: Freepik

A major issue plaguing blockchains is scalability. While Visa, a centralized payment network, asserts on its website that it can handle about 65,000 transaction messages per second, Bitcoin and Ethereum, popular decentralized blockchain networks, can only manage 7 and about 30 transactions per second.

More adoption comes with more competition for bandwidth, and expanding bandwidth in decentralized blockchain systems is complex and difficult because peer-to-peer nodes are employed rather than centralized infrastructure.

This means updating credentials or verifying identity claims may be slow and costly. Also, the amount of identity data that can be stored on-chain may be small.

2. Lack of Regulatory Clarity

An illustration of GDPR

Regulations are another big challenge of using blockchain-based identity solutions. Different countries have different laws regarding identity management, like the European Union’s General Data Protection Regulation (GDPR). How will these regulations align or conflict with the principles of blockchain?

For instance, if you add personally identifiable information (PII) to a blockchain, you can’t alter or delete it. This attribute is against the GDPR’s “right to erasure,” which allows your data to be erased once you deem it unnecessary.

3. Security Risks

Despite the high-level security blockchains offer due to cryptography and consensus algorithms, you can still fall prey to attacks or errors. You may also lose your private key and become unable to verify or manage your digital ID.

Similarly, all network participants can view data recorded on the blockchain. While this transparency makes the blockchain more reliable, it also threatens privacy, revealing more information than desired.

Five Best Tips for Securing Your Identity on the Blockchain

Despite the risks associated, you can securely use blockchain for identity management. Here are five tips that’ll help you optimize blockchain technology.

1. Keep Your Private Keys Secure

Every DID you create is backed by a private key. This private key is your master key, literally. It proves that you are who you are and that all the information you record on the blockchain belongs to you.

Never share your private key with anyone; don’t save them on devices or in places you share with others. For instance, don’t save your private key in a note app on a laptop you share with some friends. Instead, you can store your private keys in a secure diary or cold wallet, safe from the internet and prying eyes.

2. Use a Reputable Decentralized ID Protocol and Wallet Provider

ONT ID website homepage screenshot

You’ll need a decentralized ID protocol and wallet to create, manage, and store your public keys, private keys, DIDs, and verifiable credentials (VCs).

Remember that blockchain IDs don’t just eliminate intermediaries; they eliminate the need for intermediaries to store your data on their servers. Instead, your data will be cryptographically recorded on a blockchain with the help of a decentralized protocol. So, you must select a credible protocol.

Most times, the decentralized identity protocol you select will have a wallet service, which you can employ to store and manage your blockchain-based digital ID. For instance, ONT ID offers the ONTO Wallet, a cross-chain wallet you can use to manage your digital ID, assets, and data.

However, this isn’t always the case. Some decentralized identity protocols don’t have wallet services; you’ll need a wallet that supports your chosen protocol.

You must select a well-known wallet provider—software or hardware—that employs high-level security features. Check several independent reviews and the providers’ websites to catch any discrepancies.

3. Enable 2FA Whenever Possible

If you enable two-factor authentication (2FA), you’ll need an additional means of verification asides your password. For instance, you might need to scan a registered fingerprint or submit a one-time password (OTP) obtained via an authenticator app like Google authenticator.

When you create a decentralized ID, security becomes your responsibility. So you should implement as many security measures as you can. Add an extra authentication layer via security keys, authenticator apps, biometrics, or hardware tokens whenever possible. This will enhance your security by preventing unauthorized access.

4. Be Cautious of Keylogging Software

This spyware records every click on your keyboard and sends them to a remote server. Keylogging software can expose your private key, password, and other sensitive information to hackers.

Avoid downloading or opening suspicious files or links, and use antivirus software to scan and remove any potential threats. Also, ensure that all your systems are updated and patched regularly.

5. Stay Up-to-Date With Security Best Practices

A Padlock Placed on the Worldmap in Binary Background

Security is not static, and the same goes for blockchain technology. As blockchain ID security evolves, stay in the know.

Keep track of experts in the field, as well as emerging security standards. As you stay informed, ensure you implement best practices and recommendations from credible experts.

Blockchain as the Future of Digital Identity

Blockchain technology can revolutionize how we manage and control our digital identities. However, just like other innovations, it poses some risks that must be addressed.

By understanding these risks and implementing best practices, you’ll be one step closer to effectively securing your identity on the blockchain.


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