Self Sovereign Identity Basics

Self Sovereign Identity

SSI companies are working to develop systems for storing personal identity to give individuals control over specific details of their private information.

Consider how often you have to show your ID or social security number to prove identity or access a service. Sharing sensitive info with complete strangers is bad enough. How about when the request includes making a copy of your information?  

From schools to health clubs to doctors’ offices, different businesses have to comply with industry data privacy laws, such as  Family Educational Rights and Privacy Act (FERPA) and the Health Insurance Portability and Accountability Act (HIPPA). 

The regulations exist to protect sensitive personal information, but unfortunately, data is routinely stashed in unlocked cabinets and poorly secured databases. To access services, we have no choice but to share private information with strangers and organizations that may or may not have adequate security measures

Unfortunately, two of the largest sectors collecting personal data โ€“ healthcare and the public sector โ€“ have had the weakest security over the last few years.

644a974b7487e084abc27e6e Data breach piechart
Source: It Governance, Q1 2022

Most people have received an unwelcome notice of data breach from their school, hospital, or financial institution. Why does this keep happening?

One problem is centralized databases. In simplified terms, if a hacker can break into a single database, they can access all the records in one incident.

In all cases, individuals have no control over where the data is stored or even knowledge of who exactly has access. Governments store social security numbers, birth certificates, and passport info; banks store financial data; schools store grades and degrees; credit bureaus access scores and financial histories; and healthcare providers keep sensitive medical records.

The Rise of Big Data

While stored data security is an urgent concern, the other massive harvesting of individuals’ data for the last 20 years has been tech platforms collecting data about users and their online behavior.

Meta/Facebook, Google and others built massively profitable ad revenue models collecting user data and selling it to advertisers. For their part, the users have not seen one dime of compensation for sharing their data.

As the massive data breaches of the last decade show, technological innovation quickly outpaced legacy computer systems and regulatory sophistication. Many existing institutions have proven to be poor guardians of the data entrusted to them. Citizens are understandably upset and looking for more control and better solutions.

Web 3 may offer solutions via a new digital asset called self-sovereign identity (SSI). SSI companies are working to develop innovative systems for storing personal identity. In theory, these systems will be more secure and give individuals control over who has access to specific details of their private information. Let’s take a closer look.

How Self Sovereign Identity Differs From Traditional Identity Models

In a traditional identity model, a central authority such as a government, financial institution, or social media platform stores and manages an individual’s information. Individuals have little control over their personal information and must rely on the central authority to protect it.

In contrast, SSI is based on the principle of individual ownership and control of personal data. In an SSI model, individuals maintain their digital identity independent of any central authority. They control their personal information, including who has access to specific details.

SSI relies on blockchain technology, cryptography, standardized formats, and decentralized systems to enable individuals to control their digital identities. SSI promises to offer greater privacy, security, and control over personal data than traditional identity models. It also has the potential to facilitate new and innovative applications in areas such as digital identity verification, secure data sharing, and decentralized finance.

The Benefits of Self Sovereign Identity

SSI has several benefits, such as those below.

  1. Decentralized control: SSI gives individuals control over their personal information and digital identity. They can store their identity data securely and use it to access various Web3 services without relying on a central authority to keep it safe.
  2. Improved privacy and security: SSI eliminates the need for individuals to share sensitive personal information with third-party service providers. Instead, they can provide verifiable credentials that prove their identity without revealing unnecessary information. This reduces the risk of identity theft and other types of fraud.
  3. Interoperability: SSI creates standardized verifiable credentials for use across different Web3 services and platforms. Instead of sharing private information with various services, a user can simply share the same SSI wallet information without creating new accounts or repeatedly providing the same information.
  4. Reduced friction: SSI minimizes the friction involved in identity verification and sign-in processes. This can lead to a better user experience.
  5. More control over data: SSI enables individuals to control who can access their personal information and for what purposes. This gives them more control over their data and reduces the risk of data misuse.

Technical Aspects of Self Sovereign Identity

Broadly speaking, there are two competing models for SSI implementation. One is built on digital wallet technology, and the other is called an โ€œidentity layer.โ€

As any crypto investor knows, a digital wallet is a type of software that allows individuals to store and manage their digital identities and credentials โ€“ including those that allow access to crypto funds. Owners access their wallet through a private key.

Some SSI companies use wallets as a way to store and manage user identities and credentials, as they provide a secure and user-friendly way for individuals to manage their personal data.

An identity layer, on the other hand, is a more comprehensive approach to building an SSI system. It provides a framework for building decentralized, interoperable, and secure identity solutions.

An identity layer can include various components, such as decentralized identifiers (DIDs), verifiable credentials, and protocols for secure communication between different identity providers. Several SSI companies use an identity layer as the foundation for their SSI systems.

Challenges and Limitations of Self Sovereign Identity

As with all innovations, there are challenges and limitations to SSI adoption.

  1. Adoption: One of the biggest challenges facing SSI is adoption. SSI requires a fundamental shift in who manages identity. Giving control back to individuals will require the cooperation of many stakeholders, including governments, businesses, and individuals. This may take time and effort to achieve.
  2. Interoperability: Another challenge is interoperability. SSI relies on standardized formats and protocols to enable different systems to work together. However, there are still many different SSI platforms and standards, which can make interoperability a challenge.
  3. Technical complexity: SSI requires an understanding of blockchain technology, cryptography, and other technical components. This can make it difficult for organizations to implement and use SSI effectively.
  4. Security and privacy: While some Web 3 advocates present the view that SSI’s superior security and privacy are a given, the truth is that SSI security is not foolproof. If we look at cryptocurrency as a proxy for SSI security, the news is not promising. Hackers continue to drain cryptocurrency wallets at increasingly high rates. SSIs store highly valuable personal data. As they become more popular, they will also represent rich targets for hackers.

As you can see, SSI faces several challenges and limitations before it achieves widespread adoption.

Real-World Examples of Self Sovereign Identity

SSI is a relatively new concept, but there are already several real-world examples of its use in Web3. Civic is an SSI platform enabling individuals to control their digital identities and securely share personal information. It uses a mobile app and biometric authentication to provide a user-friendly experience. Civic has been used for applications such as age verification and secure access to online services.

Kiva is a microfinance platform that uses SSI to verify the identity of borrowers. It enables individuals to create their own digital identities and store verifiable credentials that can be used to apply for loans. Kiva has used SSI to expand access to microfinance services in regions where traditional identity verification methods are unavailable.

The United Nations World Food Programme (UNWFP) uses SSI to provide secure and efficient aid distribution to refugees. The UNWFP uses a blockchain-based system called Building Blocks, which enables refugees to create digital identities and receive aid without relying on traditional identity verification methods.

While SSIs could provide a secure and portable way for refugees to access identity and other documents, the real-world implementation is still controversial. Results largely depend on what institution is issuing the SSI. Some researchers have found that governments and others may  use SSIs to extend bureaucratic and commercial control.

Moving Ahead with Self Sovereign Identity

Self Sovereign Identity (SSI) is an emerging technology that offers individuals greater control over their personal data and identity. Much like cryptocurrency, SSI is still in its early stages of adoption, but has the potential to transform the way we manage identity and personal data online, providing individuals with greater autonomy and control over their digital lives.

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The above is for general info purposes only and should not be interpreted as professional advice. Please seek independent legal, financial, tax or other advice specific to your particular situation.