Blockchain ID & Self Sovereign Identity

Blockchain remains largely a hype technology despite growing disillusionment, yet identity-related applications stand out as one of its most promising use-case clusters. “Blockchain ID” is an umbrella term covering identity and access management capabilities that use blockchain for part of the solution, and the market spans KYC, authentication, and broader ID management efforts, including ambitions for universally usable identities. Approaches vary widely by use case, choice of blockchain (public vs. private/community), degree of decentralization, handling of personal data, and solution maturity—ranging from pilots to products with paying customers.

A central concept is Self-Sovereign Identity (SSI), which aims to shift control of identity data and personally identifiable information (PII) back to individuals. SSI typically relies on a user-controlled wallet on a personal device, holding identifiers and credentials, while the blockchain stores decentralized identifiers (DIDs) and related cryptographic material (e.g., public keys and addresses), intentionally avoiding PII on-chain to support Privacy by Design. SSI supports controlled, peer-to-peer sharing of agreed data, potentially governed by smart contracts, though implementations differ significantly.

KYC is currently the most crowded blockchain ID segment, leveraging tamper-proof proofs of verified identity to enable re-use across a shared ecosystem, reducing cost, friction, and user dropouts. Authentication solutions often register trusted devices and allow multiple organizations to rely on a common authenticator app, sometimes adding features like payments. Universal ID management remains less mature, largely due to the need for critical mass across users and relying parties.

Key challenges include wallet/key security, weak multi-device wallet synchronization, blockchain governance risks (forking or networks failing), volatile transaction costs, and the necessity of true pseudonymity. Successful implementations require Security by Design and Privacy by Design, blockchain flexibility, robust fallback options, and scalable vendor business models.

• Blockchain data is sequenced, time-stamped, and designed to be tamper-proof.
• Distributed ledger technology stores records across multiple nodes by default.
• Blockchains range from public and anonymous networks to private, permissioned ones with different performance and transaction costs.
• Many blockchain-based solutions remain in pilot stages; some have failed, and some are in productive use.
• Blockchain ID solutions span use cases including KYC, authentication, and ID management.
• SSI implementations commonly use a user-owned wallet running on an individual’s device.
• In SSI approaches, the blockchain stores decentralized identifiers (DIDs) and related public-key information rather than PII.
• KYC processes are costly for businesses and cumbersome for individuals, contributing to dropouts.
• Authentication approaches often store information about a registered, trusted device where an authenticator app runs.
• Blockchain governance issues such as forking or a blockchain going out of business can disrupt dependent solutions.

• “Blockchain is still a hype technology, even while there is some disillusion.”
• “There is no value in itself by relying on Blockchains.”
• “There is not the single one approach on Blockchain ID.”
• “Customers should start with their business challenge.”
• “The most prominent concept within the field of Blockchain ID, is SSI – the Self-Sovereign Identity.”
• “This concept is driven by the target of handing control about identities and related PII back to the individual.”
• “However, there is no PII stored on the Blockchain, which is essential to meet the requirements of Privacy by Design.”
• “Given that KYC processes are costly for the businesses and cumbersome for individuals, such re-use provides obvious benefits.”
• “Forking or Blockchains going out of business will cause disruption.”
• “Last but not least, there must be a good business model.”