Could Blockchain Technology Avoid Another Cambridge Analytica

7/4/2018 Could Blockchain Technology Help Avoid Another Cambridge Analytica?
RESEARCH BRIEF
Could Blockchain Technology Help Avoid Another Cambridge

Analytica?
April 3, 2018
Bitcoin & Blockchain
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Facebook and Google offer free services in exchange for user data,
but that data can be misused. Could blockchain technology help
users regain control of their information?
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The role of centralized internet giants as “digital identity brokers” is under re.
While users worry about privacy, tech giants (like Facebook and Google) primarily focus on generating
pro ts and satisfying shareholders.
These companies make money by collecting, selling, and analyzing user data, primarily on behalf of
advertisers. In 2017, Facebook brought in about $40B in advertising revenue — a gure that
represents almost 20% of the global online ad market, and is expected to grow in coming years.
https://www.cbinsights.com/research/blockchain-identity-management/?utm_source=CB+Insights+Newsletter&utm_campaign=c477d67c89-Top_Res… 1/12
BLOCKCHAIN AND IDENTITY: BUILDING A NEW INTERNET

From data privacy to supply chains, decentralized user-controlled identity could fundamentally
change how the internet works. We dive into blockchain and identity in this research brie ng.
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As these companies collect data, there’s an ever-present risk of misuse of personal information — as
most recently highlighted by the Cambridge Analytica and Facebook scandal.
“Federated identity,” in which a single credential is used to sign in across the web, is starting to gain
traction. Facebook, Google, and Twitter already offer “social sign-in,” which makes it easier for users
to sign in with pre-existing digital credentials.
While this can offer users a more seamless experience, this process also puts more power in the
hands of these internet giants acting as identity brokers, and gives them even more data.
How blockchain could shift control back to users
Users want to own their digital identities in a way that maintains privacy and permits only certain
organizations or individuals to access, store, analyze, or share personal data. At the same time,
enterprises need to identify and authenticate customers, while building a pro table data moat and
complying with user privacy regulations.
In a perfect world, identity management might look something like this:
Personal and unique to the user

Persistent and living with the user from life to death
Portable and accessible anywhere
Private, with only the user giving permission to use or view personal data
A blockchain is a type of distributed database that allows untrusted parties to agree about a shared
digital history, without a middleman.
If the shared digital history in question were an identity management system — or a database of
identifying information — it might shift power and control toward the user and away from the
enterprise.
There are two schools of thought around applying blockchain technology to identity:
1. USER-CONTROLLED IDENTITY
First is using a blockchain for user-controlled identity. A user-controlled identity is similar to a social
media account: no pre-existing identity credentials (like a driver’s license or birth certi cate) are
required to create one.
A blockchain-based account could then be used across the internet, and moreover, a user could grant
and revoke access to his or her information on a case-by-case basis.
A number of companies and organizations are working on this kind of solution, including Sovrin,
uPort, and Blockstack.
Sovrin is a nonpro t that governs a distributed identity network as a public utility. Its parent
organization, Evernym, is developing enterprise solutions on top of Sovrin, including one focused on
credit unions. Evernym has raised $7M to date.
Another solution comes from uPort, which offers a mobile wallet built on top of the Ethereum public
blockchain. The wallet will allow users to control access to their identity and tokens. Currently uPort
is working with the city of Zug (in Switzerland) to register identities on the Ethereum blockchain.
Finally, Blockstack aims to reimagine internet privacy, with identity as the foundation. Users will be
able to control their identities, issuing and revoking access on a case-by-case basis. The company
has raised $57M in combined ICO and VC nancing.
2. IDENTITY ATTESTATION
The second school of thought focuses on identity attestation. Unlike user-controlled identity,

attestation would mean verifying pre-existing credentials (like a driver’s license or birth certi cate),
and then tying that information to the rightful owner on a blockchain. This effectively creates a
decentralized database for traditional forms of identi cation.
Companies working under this school of thought include SecureKey, Civic, and ID2020.
SecureKey is launching a product called Veri ed.me to help banks prove user identi cation, and is
working with IBM to build a digital identity network for Canadian banks. The company provides
services beyond blockchain-focused solutions and has raised $73M.
Civic is another high-pro le company working in this area, enabling users to share and manage their
veri ed identity data via a blockchain. This allows users to provide multi-factor authentication without
a username or password. The company has raised $36M in equity and ICO nancing.
Lastly, ID2020 is building a platform that will help register the identities of citizens in developing
countries on a distributed ledger. ID2020 hopes to piggyback on existing systems — like
immunization programs — to register users, and is working with Microsoft, Accenture, and others to
accomplish this goal.
Current challenges to blockchain-based identi cation

There are two major issues with blockchain and identity (besides other broader issues with
blockchain technology).
The rst is that many governments and organizations don’t want it. A blockchain might cut
governments and corporations out of identity management, shifting the balance of power toward the
user.
This could take control out of the hands of governments and cause digital identity brokers to lose
money.
The second problem is that centralized platforms are still better than their blockchain technology
counterparts, and users don’t care enough about privacy to swallow the switching costs.
In other words, users care about network effects — meaning they’re most interested in which digital
identity will give them the widest recognition and highest value. While data privacy and identity
portability would be ideal, users might not want to switch to blockchains with limited network effects.
Moreover, blockchain technology solves a very speci c problem, and only makes sense when a third
party isn’t trusted to administer the record. The question then becomes: would a government or
corporation ever agree to relinquish that control?
For many organizations and corporations, distributed ledger technology is a better alternative.
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If a trusted third party could administer the ledger (to some degree), then users might regain
some power — while corporations still maintain much of their control.
Still, there are problems with governments or corporations managing a distributed database that
acts as the single source for identity credentials — especially if it’s distributed and universally agreed
upon as a “source of truth.”
Like India’s Aadhaar or China’s “social credit” system, a centrally administered distributed ledger could
turn dystopian very quickly, with governments or organizations manipulating the system.
Where digital identity is headed next

There are three main areas where blockchain technology and identity are getting lots of attention:
1. Putting national, state-sponsored identity on a blockchain

2. Identifying things (and not just people)
3. Building a new internet, with a focus on user control and privacy
Regarding national identity on a blockchain, projects out of Estonia and Illinois offer the rst signs of
what state-sponsored identity on a blockchain might look like. Estonia is using distributed ledger
technology to modernize the country’s data registries, while Illinois is using Evernym (mentioned
above) to put birth registrations on a blockchain.
Then there’s the identity of things. The idea behind this is fairly straightforward: if people can be
identi ed, so can things.
In that vein, a number of companies are using blockchain for identifying and tracking objects in a
supply chain. Everledger, for example, is using a blockchain to trace diamonds throughout the supply
chain, and is already tracking 1.6M diamonds this way.
Finally, identity could offer a way to change how users interact with the internet. In this vein, Orchid,
which has raised almost $5M in funding, looks to create an internet free of surveillance. Orchid acts
like a decentralized Tor, with users buying and selling excess bandwidth in a marketplace, ensuring
privacy.
https://www.cbinsights.com/research/blockchain-identity-management/?utm_source=CB+Insights+Newsletter&utm_campaign=c477d67c89-Top_Re… 10/12
The future of blockchain technology and identity is both scary and exciting, and with potential to
affect individuals and enterprises alike.
If distributed ledgers are incorporated into existing centralized systems, it could make them more
effective, giving more power to their administrators.
At the same time, projects like Orchid and Blockstack demonstrate how blockchain technology could
fundamentally reshape the internet, and ultimately return power to the user.
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7/4/2018 Could Blockchain Technology Help Avoid Another Cambridge Analytica?

Could Blockchain Technology Help Avoid Another Cambridge

WHERE IS THIS DATA COMING FROM?

BLOCKCHAIN AND IDENTITY: BUILDING A NEW INTERNET

How blockchain could shift control back to users

In a perfect world, identity management might look something like this:

Personal and unique to the user

The second school of thought focuses on identity attestation. Unlike user-controlled identity,

Current challenges to blockchain-based identi cation

Where digital identity is headed next

1. Putting national, state-sponsored identity on a blockchain

YOU MIGHT ALSO LIKE:

These Public Companies Were Early On Blockchain

WHERE IS THIS DATA COMING FROM?

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