How Blockchain is used by Governments as a form of National Identity
As we discussed in the previous article The Ultimate Newbie Guide to Blockchain and The Ultimate Newbie Guide to Distributed Ledgers, the uses of the blockchain technology are numerous. In this article, we will focus on how blockchain has been used to form the basis of national identity built on distributed ledger technology. Various governments have already established some uses of blockchain technology at a national level, and numerous governments have been planning to switch as of early October 2017 and are currently still working on these technological updates. This is happening because blochains are 100% transparent, secure and can be used in both private and public transactions.
Blockchain has the power to completely transform every part of our lives. It has the ability to improve democracy and provide greater opportunities but it will only realize it’s full potential with the help and co-operation of governments.
As you will see in the rest of the article, blockchain can be of great use in unregulated countries. For example, in places where land title fraud where people steal other people’s land, blockchain could be developed to eliminate those types of crimes.
Furthermore, in dense countries that have problems with poverty, weak ID systems are limiting the power of their residents to claim basic political and economic rights. Most agencies require a clear proof of identity in their provision of services, and since the poor ones usually lack such documentation, they faced enormous barriers in accessing benefits and subsidies which is why providing them with an ID is of essence for the development of the entire country.
Image 1. How Blockchain Saves Cost, Time and Effort
So, let’s do a small experiment. Imagine a world where immediately upon birth, the individual’s name, date and time of birth, parents and other data are recorded and stored in a distributed ledger. This individual, who is only hours old and her/his parents own that data and record and not a company, state or federal government. The individual cannot lose its identity, nor a mistake can happen. This identity can be used to register for school and get health care and social services access.
At some point in their life, an individual takes sole possession of their identity and can use that identity in order to establish social media accounts (no fake accounts and fraud), open bank accounts, sign contracts and so on. This is the use of distributed ledger technology.
With time, this identity will get credit scores, identity proofing, and so on but the owner gets to device what information is given up from that identity. The identity and information never leaves the individual and is under their control.
Now, this is the model that some organizations and governments are looking at to change the way that the identity is managed. Unfortunately, there are always obstacles. The government is the issues of identity documents from birth certificates, driver licenses, etc. It is the governments that have to accept the distributed ledger technology identity. One of the challenges remains that standard set of biometrics like iris and fingerprints don’t work well on an infant.
Image 2. An example of BankID information routing and public/private key schematic works
Case Studies: Countries using blockchain
Estonia — KSI blockchain
Estonia was the 1st country to use blockchain at a national level with their E-Citizenship program. Estonia utilized the distributed ledgers technology to create their own identity system called ID-kaarts or ID-cards. The benefits are numerous, with citizen satisfaction and substantial reduction of bureaucracy.
Nowadays, almost all public services in Estonia are digitized and accessed through secure digital identities. As we discussed in the The Ultimate Newbie Guide to Distributed Ledgers, a distributed ledger technology provides people more control over their own data. Their system is based on advanced encryption technology and includes 2-factor authentication. Furthermore, data is decentralised and never duplicated as in every distributed ledger.
For example, Estonians’ have their healthcare registry on a cloud. They can simply log in via their digital identities and see which medical professionals has looked at their data and when. Every government official that accessed their data without a proper reason can be prosecuted. Plus, their entire medical record is available to them.
Check the below two images to see how it looks. A user had an entire record available and everything is stored as one block. A patient uses a public key to provide access permission to the doctor who uses the health application in order to see the data. Both of them need to provide their encrypted digital signatures and their entries will be stored as a block in the blockchain database.
Image 3. Healthcare registry using blockchain
Image 4. Healthcare using blockchain process
Estonians’ save 5 days per year using their digital signatures. They do yearly taxes online, and it takes 5 minutes.
Estonia has by far the most highly-developed national ID card system in the world. Much more than a legal photo ID, the mandatory national card also provides digital access to all of Estonia’s secure e-services.
The chip on the card carries embedded files, and using 2048-bit public key encryption, it can be used as definitive proof of ID in an electronic environment.
Here are some examples of how the ID-card is regularly used in Estonia:
- legal travel ID for Estonian citizens travelling within the EU
- national health insurance card
- proof of identification when logging into bank accounts
- for digital signatures
- for i-Voting
- to check medical records, submit tax claims, etc.
- to use e-Prescriptions
Imagine voting from your computer, imaging submitting tax and checking your medical records all online. It saves a lot of time, provides security and induces trust between citizens and the government.
Dubai plans to secure all government documents on blockchain by 2020
The government of Dubai partnered with a UK startup called ObjectTech in order to provide security to their airports. They are working on developing digital passports that could eliminate the need for manual checks at the Dubai International airport. It is a blockchain-based security technology combined with the biometric verification and the system will use a “pre-approved and entirely digitized passport” in order to authorize passengers’ entrance into Dubai. Furthermore, the system will verify people through a three-dimensional scan when they pass the short tunnel that leads from the aircraft to their baggage. The pilot program is supposed to be ready by 2020 and Paul Ferris, the co-founder and CEO of ObjectTech said that the aim is to provide a safer and quicker process for travelers.
The story doesn’t end here. Blockchain technology will allow passengers to control which parties can see their passport information via a “self-sovereign identity” feature.
Dubai is also working on numerous other blockchain-based technologies for public sectors like healthcare, utilities and education. Dubai’s land registrar revealed that they are developing a system that would seek to record all Land Registry and local real estate contracts on a blockchain, you can read more on this topic here: How Blockchain can eliminate the need for Real Estate Agents, Brokers, Title & Escrow.
India introduced a nationwide centralized ID database and largely eliminated physical currency. They started by introducing the Aadhaar biometric database that gave 95% of the population a digital proof of identity in 2016. This also provided identity to a lot of people in India that were without any ID. Any person without an ID could receive an Aadhaar ID if another person already registered with Aadhaar vouched for this asker’s existence. This provided the unregistered who previously had no ID the ability to get mobile phones and open bank accounts, something not previously possible. They still can’t leave the country with an Aadhaar ID so it is important to mention that the Aadhaar ID is still not a substitute for a government-issued ID.
Aadhaar ID program is one of the largest ID programs in the world. India’s Government understood that weak ID systems were limiting the power of their residents to claim basic political and economic rights. Agencies in India require a clear proof of identity in their provision of services, and since the poor ones usually lack such documentation, they faced enormous barriers in accessing benefits and subsidies.
The core of the Aadhaar ID program is the Aadhaar number which comprises of a 12-digit number where the first 11 digits are random and the final one is a check-sum digit. A card is still not chip-based and doesn’t perform any function other than providing proof of the number. All services are performed online via the Aadhaar number.
Aadhaar Hacked — 1Billion Health Records Exposed
Due to the centralized nature of the Aadhaar database design — it was inherently insecure and simply awaiting to be hacked. Aadhaar data includes fingerprints, retina scans, names, addresses, and phone numbers through which SIM cards can be purchased, and important government services and bank accounts can be accessed. According to multiple reports, biometric data was not exposed on WhatsApp, but names, addresses, emails, photographs, and phone numbers were.
The Unique Identification Authority of India (UIDAI), which oversees Aadhaar, says over 1.19 billion people have enrolled in the system since it began in 2009. In early January of 2018 — all of the sensitive patient data for Aadhaar became exposed and readily available for entire download from various users on the mobile app WhatsApp for a reasonable price of 500 Rupees or $7.79 (as of 12/13/2018). It seems a large group of Indian “entrepreneurs” illegally got access to over a billion patient’s records and were willing to sell the full set for less than the cost of going to the movies. After sending the Rupees and an email address, the full set of health records would be emailed over shortly thereafter.
Aadhaar 2.0 Solution — Blockchain
In order to properly secure the electronic health records or EHRs, India is now looking into how to apply a blockchain solution to their centralized database. Some critics have been criticizing the unsafe, centralized design of Aadhaar since it’s inception 2010. The county is now seeking to release Aadhaar version 2.0, secured by an immutable blockchain to prevent future data breeches in future dealings. Other developing countries can heed this example when considering their own national data center designs and build blockchains from the ground up when dealing with data of the utmost importance such as identity and medical health records. India now has the problem of not only having to architect a blockchain solution, but also to securely transfer the existing centralized structure to the blockchain solution without loss of data.
Aadhaar India Stack
Aadhaar was augmented by India Stack which allowed people to store and share information like bank statements, addresses, employment records and tax filings. India Stack provided everyone access to one of the 11 Payment Banks. People could manage payments and transfers but not issue loans. The Prime minister Narendra Modi announced that Rs500 and Rs1,000 notes are going to be demonetized as part of his plan to make India a cashless and digitized society. This stripped the value of 86% of the country’s circulating cash.
By eliminating cash, people were forced to adopt the digital infrastructure which caused 270 million people to open bank accounts and 10 billion dollars was deposited in the first three years. India still manages 78% of payments in cash, but they are making strides towards becoming a cashless country. This could result in suppressing corruption and “black money” and a more effective tax system could be easily introduced. Payments could become completely secure. Raoul Pal, the former manager of GLG Global Macro Fund wrote in an editorial for Mauldin Economics:
“It may well be a bitcoin killer or at best provide the framework for how blockchain technology could be applied in the real world.”
This Cashless Experiment could herald the end of bitcoin, and Sweden is also one of the countries trying to go cashless, with its 40 % reduction in cash and coin in circulation.
Singapore wants to improve their existing e-government services called the SingPass. This is a part of the Singaporean government smart nation program. SingPass was launched in March 2003, and it allows users to transact with over 60 government agencies online with ease and security. SingPass is regularly enhanced to include improved user interface, mobile-friendly features and stronger security capabilities like 2-Step Verification for digital transactions that involve sensitive data.
Currently, they are working on “Project Ubin” which started on 16 November 2016. Monetary Authority of Singapore partnered with R3 — a blockchain inspired technology company in order to conduct inter-bank payments facilitated by DLT. It is a digital cash-on-ledger project. They are introducing SGD-on-ledger and SGD is singaporean dollar. The SGD-on-ledger is a specific use coupen issues on a one-to-one basis in exchange for money. The coupons have a specific usage domain for the settlement of interbank debts meaning that a person can cash out by exchanging the coupons back into money later on.
The MAS doesn’t receive interest on the on ledger holdings unlike money in bank accounts which reduces the complexity of managing the payment system. Every token is backed by an equivalent amount of SGD held in custody which means that the overall money supply remains unaffected by the issuance of the on ledger equivalents since there is no net increase in dollar claims on the central bank. Furthermore, SGD-on-ledger are limited use and can be designed with additional features in order to support the use case like security features against misuse. .
“Financial institutions have the power and ability to take blockchain live in production environments. To get there, companies will need to move away from experimenting with proof-of-concepts and implement solutions in ready to use production mode. Helping organisations achieve this vision is one of the foundational reasons for the setup of Deloitte’s Blockchain Labs.”
– Eric Piscini, Deloitte’s Global Blockchain Leader
State of Illinois
The state of Illinois launched a pilot trial on a Blockchain-based registry/ID system. The goal is to individualize and secure identities. They partnered with a Blockchain startup company Hashed Health through the Illinois Blockchain Initiatice in order to streamline the process of issuing and tracking medical licenses and with Evernym to use the Sovrin Foundation’s publicly accessible distributed identity ledger in the project.
The medical program aims to create a license registry and medical sharing system that runs on Blockchain technology with smart contracts that update the information automatically. The goal is to create a transparent and authentic chain of records for patients and health care provider networks.
The Illinois Blockchain Initiative is a consortium of private companies and five state agencies. It is the first of its kind. The focus is on:
- Creating a friendly regulatory environment for digital currency and Blockchain businesses.
- To attract Blockchain companies.
- To develop Blockchain prototypes to be used by the state government.
State agencies that are participating are the Department of Financial and Professional Regulation, the Department of Commerce and Economic Opportunity (DCEO), the Department of Insurance (DOI), and the newly-created Department of Innovation & Technology (DoIT).
According to Bryan Schneider, the Regulation Secretary of the Department of Financial and Professional Regulation Secretary:
“The fact that we’ve got all these agencies willing to come together and share best practices, share ideas, at some point share what they’re hearing, I think is an incredibly powerful engine and shows the degree to which Illinois government is doing its best to break down those barriers.”
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