Blockchain Identity Management – Enabling control over Identity

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Data privacy and security, as well as the risks related to record breaches, have been a matter of serious concern. And this alarming trend has been growing rapidly in recent years. According to the IDSA survey, the majority of IT security and identity specialists (94%) have dealt with identity-related breaches. Furthermore, 79% of them were breached within the last few years.

Such a negative tendency is related to the issues that traditional identity management systems currently experience. Lack of privacy, insecurity and the inevitable risk of being hacked or breached make these systems unreliable and outdated in many ways.

As a result, several industries such as fintech, education, healthcare, etc., suffer from poor identity management. This situation drives the demand for more transparent and credible alternatives. Blockchain identity management concept promises to become such a solution.

Blockchain is traditionally associated with the cryptocurrency market. However, this technology will likely enable a much more efficient and secure way to provide identity management. In this article, we will focus on the key challenges in this sphere. We’ll also look at the benefits that blockchain solutions may deliver to the business and individual needs.

The challenges of the traditional identity management systems

IAMS (Identity and access management systems) exist to control users’ access to certain data within a company or organization. Such systems involve various technologies and processes to facilitate digital identities management. They provide authentication and authorization, distributing access to deliver the protected information solely to relevant persons.

Identity management is essential for many industries, from government and healthcare to business intelligence and banking. Not surprisingly, the IAMS market is experiencing rapid growth. It is expected to be worth $24,76 billion by 2026.

However, there are multiple challenges regarding identity management. The traditional systems seem to be unable to cope with all of them. Here are the most significant weaknesses of the current IAMS approaches. 

Centralized Data Storage

Digital identity management provides data storage using a centralized server. However, these servers are not sustainable, and their security system can be hacked. The number of records stolen by hackers is constantly increasing. According to Statista, 155,8 million records were exposed in 2020, with more than a thousand data breaches. 

Multiple Usernames and Passwords 

To store their data safely, people have to create unique usernames and passwords every time they start using a new service. An individual needs to memorize these combinations for their

 bank accounts, emails, applications they use, and so on. In addition, passwords should be quite complicated so as not to be hacked. Remembering all these variations is very difficult and inconvenient. 

Poor Accessibility

Authorization is normally provided with numerous identity checks. Individuals should bypass identity verification with multiple IDs and codes. Sharing such data can be risky and insecure, especially on unknown platforms or services. Besides, a large part of the global population doesn’t have any identity proof documents. According to the source, approximately 1 billion people face issues with proving who they are. It means that IAMS systems don’t cover global data protection needs.

Control and Awareness Issues

The current identity management systems do not provide people with accurate information about how their personal data is used. It deprives them of control over data storing and spreading. Thus, the risk of fraud and identity forgery increases. 

How does blockchain-based identity management work?

Blockchain is also known as Distributed Ledger Technology. It provides digital data storage and ensures the security of data records through a peer-to-peer network. As a result, the trust is generated with no third-party involvement. A blockchain approach enables businesses and individuals to manage their identity independently, with no data security risks inherent in common IMS solutions.


Blockchain architecture consists of numerous blocks linked to each other. Each block contains certain information, protected by hashes. These algorithms are always unique, and if any changes are made in the input, the output value will automatically change as well. That’s why it’s almost impossible to hack the blockchain. 

Potentially, blockchain is a perfect alternative to traditional identity management. But for many, the way it works remains a mystery. Let’s dive deeper into the topic for a more comprehensive look at blockchain-based identity management.   

The principal components of a blockchain-based IMS

There are three core components of self-sovereign identity management: Verifiable Credentials protocol, the Decentralized Identifiers protocol, and Distributed Ledger Technology (Blockchain).


  • Verifiable credentials are used instead of physical IDs such as Passport, an ID card, driver’s license, etc. These digital credentials can fully replace data from real documents. At the same time, their disclosure does not pose any threats.
  • Decentralized identifiers (DIDs) enable verification and decentralization of digital identity. They enable secure peer-to-peer connections. Each individual or organization can create multiple DIDs for direct digital relationships, having complete control without third-parties involvement.
  • Distributed Ledger Technology (DLT), also known as Blockchain, provides secure and decentralized digital database functioning. Blockchain technology eliminates the threat of any unwanted interference and protects user data with the help of distributed network.

How Blockchain ensures privacy and security

Blockchain is a relatively new technology, but it’s already gained a reputation for reliability. In comparison to traditional IAMS, blockchain provides its users with a completely secure identity management system. Since it was originally built for Bitcoin cryptocurrency transactions, the creators came out with a ledger solution. It means that blockchain is completely decentralized and accessible, so anybody can write on the ledger. 

At the same time, the innovative security approach makes any hacks almost impossible. Any changes applied to individual blocks result in a change of all subsequent ones. These shifts occur every time somebody creates a new block. A hacker would need to crack every single piece of the cryptographic hash chain to steal private data, which is extremely hard. 

However, keep in mind that you should never put your real personal data on a blockchain. Store it off-chain as with the loss of the data, its hashed version won’t make any sense. 

What exactly goes on the Blockchain

The first Bitcoin Blockchain technology was created to store data about all transactions. Blockchain solution for identity management uses the same principles of security and independence. That’s why all data you put on the ledger is not actual private information.

Here are the key types of data that goes on the Blockchain for verification:

  • Decentralized Identifiers for digital identity verification. 
  • Credential definitions that replace the physical identity proofs.
  • Schemas that describe the credentials structure.
  • Revocation registers to inform about the cancellation.
  • Proofs of consent or data receipt.  

Use Cases of Blockchain Identity Management

Blockchain technology enters the stage of identity management with a capacity to resolve existing issues. It offers a new, more transparent, and secure tool to verify and control users’ access. With its help, many businesses and even governmental or legal authorities may identify and verify digital records with no security gaps. 

Let’s look at the most relevant use cases of this technology. They are already making a difference in certain fields or will make it in the nearest future. 

E-commerce Sign-up

A time-consuming checkout always follows the process of registration on e-commerce platforms. Users should fill in their personal information, such as name, date of birth, email, phone number, and more details. Online shops tend to look for ways to make sign-up more convenient, fast, and safe. Blockchain technology enables generating a unique number for users’ authentication with no need to waste time on multiple entries.   

Airport Identity Checks

Traveling abroad or immigrating to another country has always been accompanied by multiple security checks. A person should carry a full set of documents and spend time verifying them at the airport. Blockchain technology can become a great alternative. A single decentralized identity can be an efficient solution to save time and reduce the risk of document loss. 

Identity and access management is an integral part of any processes related to legal and governmental institutions. People have to submit various IDs that prove their age, place of work, residence address, ownership, etc. With blockchain identity management, all these procedures can be simplified and streamlined. Instead of full-scale validation, legal and administrative services may use blockchain-based identification.

Bank Verification

Multiple ID verifications are mandatory for every banking procedure, such as opening an account, making a deposit, or applying for a loan. Blockchain identity management could be a time-saving and secure solution. Any data related to personal funds is considered sensitive. With a single digital identity number, banks will reduce manual processes and speed up customer services. 

Employment Checks

Before hiring an employee, many companies should verify the information about their previous jobs. Recruiters and managers spend a lot of time validating the data given in numerous resumes. With blockchain identity, this problem can be resolved by direct requests and instant confirmation. 

What are the benefits of employing Blockchain for IM?

Blockchain-based identity management is beneficial both for users and businesses. They address the majority of existing issues related to security, control, access, and transparency. The growth of interest in innovations and digital solutions fosters upgrading the entire system of identification and protecting private data. 

Here are the key advantages that blockchain technology may bring to identity and access management. 

Data security

Blockchain technology is faultlessly stable and reliable. Thanks to its complex cryptographic structure, blockchain-based systems have proven resistant to any hacking attempts. Furthermore, no personal information is put on the ledger. So there is no chance the records will be stolen and used by somebody else.


Centralized information storage is the main cause of constant breaches. The idea of Blockchain-based identity management addresses the issue of storing users’ private data on a single centralized server. The new approach involves individual storage on a device backed by InterPlanetary File System, significantly reducing breaching threats. 

Global Access

Blockchain doesn’t have any borders and users’ location limits, unlike traditional identity management solutions. People can use this technology to be verified from anywhere in the world.  


Identity checks and validation normally take time, which is convenient neither for businesses nor for customers. Blockchain-based identity management offers a simplified and accelerated verification. A single unique ID number replaces all required documents and forms. 


The providers of traditional identity management frameworks obtain control over the data on a centralized server. In contrast, the blockchain identity management system returns control over personal information to the users. Thus, people can manage it as they wish, setting security measurements and storing it autonomously off-chain.

The Challenges of Developing a Blockchain-based Identity Management System

Building a blockchain-based identity management system is a complex and multilevel task. It requires certain expertise from the developers’ team. It’s crucial to comply with private data regulations, meet the project goals, and provide efficient solutions to alleviate end users’ pain points.  

Let’s reveal the most typical challenges of such a platform development and the ways to overcome them. 

Architecture Consistency

Blockchain’s architecture consistency plays a vital role in identity management system development. The structure is responsible for the framework’s security and capacity to provide a reliable peer-to-peer network. Blockchain-based solution developers should prioritize users’ data safety and personal control. 

In brief, the most common Etheurum blockchain IM system consists of the following layers:

  • Data layer. This fundamental part of blockchain architecture includes data storage and security assurance functions. The blocks and the chain provide the storage. The data is stored on the Merkle tree. Data security is assured with hashes and digital signature cryptography technologies. 
  • Network layer. This part of the blockchain structure provides a peer-to-peer system of data control handled by each user. Thus, there is no central server. All functions are decentralized. 
  • Consensus layer. It’s responsible for the nodes network and the transactions and data agreement. Proof of work and proof of sake mechanisms keep the nodes stable. 
  • Incentive layer. This layer supplies and distributes ethers. 
  • Smart contract layer. This one runs smart contracts with the help of a virtual machine. 

Only with well-established experience in building such systems will developers be able to meet your project’s blockchain-based IM system requirements.

Access Levels

All blockchain IM systems are built based on the same core principles. But each framework should be different, depending on the business goals. Most of these systems are quite complex since they should provide multiple access levels for different roles or groups of users. It’s especially important if blockchain technology is used for identity management by a large enterprise or entity with various access requirements. So before building such software, developers should investigate the project in detail. 


Peer-to-peer structure completely relies on trusting relations between all parties of the identity management cycle. Both users and service providers should trust the identity provider. So the blockchain IM solution developer should foresee all possible scenarios. Therefore, they build a system that will increase and hold the level of trust. The trust score generated by smart contracts is one of the keys to such reliability.  

Trust score is gained by individuals when they regularly use the app and their blockchain identity. To build a trust score, they should upload validated documents to the application. 

Why choose Unicsoft to build your blockchain IM system?

Choosing developers’ team to build an IM solution for your project is the key to its sustainability. We at Unicsoft have ample expertise working with blockchain systems for identity and access management. 

The following case study may bring you more clarity on how exactly such systems can efficiently replace the existing identity management solutions.

Blockchain-based Gold Supply Chain Management System

The project’s main goal was to develop a transparent and efficient solution for the gold supply chain. Blockchain technology was used to ensure that gold mining, production, and delivery are under proper supervision and control. One of the main challenges was to create a product in compliance with numerous regulations regarding the gold supply chain industry. Our main goal was to provide end-users with a trustworthy system that would deliver all required data about gold transactions and the entire chain of gold movement. 


We had the following challenges to overcome:

  • Real-time visibility and transparency of the entire gold supply chain. 
  • Security and reliability of sourcing verification. 
  • The alternative source for data authenticity tracking. 
  • Tracking the origin of every single gram of gold electronically. 
  • Ensuring the system security to prevent potential violations. 

Our developers’ team came up with a solution to develop an end-to-end gold bar tracking custom system. It enables registering every operation related to gold displacement. For immutable data storage, we integrated Ethereum private blockchain network, which guarantees complete security from hacking. 

Let’s upgrade identity management together!

Traditional identity management systems have many security gaps. The centralized servers are often subject to hacks and breaches. Many industries and businesses may significantly benefit from alternative solutions such as blockchain-based IM, which offer them more control, private data safety, and multilevel access. If designed properly, such an IM system opens new opportunities both for service providers and end-users. Blockchain leads to the future of identity management, reducing risks and enhancing efficiency.  

Blockchain-based IM system development is both a promising and challenging task to achieve. But we at Unicsoft are ready to help you out. Our team unites expert developers of blockchain solutions. Do you still have questions about alternative ways to address identity management issues? Feel free to drop us a line to get a free consultation and share with us your blockchain case!