A Decentralised Approach to Identity Verification

Alpha | February 26, 2018

Cryptocurrencies and blockchain transactions are gaining traction in many parts of the world. With the exponential growth of the adoption of these technologies, combined with the parallel increase in the number of data breaches each year – over 1500 breaches and over 1 billion compromised records in the United States alone – businesses are facing growing public and regulatory pressure to fortify and strengthen the data security and identity verification and protection measures deployed within their operations.


Entities leveraging blockchain technology and cryptocurrencies, in particular, face relative difficulty regarding this, given that the entire realm is decentralised and is not confined to a single country or geographical region – this makes the data protection regulations placed on traditional businesses difficult to emulate within the blockchain realm.


What is the challenge of identity verification via blockchain technology?

There are three central focuses of the contemporary data security debate that regulators are particularly interested in – both centered on identity protection and the security of personal information shared by consumers, who are often the core target of data breaches.

The first focus is on making sure businesses employ approaches that do everything they can to ensure data security and are compliant to the extent that even if a data breach does occur, consumers are notified as soon as possible – many businesses who suffered breaches have failed to do so in the past.

The second focus is enforced by recent regulations, like the European General Data Protection Regulation (GDPR), which stipulate, among other things, that consumers should have the right to request for their information to be deleted and/or not to be shared in certain instances and locations.

Finally, the third focus – one geared specifically to the blockchain realm – is on providing greater visibility into who these transactional parties are and where their cryptocurrency originates from – an effort that is oriented towards picking out the involvement of parties engaging in illegal activities.

While the initial focus is relatively easy to adhere to, the problem with the second focus is that most blockchain transactions, especially those that are public, are accessible to any individual and are immutable in nature. In other words, data on the blockchain cannot simply be deleted. Additionally, the third focus comes into direct conflict with the whole principle of anonymity that blockchain participants look for.

Therefore, it is clear that the implementation of such regulations that impact the identity verification of parties and information shared on blockchain transactions will be inherently incompatible with the realm’s underlying ideas of decentralisation. Additionally, blockchain parties’ apprehension towards non-anonymity conflicts directly with the requirements and AML/KYC goals of regulators. A compromise needs to be reached between the technology and the regulators that enables a symbiotic existence between the two sides – this is essential if blockchain technology is to survive and be integrated further.

So, how can identity verification take place with minimal to no impact of data breaches, while staying in line with the various regulatory pressures? While many businesses attempt to deploy impenetrable or “hack-proof” systems/networks, the reality is that nothing is ever hack-proof. Breachers will always find the technology and the means to get in and steal data. The perfect solution, therefore, is to make the data “hack-worthless”. How can this be achieved? Decentralised fragmented identification.


The IAME way – decentralised fragmented identification

Decentralised fragmented identification is essentially a method that reinvents the entire identification process. By shifting the identification process from wholly to fragmented systems,  transactional parties can now validate their blockchain address without having to trust the other transactional parties with their non-essential sensitive information.

With DFI, the data shared in these transactions is rendered worthless, given that it is first fragmented and then distributed among a series of independent third-parties, who are not affiliated to any parties operating as members of the transaction. This network of third-party validators are assigned the task of confirming and verifying the validity of each of these fractured pieces of personal data, which by themselves are useless to malicious parties. The compilation of these fragments would constitute a valid identification to the transactional counterparty, thereby verifying the identity of initiating party. Given this process of fragmentation and validation by third-parties, the entire need for transactional parties having to process or store non-essential information would be eradicated.

Given the need for a non-invasive identification system for decentralised blockchain technology, the IAME Identification Network’s utilisation of decentralised fragmented identification technology will be the bridge that links blockchain technology to the regulated world.


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