In an earlier blog post, I wrote on the various dimensions of identity, such as the countless siloed identities and related usernames and passwords. But there is also a distinction to be made between the dimensions of identity and the different types of identity. The latter is generally defined in three ways: the aforementioned “siloed” identity, the third party or “federated” identity and the self-sovereign identity (SSI).
When discussing the importance of SSI, however, it’s often difficult to conceptualize this type of identity. Instead, we can use the interchangeable term “decentralized identity” for SSI or self- sovereign.
Decentralized identity is so important to embrace because it effectively eliminates the need for siloed or federated identities. In the case of a siloed identity, the most common and simplest of the three models, a member might trust its credit union through the use of a password as well as security questions or a PIN number. The federated model allows a third party to act as the identity provider, which is the case for users of social media platforms, such as Facebook or Twitter. This is generally viewed as a low trust environment.
Why Decentralized Identity is So Important
A decentralized identity platform is not only useful in the financial services industry, but has the potential for widespread adoption. Take, for example, the Decentralized Identity Foundation (DIF). The organization’s website states that it “represents a diverse, international collection of organizations and contributors working together to establish an open ecosystem of decentralized identity that is accessible to all.” DIF’s supporters include Microsoft, IBM, Aetna, We Bank, Blockchain Foundry, Hyperledger and MasterCard, among others.
Regardless of industry, there are decentralized identity adoption hurdles including integrating new technologies and adhering to compliance regulations, but these obstacles are surmountable. In most cases, the real barrier is not peer-to-peer trust, but rather the user’s ability to trust an organization. To this end, credit unions are a perfect vehicle for adopting a decentralized identity solution because the credit union/member relationship is so closely associated with trust.
The credit union industry should look to adopt a trust-based solution for their members’ identities. A decentralized identity solution uses a peer-to-peer network of distributed, private agents working in parallel with the distributed ledger. This technology eliminates the need for siloed or federated identity platforms and credit union members are provided with a lifetime portable digital identity that does not depend on a central authority. And perhaps most important, the member’s decentralized identity can never be taken from them.