What is Self-Sovereign Identity (SSI)?

Self-sovereign identity (SSI) also known as decentralized identity (DID) was founded on the principle that consumers should have control over their data and digital identities. The way we communicate ourselves has altered dramatically since the World Wide Web (WWW) was introduced in August 1991.

Consider having a non-custodial crypto wallet, but instead of only holding various types of cryptocurrencies and NFTs, you could also keep your driver’s license, passport, and qualifications. The UK government is one notable example, having started a pilot for their Financial Conduct Authority (FCA) employing an SSI-powered solution for onboarding individuals.

Users in the SSI system have a personal digital wallet. The issuers generate approved credentials, which are stored in these SSI wallets. Users can choose when and what data to disclose to provide their identification when it is required.

Self-sovereign identity solves many of today’s data privacy issues while also preparing for future AI threats. Cybercrime costs are expected to rise by 15% over the next five years, reaching $10.5 trillion by 2025. SSI may verify the authenticity of the identity and material by signing various types of cryptography credentials. As a result, it can aid the work of trusted AI users by providing a means for determining if messages, videos, and other media are genuine or manufactured. IDunion, for example, collaborates with SSI to offer identity solutions for individuals, groups, and things. Bhutan is one country that is currently implementing an SSI-based digital ID system.

According to a McKinsey Global Institute study, SSI can help people gain access to banking, government benefits, education, and a variety of other services. As per their report, establishing complete digital ID and SSI coverage in nations such as the United States and the United Kingdom could yield economic gains amounting to 3-13% of GDP by 2030.

Potential Uses of Self-Sovereign Identity

The new UK Digital Information and Data Protection Bill, which was tabled in July laid the groundwork for trusting the new digital authentication service. Private companies such as Microsoft, IBM, Bosch, and Workday are active in developing SSI solutions.

• Recent uses include preventing human trafficking and securing identity documents for refugees
• SSI credit building and aid programs have the potential to reach billions of people who lack legal identification.
• SSI can be used in the banking industry for account opening, fraud prevention, compliance, and financial management.
• SSI can help schools by providing credentials for transcripts, diplomas, and certificates that are necessary for job applications.
• In the health sector, SSI can make it easier to prescribe medications, file insurance claims, share health data, and health emergencies.
• SSI can be used by government services to issue driver’s licenses, and birth certificates, and to manage public voter registration.
• SSI allows for a reusable KYC idea, which provides a much smoother method of ID verification and authentication. When ID verification is required more frequently due to compliance or regulatory pressure, SSI can considerably minimize user friction, improving the customer experience while providing a compliant service.

Challenges of Self-Sovereign Identity

However, the use of Self-Sovereign Identity has some challenges as well. The three significant privacy challenges that may be critical to SSI’s success are as follows

1. Accountability: In a decentralized approach, it is critical to define who sees what at what stage. To be accountable is a great opportunity in the digital identity system. It allows organizations to demonstrate how they handle privacy and adhere to the norms outlined in standards, as well as create and sustain people’s confidence.
2. Transparency: Given the complexity of solutions and the extent to which SSI must be presented in a user-friendly way, while also discussing different legal and regulatory aspects for privacy in different nations.

• Interoperability: Although the future of self-sovereign identity is unlikely to replace all existing identity management systems, it will be used and co-existed with. More interoperability is expected to appear in the future. As a result, collaboration in identity management systems with other SSI systems is required.

1. Key management: Unlike traditional identity management, in SSI this responsibility is taken by the users. Informing about the key management issues in kids and the elderly is also important as they cannot manage their information on their own.

According to various statistical sources, 1.5 billion individuals in developing nations, including more than 65 million refugees, lack an identity. People with disabilities can use blockchain-based self-sovereign identity systems to access and retain legal documents. As the new identification platform will be held in a distributed ledger rather than a centralized authority, it will be more secure and dependable. Self-sovereignty is also enabled by blockchain-based identity systems, which ultimately implies maintaining individual privacy. Individual rights apply to personal data decisions and disclosures

The Future of Self-Sovereign Identity: Insights and Trends

Take, for example, the recent case in Louisiana, where six million public data were revealed as part of a global attack on third-party file transfer program MOVEit. The assault has made consumers more hesitant to send up their data to third parties who are generally protected. According to a recent Thales survey of 1,000 US customers, 44% are concerned about having their identity stolen in a cyber assault, and a quarter are concerned about the security of their personal information. It can play an important role in cybersecurity in KYC and AML Compliance.

The European Commission has developed a European Self-Sovereign Identity Framework (eSSIF) and the integration of the technology into infrastructure is in process. According to Gartner Research, By 2026, 50% of smartphone users will frequently use one or more verifiable claims stored in their decentralized identity wallet. These examples underline the significance of the future of self-sovereign identity

Here are insights about the future of self-sovereign identity

End Username and Password

SI can eliminate the need for users to remember multiple usernames and passwords by delivering a single secure digital identity. Lowering the likelihood of password vulnerabilities can increase user comfort and security.

Government Crypto:

Most governments will establish or introduce some type of virtual currency by 2030. This is significant because it opens up the possibility for governments to use blockchain technology to create official digital currencies. These digital currencies can be used as part of the SSI ecosystem to provide an effective and safe means of digital identity verification and transactions.

Smooth payments:

SSI engages in peer-to-peer payments with a cryptocurrency-enabled digital wallet built for SSI. You may utilize cryptocurrency to simplify and extend your business and services. The future of self-sovereign identity allows a secure and tamper-proof record of identity interactions can be guaranteed, making financial transactions easier to monitor, and ensuring compliance with KYC and anti-money laundering (AML) rules.

Blockchain Identity for All:

As per the World Bank, 850M people globally do not have any identity. A cross-border, blockchain-based, self-sovereign identity standard for individuals and assets will arise. This statement emphasizes the increasing awareness of the need for more secure and interoperable identity solutions. A blockchain-based identification system adheres to the concepts of SSI by allowing individuals to control and securely share their personal data.

However, is SSI providing the promised level of control to users or not? As in blockchain, there are issues of scalability and privacy.

A Trusted Internet:

By cryptographically authenticating the identity of the user, SSI was presented as a solution to this problem, which can eradicate fake news and deep fake worries caused by generative AI.

Artificial Intelligence

AI has the potential to improve the security and privacy of DID systems. AI algorithms, for example, can detect and prevent identity theft, fraud, and other security concerns. Furthermore, AI may tailor the user experience based on their DID profiles.

5G

5G networks enable faster and more secure DID transactions by providing high-speed connections and low-latency communications. Individuals who use 5G can also access and monitor their DID accounts from anywhere in the world, regardless of geographic limitations. Although it is currently in the conceptual stage.

Single Identity Across Ecosystems:

The future of self-sovereign identity will allow users to maintain a single digital identity across numerous platforms and online services. This can enhance the user experience while also reducing issues such as trolls and online bullying.

Secure Messaging:

SSI can result in a unified, secure messaging system that improves privacy and security while decreasing dependency on centralized communications providers.

Greater Opportunities in Underprivileged Areas

Blockchain technology has the potential to eliminate poverty and income inequality by expanding financial inclusion, decreasing corruption, and facilitating access to value-creating assets. In this sense, the influence of blockchain on SSI can be transformative because it can offer individuals a safe and verifiable digital identity, particularly in underprivileged areas. As a result, with the future of self-sovereign identity, more people will have access to financial services, job opportunities, and social assistance.

Global trade:

By 2023 self-sovereign identification solutions can be used to promote confidence, transparency, and security in international trade procedures. Individuals and businesses involved in worldwide commerce can benefit from SSI’s streamlined identity verification.

Hyper-Personalized Shopping

SSI wants to provide a personalized online shopping experience by allowing customers to control the data exchanged across websites and services, allowing for better privacy and customization.

Sell Your Data

The future of self-sovereign identity will enable consumers to sell their own data. This improves data quality and accuracy since users are motivated to have an incentive to provide accurate information.

Online voting

The use of online voting with the help of SSI’s identity verification. This, in turn, can have an impact on the real world by influencing policies and decision-making.

Threats of Self-Sovereign Identity

As discussed above the future of self-sovereign identity is progressive. Self-Sovereign Identity (SSI) is designed to address privacy concerns by giving users entire control over their digital identities.

One of the guiding principles in our vision of the future of Self-Sovereign Identity (SSI) is that individuals have complete control over their digital identity. However, one important consideration is the question of trust and security inside the ecosystem. In contrast to the established federated identity providers such as Google, some SSI services may have limited authority and public trust.

This poses a critical question: how can we verify that SSI services, particularly those that offer verified credentials, adhere to the highest security and integrity standards?

• When users submit their personal information to these SSI providers, they are essentially putting their trust in the platform’s security. Giving users complete control over their identity and credentials, on the other hand, increases the risk of identity theft. Furthermore, if they use weak passwords, forget to update software, or fall subject to phishing attacks, their SSI credentials may be hacked, resulting in fraud.
• Another threat is the risk of self-sovereign identification systems being lost or hacked. Individuals with complete access to your personal information may use it for illegal or fraudulent purposes. This emphasizes the significance of effective security measures in preventing self-sovereign identification system exploitation. Moreover, it also lacks a legal and regulatory framework as it is still in its infancy.
• Finally, self-sovereign identity schemes may exacerbate existing inequities. Certain groups, for example, may be left behind if they do not have access to the technology required to build self-sovereign identification systems.
• Self-sovereign identity (SSI) is a potential solution for controlling your own data. However, to give the real value of the technology, a governance framework for its functioning must be established.

To address these threats, SSI’s future must prioritize strong security measures, tight privacy protocols, and transparent consent methods. Users must have faith that their data is secure and that the services they select are reliable. The future of Self-sovereign identity is about more than just user control; it’s about creating a trusted ecosystem that values user privacy and data security. As SSI evolves, these factors will be critical in deciding its viability and widespread adoption in an increasingly digital and privacy-conscious world.

Bottom Line

Many of the advantages of SSI are becoming more apparent. The future of self-sovereign Identity provides compelling benefits ranging from improved privacy and transparency to simplified approval processes. We anticipate that many companies will reap these expanding benefits. Banking, healthcare, education, and e-commerce are just a few of the industries that can benefit from the protection and control given by SSI.

As adoption grows, there will be a larger need for interoperability among the various SSI systems.  Within the SSI environment, teams will collaborate and work together to establish synergy, guaranteeing a fluid and consistent user experience across all platforms. Legislators all across the world will have to contend with the challenge of enacting legislation that respects user privacy and control while also enabling innovation and expansion in the future of self-sovereign identity.

The KYC/AML guide can help you decide between KYC technology buying and KYC vendor analysis as per your required SSI solutions. It can assist you in determining what criteria solutions should provide to ensure that they adhere to the SSI principles and standards.