NextID White Paper
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Driving Forces

According to the World Economic Forum, more than 60% of global GDP already depends on digital technologies. Furthermore, the world is in the midst of a sweeping digitalisation revolution that affects every public institution and private organisation. For industry everywhere, digitalization offers a chance to drive up productivity, drive down waste and bring forward novel solutions in new markets. And in developed countries, digital transformation is increasingly an engine of economic growth, with applications like IOT, Big Data and AI transforming agriculture, healthcare, financial systems and supply chain management.
The recent Covid pandemic has made this transformation more obvious, accelerating the adoption of workplace messaging apps, video conferencing, remote learning and work from home. Data consumption has risen exponentially during the pandemic, throwing a spotlight on the need for enhanced network capacity, coverage, and security.
Especially in the less-developed world, a lack of connectivity and inadequate access to digital services can disenfranchise the poor. According to the World Bank ID4D dataset, there are approximately 1.1 billion people with no legal identity in the world today, and a further 3.4 billion who have a legal identity but limited ability to use that identity to access digital services. This is why the UN's ID 2020 initiative promotes the use of decentralised identity and verifiable credentials to recognise education and vocational skills.
"Identity is vital for political, economic and social opportunity. But systems of identification are archaic, insecure, lack adequate privacy protection, and for over a billion people, inaccessible. With “good” digital identity, individuals could use credentials issued from a variety of different institutions in order to gain access to a variety of different services, while preserving privacy and security and maintaining control over their information." - ID 2020 Initiative

Types Of Identity Management

Against this backdrop, identity is seen as a horizontal technology which underpins privacy, security and access to crucial services. But the identity services market is not monolithic. There are 3 distinct types of identity management competing for dominance:
  • government and enterprise identity, which is ever-more dependent on biometrics
  • social identity, where individuals barter their identity information in exchange for access to services
  • decentralised or 'self-sovereign' identity, where individuals take control and manage their own digital credentials and share them selectively using Public Key Infrastructure
The market we're operating in is decentralised identity and the core technologies driving development of this market are, as explained in the first chapter, Verifiable Credentials and DIDs. Decentralised identity cannot replace centralised identity and the two will co-exist. After all, governments need to be sure that benefits reach individual citizens and they must solve tough problems like discriminating twins at border crossings. You can't fault them for using biometrics to do so.
Decentralised identity solves different problems. With decentralised identity, individuals are able to manage their own academic, financial and medical affairs, largely without relying on biometrics or government id. DIDs can take the place of sign-ins on social media sites, and can thus eliminate the unwanted tracking of personal activity and preferences that comes with it. This in itself is a huge win. DIDs can also be used to sign into ecommerce sites, allowing easy onboarding for new services and a greatly simplified order process for airline and hotel bookings. Verifiable Credentials can take the place of CVs and resumes for job seekers, making it easy for potential employers to verify education and work experiences.

A Dualistic World

So we're heading for a dualistic world in which decentralised opt-in identity replaces social identity, yet it's competing all the time with government-issued fiat identity. We will see digital versions of birth certs and death certs, drivers licenses and passports. But at the same time, government issued digital identity will encourage adoption of DIDs and Verifiable Credentials for most non-governmental use cases.
There is little doubt that our current methods of maintaining digital identity are badly flawed. We rely too much on services like Google and Facebook for password management. We rely too much on trusted third parties such as universities and hospitals to manage our personal information. This must change, but it won't happen overnight. The young and tech-savvy will be early adopters, while mainstream adoption of decentralised identity is likely to be a generational transformation.