As much as identity theft may seem like a modern problem, it is not. Forging documents to fake one's identity and thereby gain access to all of the perks of being someone else is an act that goes back centuries. The ability to prove your identity has always been based on some type of documents or personal information, all of which can be forged. While the internet may have changed the way in which we prove identity, the basics are still the same. The authentication of a digital identity is performed via the gathering of information that is rapidly becoming easier and easier to gather.
From Authentication to Multi-Factor Authentication to Decentralized Authentication
At one time, digital information and accounts were simply secured via a user ID and password. Unfortunately, these user ID's and passwords were often stored in bulk in very unsecured locations. All data thieves had to do was access a single cache of information in order to gain access to thousands, if not millions, of accounts. This gave rise to multi-factor authentication. In addition to a login ID and password, users also had to verify their identity via a number of other means. If they have access to a smart device with a thumbprint scanner or facial recognition software, that provides another means of verifying their identity. The IP address of the device they are using is another and security questions that only they know the answers to provides another.
Even multi-factor authentication is still not invulnerable, however. In fact, one of the primary difficulties with multi-factor authentication is how much easier it is for users to become locked out of their own accounts. With multi-factor authentication, users have to meet the specifications of the institution holding the data or information. If they can't meet those specififcations, they can have their own information and even funds withheld from them.
Decentralized Authentication: Not Just Security But Privacy
With the rise of the IoT, consumers and individuals have very little, if any, control over the information that is gathered and collected about them or how that information is being used or disseminated. Financial and medical data is hard enough to secure but regular businesses are now gathering an unprecedented amount of data on almost every human on the planet with no legal imperative to properly store or secure it. For that reason, highly personal and private information is leaking out like water through a sieve. The more personal and private information that is available about an individual, the less secure measures like multi-factor authentication become and the more easily you can lose control of your own accounts.
Decentralized authentication, however, is poised to put control back in the hands of consumers. Decentralized authentication is administered by blockchain, which is essentially the linking together of millions of computers to create one massive super-computer. Because the computers involed in the blockchain are constantly changing, data is also being constantly moved and shuffled as well as broken down into various components.
To understand how decentralized authorization works, imagine cutting a credit card into eight different pieces. In order to use the card, you would need all eight pieces. Now imagine that you carry one piece in your wallet, and give the other seven pieces to seven other people. Now imagine those seven people just keep passing the credit card pieces amongst themselves until you need them. When you need them, you can send out a code on your smart phone that causes all seven people currently holding a piece of your credit card to show up with them. Now imagine that instead of having 8 different pieces of a physical credit card, your information was instead digitally divided into 20 or 30 or 40 different locations and you and you alone possessed a digital key that would bring all of that information together.
The Convenience of Digital Transactions with the Privacy of Cash
Before banks, people used to have to carry some type of physical currency to make financial transactions. If this currency was lost or stolen, however, it could not be replaced because ownership could never be proven. Banking actually dates back to Roman times. Just like modern banks, individuals could hand over their currency in one location, then travel to another location and withdraw the same amount of currency they deposited in the first location.
Today, however, banks don't just hold your money until you need it, they also collect and store vast amounts of data regarding exactly how you use your money. This represents a severe violation of privacy that consumers have no control over. In addition to criminal elements looking to hide money from governments, cryptocurrencies have also gained in popularity because of the privacy they restore to consumers. Cryptocurrency can be expensive to use, however and is not as widely accepted as traditional currencies. Decentralized authentication will allow consumers to use traditional currencies with the same amount of privacy as cash or cryptocurrency.
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