[Contributed Article] User-friendly Decentralized ID leads to a new digital revolution

User-friendly Decentralized ID leads to a new digital revolution

By SeungCheon Choi regional Director of the DID Alliance Korea

In the mid-’90s, when I was working as a bank teller, I had a surprising experience. A customer with a foreign bank account came to the window and asked, “I want to transfer money from bank α to your bank by phone.”

Then I cannot forget the shock I had on that time, ‘How someone can remit money over the phone without going to the bank?’ Therefore, my astonishment led me to request the human resources manager to make me move to the department in charge of digital banking. During the 20 years I spent in the digital banking department, the number of non-face-to-face transactions surged from 0% to over 90%, and the number of employees working in bank branch decreased from 50 to about 10 employees.

Not only financial sector, but also other services based on human relations (e.g., shops, travel agencies, etc.) has been converted into digital services, and this evolution is still progressing rapidly.

As we entered the era of information age with the advent of computers and Internet following the industrial revolution, our lives became digitized, and countries are dreaming to become digital nations, as reflected by the increasing number of government services being provided digitally.

Moreover, it is not easy to estimate correctly the changes that technological progress will bring in our societies, especially with the impact of a new paradigm formed by the combination of the artificial intelligence and cashless society in recent years. However, what is clear is that the economy is rapidly shifting from a traditional economy based on human relations to a digital economy.

The Second Digital Financial Revolution

When I started working in the digital banking department of my previous company, digital finance used to refer simply to a service provider-centric experience based on the conversion of off-line transactions into on-line transactions. It now refers to a broader definition. The current digital finance is not only changing users’ experience but it also affects monetary policy through, for example, the dynamism of the Fin Tech industry.

Sweden, which is the first country to have issued bills in Europe in 1661, is the fastest country in the world for dropping cash. One of the main reason behind this phenomenon is ‘Swish’, a mobile application enhancing real-time payment. Following the success of the application, most stores in Sweden can now legally refuse payment by cash, and, as a result, the number of stores allowing payment by cash decreased to 15%. The cash usage remains at 1.4% in 2016 while the use rate of Swish app stands at 60 percent of the total population.

Sweden is not an isolated case as various countries are also following such trend. In 2014, the government of Israel authorized establishment of a committee in charge of examining ways to eliminate cash from the Israeli economy. Since 2015, France has banned cash payments for transactions above 1,000 euros. From 2017, Denmark has stopped minting coins and printing banknotes while introducing a bill to change the current laws, which make the act of accepting cash payments compulsory for most of stores. In Netherlands, debit cards (pin cards) are replacing cash, and Belgium voted a law that bans cash payments for transactions above 5,000 euros while not allowing settling real estate transactions in cash.

Digital identification for the success of the digital world

Security and identification are essential to the evolution of the digital society.

In particular, although Korea adopted various means for identification, there has been constant debate over convenience, security, and interoperability for authentication methods.

Meanwhile, the concept of Self-Sovereign Identity has emerged as a major topic in the corresponding industry not only in Korea but also overseas, fueled by the development of blockchain-based identification projects.

In other words, when using digital services, users do not need to provide all of their personal information, but only provide the necessary information that they choose to disclose. In particular, the advent of Distributed Ledger Technologies such as blockchain offers the possibility to maximize the security by preventing forgery and identity theft.

In the legacy system, in order to use services of financial institutions and public organizations, users have to go through multiple redundant non-face-to-face identification process, which differ according to each company. As a result, the existing system is not convenient for users due to the lack of interoperability between these identification processes.

Nevertheless, when DID will become widely used, users will be able to simply perform identity verification themselves and use digital services no matter which service provider they want to get access to.

Recently, companies selected as operators for the Blockchain Public Pilot Project are conducting projects to temporarily deploy and operate Decentralized Identity (DID) based services in public institutions, while DID Alliance Korea, which I belong to, aims to standardize, open and globalize DID related services. So far, the alliance has gathered various companies and public organizations that already participate in the project.

Within the next few years, the number of public institutions and companies utilizing digital identification services based on DID is expected to increase while major identification cards and credentials will be replaced by digital means, enhancing the creation of a variety of new financial, public and corporate services using this technology. The use of digital identification services based on DID will also help solve social problems due to the violation of personal privacy.

Digital innovations are constantly emerging, and are leading us to a digital society. In that regard, we believe that the Decentralized Identity technology based on the blockchain is a unique and critical innovation that will revolutionize our lives.

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