It is necessary when using financial services or government portals and when making online purchases or proving qualifications. But while the necessity of proving digital identity grows ever more important, the systems in place for identity verification are not improving at a commensurate rate and are creating issues of their own regarding privacy, security and data handling.
While the most common way many people think of digital assets and blockchain is tracking the XRP price and other assets on exchanges like Binance, there is a potential use case for blockchain technology that could help make digital identity more secure. Blockchain technology is being explored for use as digital identity infrastructure and for verifiable digital credentials.
Blockchain systems could be used to help determine if credentials supplied digitally are genuine, where they were issued and if they have been altered, while at the same time letting individuals maintain control over the sorts of information they share.
Why Does Digital Identity Need Better Security?
Digital identity systems are very useful and solve multiple problems at the same time. They can help prove people are who they claim to be, and they also limit the exposure of personal information to the public. But these systems must move with the times. The Digital Identity Guidelines for the National Institute of Standards and Technology (NIST) were updated in July of 2025 to address issues around authentication, federation and identity proofing, all while also taking into account requirements around privacy and security.
Identity systems that organizations have traditionally used involve keeping a large database of personal information which provides a juicy target for bad actors and cybercriminals, with many different individuals' information being exposed by singular breaches of such databases.
Blockchain systems, while they do not entirely eliminate the risk of breaches, change how verification and trust functions. This is especially true when blockchain is combined with cryptographic credentials, instead of merely being used as a database for personal information.
How Could Blockchain Support Digital Credentials?
Blockchain could provide a way for credentials to be verified without the need for organizations to maintain their own private versions of personal details and sensitive information.
Let's use a university and a student's degree as an example. A university issues a digital qualification when the student graduates. That credential could contain cryptographic proof of graduation and student history that an employer would be able to check and be confident in. The graduate could then, on applying for new positions, present that digital credential, rather than needing to rely on paper documents.
Similar approaches are already being used. The World Wide Web Consortium (W3C) published Verifiable Credentials 2.0 in May 2025, as a Recommendation wherein they described a method for using cryptographically stored credentials that were machine-verifiable and respectful of individual privacy. Verifiable credentials have since been standardized by the W3C.
What Sorts of Things Could A Blockchain-Based Identity System Verify?
|
Uses |
Benefits |
|
Age verification |
Provide proof of age without sharing unnecessary information. |
|
Education credentials |
Verifiable qualifications with digital tools. |
|
Government documents |
Ability to store and deliver necessary documents digitally. |
|
Professional licences |
Credentials could easily be checked for validity. |
|
Financial onboarding |
No need to make repeat inputs of verified identity information. |
It is important that blockchain be used as infrastructure for verification processes to occur, not as a location for storing personal data.
Could Blockchain Give People More Control Over Their Information?
Yes, absolutely. For many people, the selective disclosure that blockchain offers is one of the biggest draws for its use as digital identity infrastructure. Rather than giving a company a whole swathe of information that they don't need, blockchain systems could allow them to provide only whatever is strictly necessary.
As an example, many online services are age-gated for various reasons; blockchain-based systems would be able to let consumers prove their age without giving up any other sort of information like address or date of birth.
The EU has a digital identity programme that is being built under similar ideals. The European Commission has stated that its Digital Identity Wallets are intended to let users share documents and store information while also being able to have control over how much information they provide, and to whom it is provided. At present, it is expected that these wallets will be made available by Member States to residents, businesses and citizens by the end of 2026.
What Security Problems Would Blockchain Not Solve?
Merely using blockchain as an infrastructure system will not secure digital identities by itself. There are still a range of cybersecurity necessities like cryptographic keys, wallet software, identity proofing, and devices that will set the tone for how secure any identity systems built on blockchain technology might be.
The work done by W3C on verifiable credentials has also shown that digital information can be collected and correlated across different services, which could create new privacy risks.
What this means is that any new digital identity system must be much more than simply an immutable ledger. It must include secure authentication processes, credential revocation, appropriate controls around access and privacy-preserving methods for when information must be shared.
Author: Liam Clarke
Liam is a content writer from Australia. He has been writing content for years and has a flexible style that allows him to write content to suit many topics. When he isn't writing content, he's watching classic films and providing enrichment for his cat.
