How Can Blockchain Protect Your Identity? - Tax Professionals Member Article By Pat Raskob
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How Can Blockchain Protect Your Identity?

How Can Blockchain Protect Your Identity?

A blockchain is an improved database containing records of transactions stored in an unaltered ledger. It makes transactions easy to track since no one person has exclusive rights to the information. After a transaction is done, the data is stored on a dedicated 'block' and attached to a chain, called the Blockchain.


But in this age of privacy theft, how can Blockchain protect your digital Identity? Is that even possible?

The technology of Blockchain

The structure of Blockchain is adequately designed to build a high-security framework against hackers. Part of the act ensures that no one has full access to control or manipulate the stored data. Currently, there is a $91 billion US reward for any hacker who can successfully break into the Blockchain.

The encryption code has been proven to be a failsafe. Because it is a technology, it has been continuously improved over the years. 


How Blockchain Protects Data

A concept within Blockchain that has been seen to protect data is known as "Self-Sovereign Identity," which is unbreakable and has been proven to be more secure than the standard identity systems you're used to.

Instead of needing a password, you'll need your unique sovereign ID before you gain entrance to your account on the blockchain framework. 

The idea behind this concept is that the user, which is you, gets total control of the revelation of your Identity. It is designed that your information is not locked in one site but is spread across many platforms, with your consent, of course. 


How Self-Sovereignty Works

Blockchain gives you the power to have multiple identities on different platforms, or other personalities, for work and family. 

This works by giving you complete anonymous authentication. It comes in a private key, to which you only have access to it. Of course, there's a public key if you want someone else to access your different identities. Don't forget that this public key is prone to the risk of hacks, though. 

In essence, here's how the self-sovereignty operates:

  • Create multiple identities for different platforms, personalities, and situations. 

  • Access and update your information (some third-party apps may require additional verification to be sure it's you)

  • Move your information from ledger to ledger.

  • Replace passwords with private keys or mnemonic phrases.


Peer to Peer 

Another crucial concept that Blockchain employs to safeguard your Identity is peer-to-peer networking. In the traditional identity system, all your information is stored in one extensive database on one site. As seen in recent times, this has posed risks of hackers breaking into the server and stealing the information anytime they want. 

In Blockchain, nodes override a central database. These nodes or devices function by spreading the information across their extensive network. All transactions carried out on the network are broadcast across different nodes. They must make the transaction valid before it's approved. 

These transactions are initiated by the public or private keys, depending on which you choose. The keys are gotten from a hash function used to carry out transactions. Because of the intense algorithm used to create the keys, it's practically impossible for one to guess the keys.

So, instead of a large corporation requiring your private information and storing it in their extensive database, you can create an anonymous account with different keys and carry out activities privately. Your Identity is protected with this act as well.

There's the danger of the loss of your account permanently, should you lose your private keys. Since there is no central database with your information, you only have one chance to save your information by yourself.


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Pat Raskob
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