Microsoft’s Blockchain-Based Identity System, ION, Launches Amidst Data Privacy Concerns


Decentralized Identity Foundation (DIF), a non-profit organization aiming at building a digital identity ecosystem, announced the launch of the beta version of Microsoft's Identity Overlay Network, a Bitcoin-based identity platform.

At the mainnet launch, Microsoft's ION will enable over 1.1 billion people who lack a legal ID to acquire one and also help in identifying and contact tracing COVID-19 patients.

The accelerating progress in government partnerships to develop decentralized digital ID systems, however, is facing resistance from several experts who believe it may lead to privacy concerns, hacks, and breaches of personal information.

Microsoft's ION Partnership With Casa Wallet

The spread of COVID-19 has seen multiple digital identity and contact tracing apps come up in a bid to curb the spread of the pandemic. Microsoft's ION will partner with Casa, a startup known for its Casa HODL Bitcoin wallet, to improve the “authentication, privacy and security” of users' digital identities on the platform. ION's project lead, David Buchner said:

“We are thrilled to have Casa collaborating on ION with us, which showcases the potential of building real-world applications that leverage the strong foundation Bitcoin provides.”

The ION project employs a tagging system, whereby instead of including all the data on a specific transaction on the platform, the info is given a reference number. The number is then added to the ledger, and is easy to retrieve the transaction at any time from the ION nodes.

Several other initiatives, including ConsenSys, backed the project, Uport, form the DIF, and this will allow the interoperability of the systems across the DIF platform. DIF leader Rouven Heck said:

“Everybody wants to move fast and has a high interest in demonstrating this technology can be very powerful.”

The miners on the BTC network validate and verify the reference numbers for a small fee.

A Race to Form Partnerships With Governments

Competition across the blockchain digital identity industry is spiking as governments continue to show interest in citizens' medical and financial records. The targeted blockchain contact tracing on COVID-19 platforms has seen adoption by several governments and corporations.

In compliance with the World Wide Web Consortium (W3C) credentials, over sixty corporations around the world formed the COVID-19 Credentials Initiative (CCI) to develop digital identity passports. Late last year, eleven South Korean startups announced plans to launch the blockchain-based digital identification service within the government's regulatory sandbox.

However, some analysts remain skeptical of the actual safety and security of the personal data collected on these platforms.

‘Data Collected is Extremely Hard to Protect.'

On the subject of contact tracing and data collection by these decentralized identifiers, Blockchain Commons founder Christopher Allen said the project would have a hard time upholding user privacy as the data such as the location of the patient is “incredibly hard to protect.”

Microsoft and IBM, who have been at the forefront of funding and developing digital identifiers, have faced much criticism, Harry Halpin, CEO of privacy-tech startup Nym, the latest industry player branding these systems “feel-good rhetoric.” Harry sarcastically said:

“Governments need to establish identities of who owns these keys, so they say, ‘OK, we'll have an open standard, call it decentralized, and make it mandatory.'”

As the digital id systems grow, the Financial Action Task Force (FATF) released guidance for government regulation on financial institutions that use these systems.

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