HOME INSIGHTS COLUMN IDENTITY 5.0: DIGITAL IDENTITY AND BLOCKCHAIN
We embark on a journey to personality: What does identity mean? How do we move from analogue to digital identity? Now that we know that our digital identity consists of a huge mountain of data worth a few satoshis, the question arises: What do we do with it now? Today: Identity 5.0: Digital Identity and Blockchain.

SecureKey: Proof of identity by the news spy

The Canadian security company SecureKey is working with IBM on the news spy solution to store identity data on the blockchain. Whether driver’s license, ID card or bank information: Everything is retrievable and ready for use via smartphone apps. Access to and disposal of this data remains with the news spy. This is primarily a matter of proving creditworthiness. The confirmation process is automated, without touching on data protection issues. The blockchain is both decentralized and transparent.

The central administration of money is a factor that is repeatedly criticized in the camps of the crypto-communtiy. Banks, like governments, have supremacy – they determine (to a large extent) how much and what money is in circulation. With his proposal to create a decentralized digital peer-to-peer money system, the legendary Satoshi Nakamoto created an alternative: Bitcoin.

The blockchain technology behind this revolutionary currency has even more disruptive potential than the currency itself. In addition to typical fields such as the financial or electoral system, one aspect in particular is moving more and more into the center of attention: digital identity. Especially in areas that are often described as “social hotspots”, the blockchain can help. The following is a selection of projects that answer the question of how digital identity comes onto the blockchain.

Moldova: Blockchain against human trafficking

The Republic of Moldova takes a humanitarian approach. The country, better known as Moldova, is not only struggling with great poverty. The country must also combat human trafficking. A high level of corruption, coupled with a lack of money, is tempting some to buy human lives for a handful of euros. Smuggling across the border is then comparatively easy. If someone should ask for the identity of the smuggled persons, the question is answered with bribery.

To counter this, the government is working on a blockchain solution. The forgery-proof and decentralized administration of identity data is intended to prevent human trafficking. In addition, people are thinking about collecting identity data such as fingerprints or a scan of the iris in order to be able to retrieve it during checks.

Jordan: Proof of identity for fugitives
The refugee camp “Azraq” offers accommodation to about 35,000 refugees in Jordan. The internal administration also works with identity data here. At the checkout in the supermarket, for example, there is an iris scanner that compares the identity data with those on the block chain. In principle, people can pay with a scan of their eyes – the technology does the rest. All refugees in the camp have an account on the blockchain – after the scan the account is checked and the payment is approved in the best case. Without a bank and without a government.

After the massive price increases of the last few days, Bitcoin had to lose a lot of market capitalisation in the last few hours. The Bitcoin price is currently quoted at 16,900 US dollars – a minus of around 12%. Bitcoin’s market capitalisation slipped from its highest level on 17 December from 336 billion US dollars to 280 billion US dollars today. At the same time, the Bitcoin descendants, Bitcoin Cash (BCH) and Bitcoin Gold (BTG), respectively Forkcoins, were able to massively increase in value. What is behind these movements?

Looking at coinmarketcap, it is noticeable that the Bitcoin-Forkcoins are the biggest winners in the top 10 of the last hours. Bitcoin Cash ranks third with a clear lead over Ripple with a plus of over 50 % – current exchange rate: 3,500 US dollars. Considering that Bitcoin itself was trading at the same level in September of this year, this increase is more than impressive. But also Bitcoin Gold is above the expectations of many investors with a plus of 30 % and a price of 430 US dollars.

There are many reasons for this Bitcoin news

Expensive and lengthy transactions
As has so often been noted, the Bitcoin news ecosystem is barely able to cope with the massive increase in Bitcoin demand. This results in high transaction fees and long transaction waiting times. After all, Bitcoin can only execute a maximum of 7 transactions per second (theoretical value), so that the mempools are overloaded when the transactions are collected for confirmation. In order for a transaction to be processed quickly, enormous additional fees have to be paid by the user. For smaller amounts, for example, the transaction fees may exceed the purchase amount. A situation that has a negative impact on the Bitcoin news rate, even if solutions (Lightning Network) are in sight. Bitcoin Cash and Bitcoin Gold are, at least currently, in a much better position in this respect, so that they can benefit from the scaling problems as Bitcoin alternatives.

Bitcoin Futures
Futures are so-called futures contracts with which you can bet on rising as well as falling prices. This financial product class was recently introduced on the largest futures exchange in Chicago for Bitcoin. Accordingly, not only long positions, but also short positions could be built up, which push on the Bitcoin price. This is an option that does not exist for other crypto currencies and frightens some Bitcoin holders.

Mining Difficulty
Bitcoin’s high mining difficulty often makes Bitcoin Cash and Bitcoin Gold relatively more attractive. After all, the crypto currency that is most economical or promises the highest return is mined. As a result, Forkcoins can benefit time and again from miners switching to them because their mining difficulty allows higher returns than Bitcoin – the price of Bitcoin Cash and Bitcoin Gold leaves them grateful to the detriment of Bitcoin.

Service Provider Acceptance and Technical Alternative

More and more merchants and wallet providers are accepting Bitcoin-Forkcoins, first and foremost Bitcoin Cash. The world’s largest Bitcoin payment provider, Bitpay, has announced that it will also accept Bitcoin Cash. The lower transaction costs or lower scaling problems compared to the Bitcoin primary rock could fuel further adoption by Bitcoin service providers. In addition, there are many supporters of Bitcoin Cash’s alternative approaches.

Uncertain market behavior and profit taking
In addition to the factual arguments presented above, there are always price impulses that are based on the market behaviour of the participants. It can therefore be assumed that larger Bitcoin holders have sold parts of their Bitcoin positions. It is difficult to determine whether these larger sales are the result of a pure profit taking intention or of a clear negative attitude towards Bitcoin. Experience has shown that, in the context of massive volatility, price corrections of minus 13% should not be overestimated, as is the case with Bitcoin – just as price increases of 50% should not be overestimated, as is the case with Bitcoin Cash.

The Fulmo GmbH invited to the second Lightning Hackday. At this Barcamp & Hackathon one could talk about the Bitcoins Lightning Network and experience the offchain scaling in action. Almost simultaneously the team behind the COMIT Network of TenX reached an important milestone at the other end of the world.

Barcamps or unconferences are events organized by the visitors themselves

Admittedly, a topic is set, but some guest speakers can also be invited. However, the majority of the individual events are not decided until the event itself. Participants stand up and present an idea they would like to talk about. Each other can decide then, which of these topics interest them. This is the way to get together for demonstrations of beta versions, to meet in challenging discussion groups and to maintain a general exchange. Networking is an important keyword here. Isn’t it fitting that such a decentralized format was chosen for the Lightning Hackday, an event via the Lightning Network?

Fulmo GmbH is a young company which has dedicated itself 100 percent to the possibilities of the Lightning Network. In order to fulfil their role as Lightning evangelists and for networking, they created the Lightning Hackday, which went into its second round on 23 June. Unfortunately I couldn’t stop by at the first event, which is why it was especially important for me to be there. The to-do lists may get longer, deadlines more tight and sleep less, but some events still have to be attended.

The Lightning Hackday – a barcamp around the Lightning Network

And it was worth it! Beyond the course discussions that have shaped the crypto debates since the bull market last year, the focus here was on technology. The various main events, in which XUD and Lightning Labs presented individual aspects of the Lightning Network in detail, showed how large the Lightning Network complex of topics is. With Socrates I had to call οἶδα οὐκ εἰδώς : I know that I don’t know (how it would be better translated). If I thought that I would be familiar with the Lightning Network, I had to learn that a new world around Atomic multiple payments, Watchtowers, Autopilots or Splicing opens up. This large complex of topics was discussed in the mentioned lectures as well as in discussion groups. The possibilities and current limits of the Lightning Network could thus be explored.

Other developers presented their implementation of a Cross Chain Atomic Swap between Bitcoin and Litecoin. Finally, several participants, together with the Honey Roof, demonstrated in the form of a play how a transaction in the Lightning Network works.

But a hackday wouldn’t be a hackday if you didn’t make the new technology tangible and give them the opportunity to play a hand themselves. So you could experiment with several Lightning Nodes installed on a Raspberry Pi – or simply buy them for the equivalent of 20 cents via Lightning M&Ms from a Candy Dispenser. I tried the latter with Michael Mertens and Sebastian Stommel from Cryptotec – and it worked quite well despite some WLAN problems: