UK to roll out digital IDs—what does it mean for privacy?

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Earlier this month, the United Kingdom government announced the introduction of government-backed digital IDs.

The IDs will allow people to use their smartphones to buy alcohol in pubs, clubs, and shops. Scheduled for rollout next year, they’re part of a broader effort to digitize state functions, including paying taxes, opening bank accounts, and more.

The digital IDs are voluntary and will be issued by certified providers that meet government standards for security and reliability. They’ll allow for quick and potentially contactless age verification without revealing personal details such as name and address.

However, privacy advocates are concerned that it is the beginning of more Nanny State involvement in citizens’ lives and will lead to more tracking, tracing, and loss of privacy. Some critics noted the voluntary approach and limited scope of the digital IDs are stepping stones to making them mandatory after a successful test.

Balancing progress and innovation with privacy and liberty

Across the world, we’re seeing the same worried reactions to all things that may strip us of our personal autonomy: digital IDs, central bank digital currencies (CBDCs), and even electric cars.

Most recognize that these things are the inevitable result of technological progress, and they are undoubtedly beneficial. Some of the upsides are greater efficiency, streamlined processes, and the reduction of bureaucracies. Still, concerns about centralized control, privacy, and the potential for abuse are growing louder.

It’s not difficult to imagine why: a dystopian scenario where an authoritarian government can block political dissidents from accessing essential services, rescind or freeze digital currencies, or even switch off someone’s electric vehicle may be unlikely, but even the possibility is alarming.

With digitalization in its various forms seeming inevitable, some are looking to another emerging technology, blockchain, for potential solutions.

Opinion: blockchain technology can enhance privacy and preserve liberty

In the worst-case scenarios feared by opponents of digital IDs and currencies, authorities can render someone persona non grata for opposing them. However, that’s only possible if those same powers control the digital systems we depend on. It doesn’t have to be that way.

Blockchains are commonly associated with digital currencies like BTC and Ethereum but have many other potential use cases. As decentralized databases, it’s possible to tokenize almost anything on them, including digital IDs, currencies, real-world assets (RWAs), and more.

Since they’re decentralized, no given government or centralized power can change the rules and censor people based on their political affiliations, criminal records, or other arbitrary factors. Sure, the local library or school could stop criminals from entering, but imposing the sort of blanket bans imagined in dystopian scenarios would be difficult.

Blockchains can also mitigate some other concerns: government surveillance is much more difficult amidst billions of unrelated transactions and records on the blockchain, records are auditable, so any cases of abuse of power would be provable, data security is enhanced due to decentralized storage and encryption, and tools like Zero-Knowledge Proofs (ZKPs) can greatly enhance privacy with no risk of data breaches compromising it later.

It’s not perfect, but it’s better than the alternative

Blockchain technology offers a middle ground whereby businesses and governments can realize the innovation and modernization desired while the concerns of privacy advocates, libertarians, and others can be addressed, and the worst-case scenarios can be prevented.

No tool is perfect, and there are always tradeoffs, but having digital IDs that protect privacy without relying on third parties, digital currencies that allow peer-to-peer transactions, and enabling interaction with all sorts of innovative apps and services is a net good, especially if digitization is inevitable.

In China, a payment system based on a scan of the palm of WeChat Palm Pay has been launched.

The scanning device reads biometric data and automatically debits money from the buyer's account.

The system works in poor light and even "remembers" the position of the palm of a… pic.twitter.com/KSaGsH3aDs

— Tansu Yegen (@TansuYegen) June 12, 2023

While some will argue against digital IDs, CBDCs, and other tokenization on principle, many parts of the world are moving forward with these and realizing the benefits, e.g., enhanced efficiency and cost savings. Countries that resist these trends will likely have to do the same to some extent to stay competitive.

Blockchain offers a way to do so while preserving cherished ideals like liberty, privacy, and individual autonomy. If these systems are going to be built, they should be built on public, scalable blockchains like BSV.

Watch: Why identity is important as we move to Web3