top of page

Todo acerca de Web 3 y GovTech


6 recommendations for implementing a Blockchain identity project

By Lucas Jolías, Ana Castro y Jesús Cepeda

When thinking about an identity and credentials project, you may have doubts such as which blockchain to use, how to validate the identity of citizens, and whether to develop your own blockchain or use one from the market. In this brief guide, we will provide answers to some of these concerns, with the aim of clarifying some obstacles that may arise in the implementation process

1. Define an authentication and/or identity verification method.

The first thing we must define is how we are going to identify the citizen. As we have mentioned in other publications, our position is that the identity belongs to the citizen through a decentralized system like blockchain, but the validation of their identity is still done by the State (at least in Latin America). For this, there are several possibilities:

  • National authentication service: in various countries there are national-level authentication systems that can be integrated by third-party applications (government or private). For example, in Argentina there is, which is the presidency's service to verify the identity of citizens against various State authentication providers; in Uruguay there is something similar under, and in Brazil the same through its unique login. In Mexico, there is authentication with advanced electronic signature, used by various agencies and municipalities, but it is not a full-fledged authentication system like those mentioned above.

  • Custom development: a government can also choose to have its own validation system and not depend on a national government. For this, the government must develop or integrate a biometric recognition system that allows it to securely register its citizens and build a database that contains their validated records. These types of systems used to be quite expensive, but in recent years, solutions have emerged that allow citizens to be biometrically validated easily and at a low cost. We recommend this type of option once identity projects begin to scale up.

  • Presential validation: although digital validation is optimal, we should not rule out the possibility of validating our citizens in person. In many cases, it is advisable to have this option as a complement to digital validations for two reasons: a) digital systems often fail and b) there are age groups that often prefer to do it in person. What many governments have done is to generate two levels of security associated with my identity, where the first level is obtained simply by generating a user and password (without validation) and the second level is obtained by validating my identity with a government official in person. As we can see, there are several options to validate the identity of our citizens. Taking into account the different profiles, it is advisable to consider these options as complementary and not exclusive since more options can improve the user experience. Currently, decentralized identity validation methods are being developed, where it is no longer the state that guarantees that a person is who they say they are, but rather peers (friends, family, acquaintances, etc). This type of innovation is being tested in the crypto world and has great potential, although we still consider it premature for procedures with governments.

2. Define the infrastructure (blockchain) of the project.

Firstly, we must avoid the idea of building "our own blockchain." On many occasions, we think that it is necessary to develop a particular infrastructure for public sector projects. Developing a decentralized infrastructure takes time and money, but mainly involves the commitment of dozens or hundreds of actors over time. Let's think of blockchain as a highway (infrastructure) on which different cars (projects, applications, etc.) will run. Does it seem like a good idea to invest in a highway for 2 or 3 cars per day? Developing a specific blockchain would make sense if we already have dozens or hundreds of projects, a mature ecosystem, and the long-term commitment of its members. The second decision will be what kind of infrastructure to use, and here there are flavors for everyone. There is no blockchain per se that is better than another, but each one has characteristics that will fit better or worse for your project. Public blockchains tend to be more secure, usually have a community behind them that gives "life" to the infrastructure, and are resistant to censorship, but they also tend to have very high costs for developing social projects. The emergence of Layer 2 or second-layer on public blockchains that will lower the cost of each transaction is promising, but their development is still in its infancy. Permissioned blockchains are commonly smaller, have many fewer nodes, and are not as resistant to censorship, but they commonly have no costs, or these are very low. If you are going to work on a pilot experience level, you will not find many difficulties when working with one or another blockchain, but things change if you think about scalability. We are going to a world where there will not be a single blockchain but a multiplicity of infrastructures with different characteristics and magnitudes. Regardless of whether we work on a public or private blockchain, we must consider the interoperability between them, what standards they adopt, and how we avoid getting "stuck" in a single infrastructure. For example, there are private blockchains like LACChain that were built following public blockchain standards like Ethereum, allowing us to have compatible standards and develop projects that can migrate in the future.

3. Integrating an identity wallet.

Once we have defined the authentication method and the infrastructure to use, we must define what type of wallet we are going to integrate. Here we must make several decisions, but there are two that we consider central:

  • If we are going to use a "non-custodial" wallet (where the private key is stored on the citizen's device and the wallet provider does not have access to it) or an app where the provider has access to the private key (technically we would not be talking about a wallet);

  • If we are going to use a cryptocurrency wallet or a wallet specifically for verifiable credentials.

Each decision has its pros and cons. For example, if we decide to use a non-custodial wallet (where the citizen's private key is stored on their device and the wallet provider has no access to it), we are respecting the ideal of decentralization since only the citizen has access to manage their credentials. However, if they lose their private key or recovery phrase, they may lose their credentials (although recovery methods exist today). On the other hand, if they decide to use a custodial wallet, the citizen will not have any problems if they lose their keys, but their private key is held by the wallet provider, who ultimately manages the citizen's identity. We have the same ambiguity if we decide to use a cryptocurrency wallet, which has a much more mature development but was designed for another purpose, or if we decide to use a wallet that supports verifiable credentials, which has a much more user-friendly experience for government procedures.

Our recommendation is to start with wallets that have been specifically designed for procedures and credentials with organizations and governments, and as the population becomes familiar with the use of different wallets, then we can integrate cryptocurrency wallets. This is because if we integrate crypto wallets from the beginning, non-specialized users may have great difficulty managing their information and achieving the goal (completing a government procedure). The decision to use custodial or non-custodial wallets has a lot to do with the recovery methods offered by each wallet and the degree of autonomy a citizen can have. Our perspective is that custodial wallets do not respect the idea of Decentralized Identity. Ultimately, although it is initially a decision of each government, in the long term, we believe that the decision to use one wallet or another should be the citizen's choice. It is the citizen who must decide what type of wallet to use, which is why services like Wallet Connect are crucial to integrating various wallets and giving the citizen the final say.