The decentralized digital identity and the national digital identity can complement and enhance each other, instead of being mutually exclusive. There are multiple benefits for both citizens and governments in Latin America by working together.
In recent years, with greater momentum after the pandemic, we have witnessed the emergence of national digital identity projects in the region, such as Mi Argentina in Argentina, Carpeta Ciudadana in Colombia, or Carteira de Identidade in Brazil. These projects aim to improve the efficiency and transparency of government services through the digitalization of identity and the creation of a centralized database.
However, some have raised the idea that these projects are opposed to the efforts of decentralization and data privacy promoted by blockchain technology. That is not necessarily true.
The national digital identity and the decentralized digital identity are not mutually exclusive, but rather complement and enhance each other.
On one hand, the national digital identity can serve as a reliable and secure authentication mechanism for the decentralized digital identity. This means that citizens can verify their identity with the government and use that verification to access digital services, which are reliable and secure, provided by the public, private and/or academic sector.
On the other hand, the decentralized digital identity can provide a solution to the interoperability and lack of agility problems faced by governments in Latin America. By using blockchain technologies, infrastructure costs can be reduced, unnecessary bureaucracy can be eliminated, costs in information verification can be removed, and new digital revenue channels can be generated for governments that were not available before, all in an environment of greater privacy and data security.
If the only path were towards decentralization, we would be missing out on the best ally to authenticate people and companies, and therefore on the best mechanism to trust that a person or company is who they say they are in the new trust frameworks of the digital economy.
The decentralized digital identity needs the national digital identity to be reliable.
But also, if the only path were towards the national digital identity, we would be placing all the economic and technological burden of homogenizing infrastructures, budgets, and visions for the modernization of all levels and areas of government in a country on top of the government: a titanic task that has never been achieved to date. Furthermore, it does not guarantee citizen adoption, as is the case with the United States and its login.gov.
The national digital identity needs the decentralized digital identity to increase both the government's service capacity and citizen adoption.
In summary, the incentives provided by decentralization range from distributing the burden on the government and increasing its agility by allowing unprecedented interoperability, to facilitating people's adoption so that they not only use digital identity to interact with their government but also with other sectors of their daily life.
It will be vital for the new digital identity systems that governments, companies, and multilateral organizations in Latin America recognize the potential of combining both approaches. Perhaps the greatest opportunity for the region lies ahead of us, and it is more evident than ever that to go far, we will have to take them together.
Additional notes on terminology
It is important to differentiate between identity, identifier, and authentication. To do so, I recommend reading the identity systems blog post, but in a basic way, we leave the following definitions.
Identity: it is the set of credentials and documents that belong to an entity or person and that characterize them based on their relationships with those who issued their documents.
Identifier: it is a method, which can be a number or a combination of letters and numbers, that serves to identify an entity or person. We can think of it as a username, an email, or a decentralized identifier.
Authentication: it refers to the mechanism through which a relationship of ownership is demonstrated between a user, their credentials or documents, and their identifiers.
Jesús Cepeda, CEO at OS City