Fundamentals of Blockchain

Bitcoin is now an ubiquitous term for a leger-based cyber cryptocurrency and is often mentioned in tandem with blockchain. What is blockchain? Are Bitcoin and blockchain the same thing? No, they are not. Bitcoin and blockchain are different in that blockchain is the decentralized ledger that keeps track of all of the Bitcoin transactions. Blockchain technology isn’t confined to just bitcoin though. It’s a digital platform that can be applied to other digital transactions—a smart-grid, of sorts.

“Simply put, blockchain is a machine for creating trust.” – THE ECONOMIST

Blockchain applied to an identity world is an interesting, if not fairly speculative, real-world application thus far. Blockchain technologies represent a new type of decentralized network. In a blockchain network, a whole series of ‘peer’ nodes are able to form a sort of multi-master environment where any participating peer could verify an identity and/or identity claim. This model aims to keep any one vendor, or government from monopolizing the technology.

Assets may be traded among peers without borders or a master overseer. In the identity world, there is no ‘Microsoft-only’ digital identity asset. Microsoft could be a peer (a part of the chain that processes the blocks of added data), but not the master broker of identity authentications, protocols, etc. The blockchain ledger system would only append data, no previous historical transaction (e.g. authentication) could be erased or changed.

Foundational Components of an Identity Blockchain

Some of the compelling foundational components of an identity blockchain are that you don’t need a central ‘store’ (or bank) in the middle to trade with a partner. In fact, you don’t even know who the partner is—only that they are a verified participant in the blockchain. Peers actually don’t need to trust each other, rather only the mechanism to where a decision can be made. No one actor on a network could force an entry that other peers disagree with. There must be a way to be 100% certain each transaction is trusted and that there is no way to defraud or alter a past transaction.

All peers store the same history of transactions which allow any peer to validate an identity transaction with total consensus. A minimum level of cryptology is required to be a peer and, in the case of identity, likely a common, shared, non-proprietary API and protocols to participate.

In an identity blockchain model, your government, university, community, or corporation could verify a related attribute related to your identity. For example, your I.T. certifications, educational degrees, passport status, citizenry, etc. could all be verified by both a single entity (e.g. your government) and then passed on to each peer of the network to verify you are who you say you are.

Trust – The Sweet Spot of Blockchain

Trust is essential to commerce and that is blockchain’s sweet spot. A distributed, shared blockchain network fills the void of trust currently required in a single entity (e.g. government, corporation or individual seller). Imagine a piece of art sold and resold over and over. How do you know to trust the entity that is selling it to you? Simply by the reputation of the appraiser or seller? That’s not needed in a Blockchain network. Blockchain allows for a trusted and verified transactional history from the point of ‘genesis’ (the point in time where the first transaction against that object was originally recorded) to the present. So, in this example, you’d be able to see each transactional sale of the art you are purchasing without blindly trusting some salesman’s stories. Blockchain allows for more trust in commerce.

How Do Blockchains Work?

At a low level, each identity ‘block’ in the ‘chain’ might contain several pieces of information and a transactional record (history) of each new, added attribute or value as well as a digital fingerprint (hash) to ensure consistency of the information. Each block builds upon the previous one. Each time data/information is added, a new block is created by using the old cryptographic hash value and time stamp to calculate a new hash in that fresh block. Then, both the new recalculated hash and the old one is stored and chained to each other. Every one of your transactions builds upon an older one. You can’t really tamper with any one block because you have no knowledge of the historical value of any of the stored cryptographic hashes before or after the block in the chain you are trying to tamper with. Also, the decentralized nature of the chain ensures security as there is no one trusted overseer (god) object with power to change objects.

In part two of our identity blockchain series, we will look at potential barriers to entry. In the meantime, contact Optimal IdM today to learn how we can help you with your identity solutions.


  • The database in which all of your organization’s sensitive identity data is stored.
  • A digital ledger in which digital transactions are recorded chronologically and publicly.
  • Securely managing customer identity and profile data, and controlling customer access to applications and services.
  • The means of linking a person's electronic identity and attributes, stored across multiple distinct identity management systems.
  • A legal framework that sets guidelines for the collection and processing of personal information of individuals within the EU.
  • The policy-based centralized orchestration of user identity management and access control.
  • An authentication infrastructure that is built, hosted and managed by a third-party service provider.
  • A security system that requires more than one method of authentication from independent categories of credentials to verify the user's identity for a login or other transaction.
  • A global provider of innovative and affordable identity access management solutions. 
  • Tools and technologies for controlling user access to critical information within an organization.
  • An authentication process that allows a user to access multiple applications with one set of login credentials.