Blockchain technology as a trust anchor in the digital business world

Trust has always been the basis for successful businesses: face to face, two parties clarify the final details of their agreement and reach out to each other in a spirit of trust after the deal has been closed. However, in the context of globalization, business processes are increasingly being shifted to the digital realm – and are thus raising a new trust problem.

How do I know that my business partner is really who he claims to be? That the product he wants to sell me has been manufactured sustainably? These questions often arise when the business transaction is conducted completely digitally. Central platforms have been created to give both sellers and buyers more security in this matter. They bring both parties together in the digital space and provide the necessary framework of trust through identity and data verification.

But this creates a new problem: By conducting business via platforms, platform operators collect important user data that gives them a competitive advantage over other providers. At the same time, users become dependent on these platforms, making more and more data available to providers. To break this dependency spiral or even prevent it altogether, decentralized identity and trust technologies based on blockchain can help: Digital business relationships can be established and managed end-to-end along the supply chain, while at the same time all parties retain control over their data.

Decentralized digital identity: Connecting the analog and digital worlds

In a stable supply chain, it must be possible to integrate new business partners quickly and securely. Verifying the identity of the business partner and checking the authenticity of his certificates is essential for this integration. Decentralized digital identity technology enables the exchange of trust data directly between business partners. Each company creates and manages its own digital identity (DID). Verifiable credentials (VCs) can be stored in the digital identity. These are data that support the proof of trust, e.g. company master data, certificates or audits.

To increase the confidence in the authenticity of this data, it can be confirmed by a trustworthy third party, i.e. by notaries and certifiers, but also by credit agencies such as Creditreform. Through the trust data (VCs) stored in the identity, a provider can, for example, verify itself to a buyer, while at the same time the buyer can see which trusted third parties have confirmed the authenticity of the data. Decentralized digital identities thus act as a link between the analog and digital worlds.

In contrast to centralized platforms, data management is always the responsibility of the identity holder. They decide for themselves which of their data should be shared with which business partners. Transparency between the two parties can thus create a trustworthy framework for business transactions – in which all parties involved simultaneously retain complete control over their data.

DIDs are managed by the companies themselves, data can be verified by VCs and shared with business partners. Source: evan GmbH

Blockchain as neutral basis of trust

Blockchain technology plays an important role in this process. In the context of the decentralized platform economy, it acts as a registry in which VCs’ confirmations can be stored, but also withdrawn again. As a neutral basis, it ensures that the trust in data has been confirmed by a specified party. Let’s take the rental of a car as an example for clarification: A tenant wants to rent a car. To do so, however, he must verify to the provider that he is in possession of a valid driver’s license. In the identity of the renter, the possession of a driver’s license is deposited as a VC document. This in turn has been confirmed by the Federal Motor Transport Authority as a trustworthy third party.

For the rental, the renter can therefore provide the VC document including a proof of trust to the provider in order to verify the possession of a valid driver’s license. The blockchain is the trust anchor between both parties and provides proof that the information provided by the contractual partner is correct. In its trust-building role, it makes central platforms obsolete – and thus solves the dependency problem mentioned above.

Technical hurdles in medium-sized businesses – software solutions can help

Many companies have already recognized the risk of dependence on central platforms. Digital identities are becoming increasingly important as a basis for trust in digital business processes. However, medium-sized companies in particular have to overcome technical hurdles to implement them and provide their employees with the simplest possible solutions for creating and managing identities, verifiable credentials and managing trust relationships.

If the necessary IT infrastructure is not available in SMEs, software solutions such as TRUST&TRACE can help companies use the advantages of decentralized identities in digital business relationships. Interoperability is ensured by the standardization of DIDs and VCs by the W3C.

*Originally published at CVJ.ch

About the Author

crypto-valley-journal

The CVJ editorial team consists of crypto experts, active in different areas around the blockchain technology. In cooperation with selected authors, CVJ.CH provides a high-quality resource around the distributed ledger technology. Independent and up-to-date reporting according to journalistic standards as well as educational content around the topic blockchain, rounds off the offer. 

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