Evaluating The Benefits of Digital Credentials Issued on Centralised vs Decentralized Ledger

In this article, we explore the benefits of decentralised ledgers for storing digital credentials and why that’s important. Then we consider the pros and cons of centralised vs decentralised ledgers for the issuance of digital credentials on blockchain systems.

What are digital credentials?

Digital credentials are electronic representations of proof-of-ability that are issued to users for an online course or program, work experience, skill assessment, or professional certification. There are also hybrid forms of digital credentials that combine a paper document with an electronic record. Digital credentials can be stored on a centralised or decentralised ledger.

Why is issuers should consider storing digital credentials on a blockchain?

Centralised ledgers, where a single authority maintains control of a network’s ledger, are currently the norm for storing data. However, blockchain technology offers a new option for the secure storage of credentials by using decentralised ledgers. Decentralised ledgers, which can be hosted by a distributed network of computers, make it impossible to manipulate data, such as an individual’s credentials. For these reasons, credentials stored on a blockchain are more trustworthy compared to those that are only maintained on a centralised ledger. Issuers of digital credentials can choose from a range of blockchain technologies, each with different technical specifications, to create a decentralised ledger for storing credentials.

Problems with Centralised Storage of Credentials such as repository or depository?

Centralised storage of credentials in a repository or depository is a common approach used by educational institutions, professional associations, and other organisations to store digital credential records. However, the control of the credentials and access to those records is controlled by a central authority. These centralised storage systems are not ideal for the blockchain era for a number of reasons. For example, centralised systems are vulnerable to cyber attacks and might be hacked. A hack could jeopardise the integrity of the entire data system, leaving it open for fraudulent credential issuance. Another concern is the risk of data breaches in which individual’s sensitive data can be exposed, including their private information, Social Security numbers, health data, and financial information.

Benefits of storing Digital Credentials on Decentralised Ledger Technology

Decentralised ledgers operate autonomously and use the network itself as the means to secure the data. This means there is no single point of failure and the data is not controlled by a single authority. Together, these features make it extremely difficult to hack a blockchain network, let alone modify data. Decentralised ledgers are also designed to be public or private, meaning they can be used by organisations to issue and store credentials while keeping them private from third parties. This capability offers a high level of privacy that is not possible in centralised systems. A blockchain ledger also offers a high level of transparency, which means that anyone can view the data stored in the ledger, but only the owner of an individual credential can confirm its authenticity.

Key takeaways

Digital credentials, which are electronic representations of proof-of-ability, are increasingly becoming the norm for education and employment, as well as for professional development and skill assessment. Organizations that issue these credentials face a number of challenges in managing them, including securely storing them and making them verifiable by third parties. For this reason, it’s important for them to consider using a blockchain ledger to store these credentials. A blockchain ledger is a distributed database that uses cryptography to store data. It is particularly relevant to storing digital credentials because it is decentralised and therefore harder to hack than a centralised database like a repository or depository where credentials are currently stored. Decentralised ledgers also offer a high level of privacy that is not possible in centralised systems.

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