What Is Selective Disclosure?

Key Takeaways:

• Selective disclosure is the process of sharing only the information necessary for a specific purpose while keeping other personal details private.
• Selective disclosure is a key feature of Verifiable Credentials, allowing individuals to present only the required information in a digital credential. This gives users greater control and privacy over how their data is shared and managed.
• This approach aligns with the growing demand for user-centric privacy solutions and with data protection regulations, by minimizing unnecessary data exposure.

Why Is Data the New Gold?

Data is often referred to as the new gold, becoming a valuable resource for organizations, especially in the age of AI. AI leverages data to provide businesses with insights and tools to better target individuals and identify patterns. As a result, your personal information is scattered across the internet, with various organizations competing to obtain it. Social media platforms collect and use your data for targeted marketing, scammers steal and sell it, and government agencies use it for surveillance. 

The lack of true data privacy in most organizations has led to growing concerns among consumers, prompting governments to introduce stricter regulations like the European Union’s GDPR and the United States’ CPRA. However, these regulations are only as effective as their enforcement and companies’ willingness to comply. Incidents such as the Facebook and Cambridge Analytica scandals have highlighted how personal data can be misused for profit or political gain. Given the difficulty of erasing one’s digital footprint once it’s been created, the best approach may be to limit the data shared in the first place.

One effective solution is selective disclosure which empowers individuals to control how and with whom they share their data, safeguarding their privacy and security.. Could selective disclosure be the answer to a more secure and private digital future?

What Is Selective Disclosure?

Selective disclosure is the process of sharing only the necessary personal information required for a transaction, while keeping other details private. It’s a key feature of verifiable credentials and is particularly useful in scenarios like identity verification, where limited details are needed.

For example, if you’re buying a beer and need to prove you’re over 21, typically, you would show a government-issued ID, such as a driver’s license, which reveals not only your age but also your name, address, and other personal details. This unnecessary data exposure creates privacy risks, especially if your information falls into the wrong hands.

With selective disclosure, you can prove you’re over 21 without revealing additional personal information. The system only verifies that you meet the age requirement, allowing the transaction to proceed without exposing sensitive data like your full name or address. This method enhances privacy by limiting data exposure, reducing the risks of identity theft, and better safeguarding your personal information from breaches.

How Verifiable Credentials Enable Selective Disclosure in Digital Identity Systems

Verifiable Credentials (VCs) make selective disclosure possible by allowing individuals to share only the information needed for a specific interaction, while keeping other personal details private. This technology offers greater control, interoperability, and privacy within digital identity systems by leveraging several key components:

Decentralized Identifiers (DIDs)

DIDs are a foundational element of verifiable credentials. They function as decentralized, unique identifiers, giving users control over their digital identity without relying on a central authority. DIDs allow individuals to selectively disclose specific parts of their credentials to verifiers, ensuring only the necessary information is shared while safeguarding the rest of their personal data.

Blockchain

Blockchain, or distributed ledger technology, ensures the integrity and security of verifiable credentials by maintaining an immutable, decentralized record of transactions. Smart contracts—self-executing contracts stored on the blockchain—automate the verification process, allowing for trustless credential exchanges. Blockchain enhances trust in the issuance and verification process while enforcing selective disclosure without third-party intervention. VCs can be linked to underlying credential data stored on the blockchain, offering transparency and security.

Cryptography 

Cryptography is crucial to the security of verifiable credentials through two key components. First, digital signatures ensure the authenticity and integrity of each credential. When a credential is presented, the verifier uses the issuer’s public key to verify the digital signature, confirming that the credential hasn’t been altered. Second, public-key cryptography encrypts sensitive information within the verifiable credential, ensuring only the intended recipient with the correct private key can decrypt and access the data, therefore protecting user privacy and enabling selective disclosure.

Digital ID Wallets 

If not stored on a blockchain as digital tokens, verifiable credentials can be stored in digital ID wallets. These secure applications allow users to manage and selectively share their credentials directly from their devices. Digital ID wallets give users control over which attributes of their identity to share, ensuring privacy and control. With built-in privacy protections, these wallets facilitate the seamless use of verifiable credentials across platforms while ensuring that only necessary data is shared.

Use-Cases of Selective Disclosure

1. Hotel Check-in and Travel

Hotels and travel companies often require identification to confirm bookings or verify age. With selective disclosure, travelers can prove their age or the validity of their ID without sharing unnecessary personal details, such as home addresses or passport numbers, reducing the risk of data theft. The Gansevoort Hotel Group data breach in February 2024 highlights the need for selective disclosure in the hospitality industry, as it could have mitigated the risk of exposing personal information.

2. Access to Healthcare Services

Patients can use selective disclosure to verify their eligibility for healthcare services or insurance coverage without revealing their full medical history. For example, they can confirm they meet specific criteria or have coverage without disclosing personal health records, lowering the risk of privacy breaches. The $22 million ransom cyberattack on Change Healthcare in February 2024 demonstrates the potential benefits of selective disclosure, as reducing data collection can limit the impact of data breaches.

3. Supply chain

Selective disclosure allows suppliers and partners to share only the necessary information, such as product certifications or compliance records, without exposing sensitive business details like pricing strategies or proprietary data. This protects competitive advantages while ensuring that relevant credentials and qualifications are verified for smooth and secure operations throughout the supply chain.

4. Smart Contracts in Decentralized Finance (DeFi)

In DeFi, users often interact with smart contracts that require certain criteria, such as owning a minimum number of tokens. Selective disclosure allows users to prove they meet these criteria without revealing their entire wallet contents, improving privacy and reducing the risk of financial theft. Rob Hitchens has outlined how this concept can be implemented within Ethereum smart contracts.

5. Secure Voting Systems

Selective disclosure can protect voter privacy in digital voting systems while ensuring eligibility. Voters can prove they are registered and eligible to vote without revealing personal identities or voting choices. Cryptographic methods like verifiable credentials can ensure both fairness and security in elections.

Selective Disclosure vs. Other Data Control Methods

As data privacy concerns grow, several alternatives have emerged as people seek better ways to protect their information. Here’s how selective disclosure compares with three key approaches: homomorphic encryption, pseudonymization, and anonymization.

1. Homomorphic Encryption

Homomorphic encryption allows data to be processed without ever being decrypted, ensuring personal information remains secure throughout the process. For instance, a service can verify a user’s age without needing to see their birthdate. While this method offers robust privacy, it’s computationally intensive and not yet widely adopted due to its complexity.

Selective disclosure, in contrast, is more practical for real-time applications. It enables users to share only the necessary data points, making it simpler and faster to implement. This approach also gives users direct control over which information to reveal, aligning more easily with privacy regulations.

2. Pseudonymization

Pseudonymization replaces personal identifiers with unique codes or numbers, allowing re-identification if necessary. For example, a retailer might assign a customer ID instead of storing names. However, there is a risk of re-identification, especially if the pseudonymized data is linked to other information.

Selective disclosure eliminates this risk by sharing only specific data relevant to the interaction without allowing re-identification. This method offers stronger privacy protection while still enabling verifiable identity checks as needed.

3. Anonymization

Anonymization permanently removes personal identifiers from data, making it impossible to trace the information back to an individual.This approach is often used for research or analysis where personal identity isn’t needed. However, removing identifying details limits the data’s utility for future interactions or verifications.

Selective disclosure, on the other hand, maintains the utility of the data for verification purposes by allowing users to share only necessary information. Unlike anonymization, which is irreversible, selective disclosure offers flexibility, enabling re-identification when required, giving users more control over their data.

Selective Disclosure and Regulatory Compliance

Selective disclosure, the practice of sharing specific information with a select group, remains a complex issue in the regulatory landscape. While existing frameworks address many concerns, there is still room for refinement to ensure greater protection for individuals, particularly in the context of data privacy.  Here are some key regulations that underpin the concept of selective disclosure:

Regulation FD (Fair Disclosure)

Implemented by the SEC in 2000, Regulation FD mandates that public companies disclose material nonpublic information to all investors simultaneously. This prevents selective disclosure by ensuring that no group of investors gains an unfair advantage through early access to critical information. Regulation FD is crucial for maintaining market integrity and investor confidence.

Insider Trading Laws

These laws prohibit individuals with access to material nonpublic information from trading on that information or tipping others to do so for personal gain. Insider trading laws prevent selective disclosure that could lead to unfair market advantages, maintaining a level playing field in financial markets by restricting the misuse of insider information.

Corporate Governance Standards

Strong corporate governance standards, including independent boards of directors and clear internal controls, play a crucial role in preventing selective disclosure. These standards require companies to establish policies and procedures for the fair and transparent dissemination of information. Good governance practices ensure that sensitive data is shared responsibly and legally, protecting both the company and its stakeholders.

Data Privacy Regulations

Data privacy laws like the GDPR in the EU and the CPRA in California focus on user control and transparency. These regulations support selective disclosure by giving individuals authority over what personal information they share and with whom. By adhering to these regulations, companies can limit unnecessary data exposure, ensure compliance, and safeguard consumer privacy. Selective disclosure allows organizations to comply with these laws by only sharing the necessary information for specific purposes, therefore minimizing the risk of breaches and protecting users’ rights.

The Role of Selective Disclosure In The Future of Data Control

Selective disclosure is set to play a major role in shaping how data is managed and shared in digital identity systems. Below are key ways in which selective disclosure will drive the future of data control, fostering a safer and more trustworthy digital environment.

1. Enhancing Privacy Control in Self-Sovereign Identity (SSI) 

Self-sovereign identity (SSI) is a growing digital identity model that aims to give users full control over their personal data. With selective disclosure, SSI can reach its full potential by allowing users to share only the necessary information for specific transactions, while keeping other personal data private. As SSI becomes more widely adopted, selective disclosure will become a critical feature of digital wallets and identity platforms, facilitating secure and privacy-focused interactions.

2. Aligning with Privacy Regulations and Compliance

 Privacy regulations like GDPR and CPRA emphasize data minimization and consent-based data sharing, principles that are closely aligned with selective disclosure. As these privacy laws become stricter, businesses adopting selective disclosure practices will be better positioned to minimize legal risks, improve data management, and build consumer trust. This approach ensures compliance by allowing users to share only the necessary information, reducing the risk of data breaches and enhancing transparency.

3. Facilitating Privacy-Preserving Interoperability Across Digital Ecosystems

Facilitating Privacy-Preserving Interoperability Across Digital Ecosystems With the increasing interconnectivity of digital certification systems, selective disclosure will enable secure and private data sharing across platforms, supporting interoperability. For example, a digital credential issued by a university can be shared with potential employers or government agencies, revealing only the required details. This approach will help create a unified digital economy, where users can seamlessly interact with multiple services using a single, privacy-preserving digital identity.

4. Driving Innovation in Decentralized Finance (DeFi) and Blockchain

In decentralized finance (DeFi) and blockchain environments, selective disclosure enhances privacy while preserving transparency. It allows users to prove ownership of digital assets without revealing the entire contents of their wallets. As DeFi platforms and blockchain applications continue to grow, selective disclosure will be key in balancing privacy with regulatory compliance, opening up new opportunities for decentralized applications.

5. Supporting Responsible AI Systems  

Identity.com’s Mobile App Enabling Selective Disclosure 

The Identity.com app empowers individuals to take control of their digital identities through verifiable credentials (VCs). Users can add, share, and manage their credentials directly from their device, ensuring privacy and security.

A key feature of the app is selective disclosure, which allows users to share only specific pieces of personal information rather than their entire data set. For example, credentials like age verification, email, or a government ID can be securely stored on the user’s device. When a business or service requests verification, such as confirming age for an age-restricted purchase, the app prompts the user to select the relevant credential to share.

Instead of sharing all personal data, the app enables users to disclose only the necessary information for each transaction. For instance, if only age verification is needed, the user shares that detail while keeping other sensitive information, like their address or full ID, private. The app cryptographically verifies the selected credential in real time and securely transmits it to the requester.

Stay tuned for our official announcement of the app, which will be available on Android and iOS!