How Blockchain can Prevent Identity Theft
Identity theft cost consumers $16 billion dollars in 2016 alone. Although financial institutions alert consumers of potentially fraudulent transactions, this has never stopped criminals in the past.
Organizations soon demanded more information from the individual to minimize identity theft, leaving individuals with no choice but to lose control over their personal information.
Blockchain can remove this problem by creating a future where individuals can retain their privacy without risking identity theft.
The origins of identity theft
There are three parts to validating an individual’s identity: claim, proof, and assertion.
A claim is a statement made by an individual or entity. To support an identity claim, an individual needs a form of proof like an ID. If extra validity is required, a third party can assert this claim by cross-referencing their records.
This form of data is, however, unstructured. Proofs are often in the form of images or photocopies and can easily be stolen, faked or duplicated.
The online equivalent is a bot or spyware that accesses sensitive information such as credit card numbers, bank account numbers and username and passwords. Having a third party repository that owns and controls confidential information may seem ideal, but if hacked it would be of great detriment to everyone in the system.
Identity theft often occurs because identity verification processes are weak. With personal data widely available online, it is easy for hackers to gain access and take over personal accounts. Organizations have added extra security measures. However, this adds further friction and cost for the consumer.
Sovereign identity through blockchain
Blockchain enables the individual to gain greater security regarding their personal information without losing their privacy and paying further fees.
Creating a distributed ledger containing everyone’s identity distributes trust from a single central point towards the whole system.
A sovereign identity enables the individual to keep personal information under their control and share only when required. Individuals can choose to revoke the information after some time. The individual is now independent of a third party or government organization. Individuals can keep their privacy without risking identity theft.
In the past, to file for a loan, an individual would need to fill out personal information in their application, like their salary. With blockchain, an employer and the network could verify the individual’s pay without revealing any personal information. Stealing someone’s identity is therefore significantly harder when personal information is no longer widely available.
Although this technology requires further development, IBM and Canada’s SecureKey are making this a reality. They are pioneering a decentralized network and piloting in Canada using the IBM blockchain this year. IBM also recommended interesting uses for blockchain technology across Canada.
By redefining the way consumers prove their identity, blockchain can prevent and reduce the impact of identity theft on individuals.
Buy Bitcoin, Ethereum, XRP, and other cryptocurrencies on Coinsquare.
Get the latest blockchain and digital currency news from Canada and around the world, delivered each week to your inbox.
Your Email address