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Can Blockchain Protect Your Identity?

Can Blockchain Protect Your Identity?

Since the start of COVID-induced digital transformation, cybersecurity has become a hot topic and has highlighted the lack of awareness of cybercrime and, more specifically, identity fraud. The number of identity theft cases has increased exponentially globally, exposing the high risks of losing personal data and access to vital institutional resources. The improved use of online shopping and social media has created modern digital identities that are fragmented and at risk of exploitation as user data is stored on cloud servers.

Data is our modern economy's most valuable asset, making these servers digital goldmines. These huge centralized data servers on the Internet contain the personally identifiable information of millions of people and have become the target of modern cybercriminals we call hackers. Hackers seek out this information to exploit financial avenues such as government aid, health insurance, or financial institutions, stealing critical identity information and using it to profit at the victim's expense. Improvements in cryptography and blockchain technology help reduce the risks associated with identity theft by centralizing identity verification in a more secure and restricted network.

Identity theft

Identity theft is expeditiously expanding criminal enterprise in the United States, with the number of reported cases of identity theft rising from just over 650,000 in 2019 to nearly 1.4 million in 2020, according to the Federal Trade Commission (FTC). The reality is simply having unique data points such as a social security number, driver's license, or address are no longer sufficient verification methods to prevent fraud. If a fraudster gets hold of any of this unique data, restoring the victim's identity and convicting the fraudster will become almost impossible. The risk of storing credentials in physical documents is not a viable solution because once an identity document is compromised, no paper trail can be used to identify the perpetrator. Additionally, entering credentials online could result in a data breach revealing information to hackers. 

In principle, the cloud is secure; however, the overall security of data hosted in the cloud depends on the integrity of cloud service providers and how identity information is used and managed. Many organizations validate online identity by verifying copies of data hosted on cloud servers. This method makes servers vulnerable to hackers who can access personal data if the server storing this information is compromised. However, with blockchain technology, the risk associated with identity verification is mitigated because you do not receive a copy of the data. Still, you can view non-fungible activity by its position on the chain. The technology requires the location of documents (or digital wallets) to be linked to a person's digital identity. Blockchain integration allows anyone with permissions on the network to verify the user's identity and confirm ownership of the actual ID instead of relying on personal information in the user's account id for verification.

Blockchain and Artificial Intelligence

The process of storing individual identity on a blockchain would involve converting identity documents into "tokens" and storing those tokens in a distribution ledger run by the US government if a federal-level identity verification system would allow agencies to verify identity by providing authentication verification with the blockchain network for anyone trying to use their digital identity to access resources such as government aid or financial services.

In order to verify a request, the user must provide a digital identity to an institution and request verification of the user's digital identity in the chain. It will be routed through the federal network and will appear in the federal web application to access a digital identity. The client would authenticate the request to verify their digital identity, allowing regulators to verify that the authentication came from the correct digital identity on the chain. The good part of this authentication system is that the original ID document data (such as the customer's date of birth, CPF, address, or photo ID) is never disclosed in the process. Application, which reduces the risk both for the customer as well as for the institutions and would also allow better integration of artificial intelligence via facial recognition or readers of unique biometric markers (such as retinal scans or fingerprints) to further protect the system from potential fraud.

Identity-integrated blockchain transparency offers the potential to revolutionize the way we verify people across industries. Even if a hacker could compromise data on the network, those changes would be reflected in the registry, notifying all network participants of the exact changes made and allowing a person's identity to be restored seamlessly. Furthermore, any modification that a cybercriminal attempted would leave a digital trail leading to the criminal, as ownership of the digital asset would have to shift from the victim to another digital identity address for the document to be used by the scammer.


Currently, existing identity verification processes have security issues that can be mitigated by implementing blockchain technology, which would provide unprecedented security and transparency to reduce identity theft and provide information to identify fraudsters. Several states, including Colorado and Louisiana, are now adopting digital ID, allowing state officials to accept scanned versions of driver's licenses. Louisiana's LA Wallet app allows users to store a digital driver's license that can be accepted by state police and quickly identify fake identities with a touch-activated biometric seal. Nationalizing this process to include identity documents issued by state and federal governments would increase security, reduce fraud, and increase access to identity through encrypted wallets that could be stored on mobile phones as technology becomes more secure and advanced by integrating artificial intelligence functions such as facial recognition or biometrics.



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