- The blockchain, what it is and how it works.
- The problem of identity theft for blockchain-based companies.
- How blockchain helps companies tackle the problem of identity theft.
Blockchain’s rising popularity can be attributed to its promise of secure money transactions and eradicating identity theft.
There will be astronomical annual spending on the blockchain, estimated at $20 billion, with the banking industry alone contributing about $522 billion. Then why is everyone talking about it? Blockchain is preferred by both users and businesses for its ability to securely store user data.
Visualize the magnitude of identity theft on a global scale. Unfortunately, victims of identity theft often don’t find out until they experience dire consequences. If online stores don’t take identity theft seriously, they risk losing customers and damaging their image. Blockchain gives individuals more control over their data and a more secure way to avoid identity theft.
The blockchain: what is it?
Blockchain is a network of technologies designed to securely collect user data and distribute it in chunks across the internet. The blocks are a network of data centers that conduct secure public transactions using encryption. Each transaction in a chain must be recorded in a distributed ledger.
A problem for blockchain-based companies: identity theft
Customers aren’t the only ones affected by identity theft; Internet companies are also at risk. To achieve their goals, cybercriminals use a wide variety of tactics, such as hacking, account takeovers, and credit card theft. Examples of some of the most typical forms of identity theft are shown below.
The Scam of Fake IDs
Synthetic identity theft occurs when multiple victims’ personal information is used to create one fraudulent persona. To complete the operation, it is common practice to combine false information with real user records that have been stolen. Criminals create new identities to participate in other fraudulent schemes. For example, cyber criminals can create fake profiles to appear affiliated with legitimate companies and launder money using these accounts.
Online shopping fraud
Scammers prey on those who make purchases on digital platforms, making online purchases dangerous. People of questionable origins populate these online marketplaces, hoping to trick customers into giving up their credit card information. Using tempting offers and phishing emails, scammers can trick online stores into unsuspecting customers into giving up their personal information.
Identity theft in healthcare
Insurance companies and hospitals should be wary of devious scammers who steal people’s medical identities.
The theft of a patient’s medical identification information can give the perpetrator access to sensitive medical information that can be sold for a profit. Since there are no foolproof identity verification systems when patients register or make insurance payments, these types of scams often go undetected.
Theft of social security numbers
Another method of committing identity theft is by using stolen social security numbers (SSNs).
The nine-digit SSN is a form of identification typically given to people at birth. Online scams such as medical and identity theft from children would be impossible without them. Cybercriminals often use social security numbers to track the suspect’s accounting transactions and file fraudulent tax returns.
Prevent identity theft with blockchain
There are a few ways that blockchain technology improves the security of user data and prevents fraudulent identities from being accepted into the system. Here are some examples:
Providing a safe and responsible way of financial transactions
When it comes to fighting identity theft, blockchain is generally seen as a potential cybersecurity solution. Due to the high level of security it offers, it can help prevent private information from falling into the wrong hands. The Blockchain distributed ledger is an electronic database that stores transactional data. Data stored on the blockchain is secured by using encryption techniques to ensure the privacy of all user data.
We have to take precautions to prevent any kind of theft or breach of the system and they are activated as soon as they are noticed. As a result, customers of online services can interact with confidence knowing that their personal information is protected.
Using ID verification tools such as Bitcoin Loophole or Chainanalysis, distributed ledger technology (DLP) in blockchain can validate the identity of customers through various channels.
The snackable wall against fraud
An attacker can easily penetrate a centralized network and go undetected for a long time. Identity verification systems are very vulnerable to a single point of failure, which can result in the loss of millions of dollars by allowing criminals to access sensitive information such as credit card numbers, social security numbers and other personal information.
With blockchain, the situation is very different, as identity thieves have to physically move from one location to another, which takes a lot of time and energy.
Blockchain uses Public Key Cryptography (PKI) to build a decentralized, digital network made up of individual blocks of data. PKIs are crucial as they prevent widespread data breaches and protect individuals’ personal information.
Title of individual data
Synthetic identities are used by cybercriminals to impersonate legitimate companies and gain access to sensitive information, such as credit card and bank account information. Banks lose a significant amount to identity theft every year and the number of cases is increasing.
Bad credit, massive credit card debt, and flags from financial authorities are all possible outcomes.
To get around this problem, blockchain technology provides public keys that can be used to initiate a secure transaction between two parties. Users gain control over their data when, for example, personal information such as their birthdays are recorded in a distributed ledger. This provides extra security for all your digital chats.
And last but not least
Identity theft protection is critical for all types of businesses. Know your customer (KYC) and anti-money laundering (AML) rules can be easily implemented via customer identification verification, which also helps reduce the cost of cybercrime.
Companies in the blockchain industry can use ID verification services to quickly and easily add new users. Identity verification service providers in the blockchain industry can use this to speed up the onboarding process for new customers.
Blockchain companies can meet global KYC and AML criteria and secure customer loyalty by offering IDV solutions powered by AI.