Blockchain and identity theft problem

• The blockchain, what it is and how it works.
• The problem of identity theft for blockchain-based businesses.
• How blockchain is helping businesses tackle the problem of identity theft.

Blockchain’s growing popularity can be attributed to its promise of secure monetary transactions and elimination of identity theft.

There will be astronomical annual spending on the blockchain, estimated at $20 billion, with the banking industry alone contributing around $522 billion. So why is everyone talking about it? Blockchain is preferred by both users and businesses due to its ability to securely store user data.

Visualize the scope of identity theft on a worldwide scale. Unfortunately, victims of identity theft often don’t find out until they experience serious consequences. If online stores do not 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.

Blockchain: What is it?

Blockchain is a network of technologies designed to securely collect user data and distribute it across the internet in chunks. The blocks are a network of data centers that perform secure public transactions using encryption. Every transaction in a chain must be recorded in a distributed ledger.

A problem for blockchain-based businesses: Identity theft

Customers aren’t the only ones who suffer from identity theft; Internet companies are also at risk. To achieve their goals, cybercriminals use a wide range 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.

Fraud with fake IDs

Synthetic identity theft occurs when multiple victims’ personal information is used to create a single false persona. To complete the operation, it is common practice to combine fake information with genuine user registrations that have been stolen. Criminals create new identities to participate in other fraudulent schemes. For example, cybercriminals can create fake profiles to appear associated with legitimate companies and launder money using these accounts.

Online shopping scams

Fraudsters prey on those who buy on digital platforms, making online shopping dangerous. People of dubious provenance populate these online marketplaces, hoping to trick customers into giving up their credit card details. Using tempting offers and phishing emails, fraudulent online stores can trick unsuspecting customers into giving up personal information.

Identity theft in the healthcare system

Insurance companies and hospitals need to be on the lookout for cunning fraudsters who steal people’s medical identities.

Theft of a patient’s medical identification information can give the perpetrator access to sensitive medical information that can be sold for profit. Since there are no foolproof identity verification systems in place when patients sign up or make insurance payments, this type of fraud often goes undetected.

Theft of social security numbers

Another method of committing identity theft is to use stolen social security numbers (SSNs).

The nine-digit SSN is a form of identification that is usually given to people at birth. Online fraud such as medical and identity theft for children would be impossible without them. Cybercriminals often use social security numbers to obtain the suspect’s accounting transactions and submit fraudulent tax returns.

Avoid identity theft with blockchain

There are a few ways in which blockchain technology improves the security of user data and prevents false identities from being accepted into the system. The following are examples of some of these:

Provide a safe and secure method for financial transactions

When it comes to combating identity theft, blockchain is generally seen as a potential cybersecurity solution. Due to the high degree of security it offers, it can help prevent private information from falling into the wrong hands. Blockchain’s distributed ledger is an electronic database that stores transaction data. Data stored on the blockchain is secured by using encryption techniques to ensure the privacy of all users’ data.

We should have security measures in place to prevent any kind of theft or intrusion into the system and they are activated the moment they are detected. As a result, customers of online services can relate with confidence and know that their personal information is being protected.

Using ID verification tools such as Bitcoin loopholes or chain analysis, distributed ledger technology (DLP) in blockchain can validate customers’ identities across different channels.

The snackable wall against fraud

An attacker can easily compromise a centralized network and remain undetected for long periods of time. Identity verification systems are highly vulnerable to a single point of failure, which can result in the loss of millions of dollars by giving criminals access to sensitive information such as credit card numbers, social security numbers and other personal details.

With blockchain, the situation is quite different since identity thieves have to physically move from one place to another, which takes a lot of time and energy.

Blockchain uses Public Key Cryptography (PKI) to build a decentralized, digital network consisting of individual blocks of data. PKIs are essential because they prevent large-scale data breaches and protect individuals’ personal information.

Title of individual data

Synthetic identities are used by cybercriminals to impersonate legitimate businesses and gain access to sensitive information, such as credit card and bank account details. Banks lose a significant amount due 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 circumvent 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 details such as birthdays are recorded in a distributed ledger. This provides extra protection for all your digital chats.

Last but not least

Protection against identity theft is essential for businesses of all kinds. Know your customer (KYC) and anti-money laundering (AML) rules can be easily implemented via client 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 ensure customer loyalty by offering IDV solutions powered by AI.