Does Blockchain Secure Your Identity?

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The number of identities exposed increased from 16 million to 164 million in 2019. Image source: Forbes

Why should you worry about identity theft? Because it could mean you are losing everything that represents you in this world; this includes your name, date of birth, address, social security number, driver’s license number, credit card information, and more. Many people have had their credit card information stolen, bank accounts hacked, and their identities used in illegal activities without them knowing. Some of the most prominent examples of this are the data breaches suffered by Equifax, Facebook, and CapitalOne.

According to the Insurance Information Institute, the number of records exposed online increased from 16 million to 164 million in 2019; this is how big the problem of online identity theft is.

The bad news is that it is not within everyone’s scope to prevent data breaches and identity theft; this is because the hackers involved in these cybercrimes are experts at what they do. Therefore, specialized people and technology are needed to prevent the threat of these highly sophisticated hackers.

The Identity Theft Problem Is of Our Own Making

Massive data breaches — such as those suffered by Equifax, Facebook, and CapitalOne — are a significant cause of concern. Hackers that carry out these criminal acts can gain access to our data stored within these Social platforms and Financial Institutions and then misuse it. In this situation, the fault lies entirely with the platforms that have saved our data. However, there are times when we compromise our identity by ourselves; this is worse than having our identity stolen due to a data breach.

🤔 Think about it. You are asked to share sensitive information such as your full name, address, phone number, driver license’s ID, family details, etc. as proof of your identity whenever you want to perform a transaction online. You oblige every single time. While the party asking for this information may have a genuine reason for it, such as needing to verify the transaction, the oversharing of sensitive information online often leads to a data breach or identity theft.

While it is easy to blame ourselves for not being more careful with the sharing of our sensitive information online, there are some situations in which we have no other choice. Two perfect examples are Identity verification and Income verification. Following is an explanation of how these two situations or verification methods force us to share our sensitive details.

Most payment processing companies allow customers to make purchases without having to prove their identity. Despite this, many merchants insist on customers providing proof-of-identity; they refuse to accept the credit card transaction until the customer provides something to establish their identity, such as a driver’s license; this can put the customer’s identity at risk.

Identity verification is a process that the verifier, the merchant in most cases, uses to verify if the person making a transaction is the owner of the credit card being used to make the payment. The verification process generally involves checking an identity document that shows the person is the rightful owner of the credit card.

While enforcing the verification process is a good practice, it often leads to a person surrendering a lot of sensitive information that is not even necessary for the transaction or verification- This includes the person’s name, address, and even a social security number.

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ID verification process at the supermarkets. Image source:

Here is an example to explain this. Let’s suppose your imaginary friend, ‘Mark,’ visits the mall to do some shopping. He enters the hypermart and starts to load his cart with items. Once he’s done shopping, he heads to the cash register to make the payment.

The teller enters all the items into a POS software and then hands Mark the bill. Mark presents his credit card to the teller to make the payment. The teller takes the credit card and then asks Mark for an ID to prove he owns the card. Mark obliges and provides his driver’s license to the teller. After reading the card, the teller gives it back to Mark. The payment is then processed.

The only thing that the teller needs to check to verify Mark’s identity is if his name and signature on the credit card match the same on his driver’s license. However, by providing his driver’s license to the teller, Mark not only reveals this, but he also shows other sensitive information such as his address, date of birth, and driver License number. All this information can be misused by a dishonest cashier to steal Mark’s identity.

Let’s see the other example of the verification process.

Proof-of-income is a process that involves checking a document or set of documents to verify a person’s income and find out if they are capable of paying for the service being provided. Typically, proof-of-income is required by banks or rental agencies. Following is an example to explain proof-of-income and how it can compromise your identity.

Say your friend Mark wants to rent an apartment. Now, he likes a few apartments and has submitted applications for them to the relevant rental agents. The rental agents ask Mark to provide sensitive documents such as driver’s ID, employer information, proof-of-income (Paychecks and bank statements), social security number (SSN), and family details so they can process his application. Once again, Mark obliges and provides all his sensitive documents to the rental agents to provide his identity and income. Despite providing all this confidential information, Mark may still not get the apartment he wants.

However, what is guaranteed is that the agents to whom Mark provides his documents will have access to all his sensitive information; this information can be misused for illegal activities or to steal money from Mark’s bank accounts.

In reality, there are many people like Mark who compromise their identities unknowingly.

How Could Blockchain Help Prevent Identity Theft Issues?

Once data is documented in a blockchain, the nodes in the network ensure its validity. It is important to know that a blockchain-based identity system does not require the exchange of confidential information explicitly or directly. Rather, digital data can be exchanged and validated using cryptographic methods, such as zero-knowledge proofs, digital signatures, and hashing functions.

Let’s take a look at a few interesting solutions to blockchain identity challenges that are already being used to solve identity/privacy concerns using blockchain technology.

A digital wallet, Civic, helps you to verify your identity once and use it again and again. Civic allows you the freedom to share your identity details only with the entities you trust.

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Age verification on the Civic app. Image source:

Additionally, Civic is releasing COVID-19 Vaccination-Proofing Tool on Apple and Google stores to confirm the health status of individuals without violating their privacy.

Developed by Cardano — the 3rd generation blockchain project — Atala PRISM is secure, lightweight, and meets the regulatory compliance requirements. It helps to build credibility and trust among consumers by allowing them to monitor and manage how their data is utilized. Cardano Foundation has developed an incredible app that you can download from Apple and Google stores.

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Alata PRISM app from Apple store.

This approach allows the user to have complete control over their information and exposure in regards to how their personal data is managed and with whom it is shared. Here is a video link showing how Atala PRISM works and solves the underlying problems.

Does Blockchain Secure Your Identity?

Absolutely! With a protocol such as Zero-proof-knowledge, blockchain technology can allow people to manage their privacy concerns. However, this technical convergence and the adoption of technology by individuals and companies pose several challenges. The good news is that companies like Cardano, IBM, and Ethereum are already making efforts to get these technical developments closer to the early adopters and the market.

Written by

Decentralization believer | Blockchain blogger | Technology Enthusiast

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