Identity verification is a crucial aspect of our daily lives, and its significance extends to various sectors, including banking, education, healthcare, and employment. However, the traditional identity verification system is plagued by errors, delays, and data silos, which can lead to identity theft and poor user experiences. According to the US Federal Trade Commission, there were over 1.1 million reports of identity theft in 2024, resulting in $12.5 billion in fraud.
The Limitations of Traditional Identity Verification
The rise of AI-powered deepfakes has further complicated the identity verification process. For instance, a company called OnlyFake generated realistic-looking fake driver’s licenses and passports from 26 countries for just $15, using fake image metadata that spoofed GPS location, date, and time. These AI-generated fake IDs have successfully bypassed Know Your Customer (KYC) verification of popular crypto exchanges and financial services providers such as OKX, Kraken, Bybit, Huobi, and PayPal.
The consequences of identity theft are far-reaching, with 25% of victims considering suicide and over 70% falling victim to cybercriminals again, according to a report from the Identity Theft Resource Center. To mitigate these risks, companies implement multi-step verification procedures and ongoing KYC checks, which can create new points of friction between users and companies. This can lead to lost revenue for companies and a poor user experience.
Blockchain-Based Identity Verification: A Solution
Blockchain technology offers a promising solution to the limitations of traditional identity verification. By encrypting data off-chain and storing verification hashes on-chain, blockchain-based systems enable users to control their credentials while ensuring compliance, reducing friction, and preventing data leaks. This approach allows companies to automate verification systems with real-time audits and cryptographically protected information.
Blockchain-based identity verification systems are being adopted by companies of all sizes, from startups to enterprises. These solutions provide affordable, automated, and auditable verification processes that improve efficiency, regulator trust, and protection against deepfakes and fraud. For example, small businesses can use blockchain-based solutions to achieve enterprise-grade functionality without incurring large costs, while medium-sized companies can benefit from scalable verification systems that can grow with their workforce and organizational infrastructure.
According to Zain Zaidi, CEO of TransCrypts, a San Francisco digital identity company backed by Mark Cuban, Pantera Capital, and Lightspeed Faction, blockchain technology has the potential to revolutionize the identity verification process. His company works with over 450 enterprise customers in finance, healthcare, and technology, including Fortune 100 employers, to authenticate digital records and stop AI-generated counterfeits before they cause harm.
Zain Zaidi, CEO of TransCrypts, has watched AI reshape verification and is at the forefront of developing blockchain-based solutions to combat identity theft.
Benefits of Blockchain-Based Identity Verification
The benefits of blockchain-based identity verification are numerous. It enables users to maintain sovereign ownership of their data and choose what data they want to share or what conditions apply to its reuse/re-verification. This approach also allows companies to eliminate unnecessary bottlenecks and streamline the onboarding process for employees, students, patients, and consumers without compromising on regulatory obligations.
In conclusion, blockchain-based identity verification offers a secure, efficient, and user-centric solution to the limitations of traditional identity verification. As the threat of deepfakes and identity theft continues to grow, blockchain technology has the potential to demonstrably prove the true identity of humanity in all areas of existence. For more information on how blockchain is being used to modernize verification, visit https://crypto.news/business-leveraging-blockchain-modernize-verification/.
