Digital Identity Verification 2.0 with Blockchain Adoption

The widespread usage of the internet and on-cloud storage has led to significant advancements in blockchain and cloud technologies.

The need for cloud storage grew throughout the late 2000s as several IT companies began utilizing it. Additionally, many firms and governments relied on on-chain storage to secure the regularly procured data.

The importance of on-chain data storage and security has risen with blockchain technology. According to PR Newswire, the data storage market is projected to reach $128.94 billion by 2030. With blockchain cloud storage becoming a reality, it is clear that it will have a strong presence in this sector.

Current Digital Identity Verification

These days, information about every person all across the world is uploaded online for identity verification.

For banks, digital ID verification is extremely helpful in tracking a user's daily activity. Governments, corporations, and even educational institutions rely on these on-chain storages. It validates the individual's identity and states that they are a part of the organization.

To provide security and prevent data breaches, these IDs are hosted on intranets and held on a remote server. Most institutions offer physical or digital IDs that verify the user identity automatically and are easy to cross-verify.

Cyber Risks and Possible Solutions

Uploading any data on the chain always comes with risks. Institutions must be more careful about data security, especially when customer data is involved.

Due to the rise of scams and hacks, securing data will be possible when disputes are quickly discovered and fixed.

• Cyber-attacks: Despite active internal data security measures, significant external attacks can still affect data, which is a major concern for enterprises. Hackers breach and steal information on the cloud, leading to phishing scams. According to a Trans Union report, since COVID, digital scams have increased to 31%, with phishing being the most common occurrence at 28%.
• Data leakage: Cyber-attacks may lead to many problems, of which one prominent outbreak is the leakage of data. In such cases, both the businesses and individuals involved tend to suffer. Even a tech giant like Facebook is vulnerable to such attacks; data from 533 million users was stolen in a breach. Later it was decided that the exploited user accounts would not be communicated about the breaches, which led to a settlement of $5 billion to the U.S. Federal Trade Commission as Facebook failed to protect user data privacy.
• Digital ID thefts: Identity theft is one of the most common effects of cyber-attacks. Criminals get a hold of the information and exploit it to attain something or gain access.

These kinds of severe data mishandling instances concern both companies and individuals. There is a need for stronger security systems to resolve this and oversee the problems:

• Strong Identity verification system: As the global identity verification market is predicted to reach $15.8 billion by 2025, businesses are focused on creating more effective identity verification systems by minimizing KYC requirements and improving security. This reduces the risks of potential financial breaches and money laundering.
• Secure Blockchain technology: When there is a need for on-chain data storage, privacy should be the main concern. The data entered in the blockchain takes on a different format, as they are cryptography-based. This data can only be decrypted with the proper code. As a result, security becomes a strong component with fewer possibilities of data theft. 

Blockchain Digital Identity Verification in Fintech

KYC details, digital IDs, and other personal information are very vital sets of data for individuals. Protecting them is just as important as tracking data.

In response to the growing demand and market growth, institutions are leaning toward blockchain technology for digital ID verifications. This transformation is referred to as digital Identity verification 2.0.

The data are turned into codes and can only be accessed through private keys. The information is thus considered safe right from the point of entry.

Due to this, several use cases of blockchain in fintech and traditional financial entities for digital ID verifications are emerging and being considered. This helps financial sectors prevent human errors and protect consumers' financial data from hacks.

Blockchain in the Financial Industry: Digital Identity Verification by Canadian Banks

The Canadian federal government facilitated the open banking process, which lets users share data with external entities. Thereafter, the Canadian Bankers Association opted to embrace digital ID verification to safeguard their users' data and prevent data leakage.

As per their statement, Canadian banks partnered with SecureKey Technologies Inc., a leading identity authentication provider, to develop a Blockchain-based digital ID verification system.

Banks like the Royal Bank of Canada, Bank of Nova Scotia, Canadian Imperial Bank of Commerce, Desjardins Group, and Toronto-Dominion Bank were the first to attempt this. This practice is now also being followed by the Bank of Montreal and the National Bank of Canada, along with an insurance company, Sunlife Financial.

Greg Wolfond, the CEO of SecureKey, stated that with this collaboration, they hope to share data more securely than ever before.

Conclusion

Having a proper digital identity is essential to lead a thriving and comfortable life in society. Although a centralized ecosystem offers the necessary frameworks, the security of data is now in doubt due to cyberattacks. With Blockchain storage, cyber-attacks become more expensive and difficult for perpetrators to crack in because of cryptography.

The use of blockchain will definitely influence data security, as well as numerous other factors like cost cutting, data controls, etc. Therefore, the global economy will undoubtedly be impacted by the massive growth of the digital identity verification industry over the next ten years.