The business community is using blockchain to modernize the verification workflow

Identity verification is a fundamental part of daily operations. People need it in banks, workspaces, educational institutions and healthcare facilities. But the traditional identity verification system fails due to error-prone mechanisms, long delays, data silos, and non-compliance risks.

Companies both large and small are increasingly relying on emerging technological innovations such as blockchains to verify the identities of employees, customers, students, patients and others. Because blockchains serve as a permissionless, immutable ledger to securely store data, they automate verification systems with real-time checks and cryptographically secured information.

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The old verification system is problematic

According to the US Federal Trade Commission, there were more than 1.1 million reports of identity theft in 2024, with fraud accounting for $12.5 billion. With the advent of AI-driven deepfakes, identity verification has become even more challenging.

A year ago, OnlyFake generated realistic-looking fake driver’s licenses and passports from 26 countries for just $15, with fake image metadata that spoofed GPS location, date and time. These AI-generated fake IDs successfully bypassed the KYC verification of popular crypto exchanges and financial services providers such as OKX, Kraken, Bybit, Huobi, PayPal and others.

The damage of identity theft extends far beyond the financial domain. According to a report from the Identity Theft Resource Center, identity theft has a serious emotional toll, with 25% of victims contemplating suicide and more than 70% being re-victimized by cybercriminals. With 19% of consumers losing up to $1 million, victims often feel vulnerable, angry and lose confidence.

To regain user trust, companies are implementing multi-layer verification procedures and ongoing KYC checks. Users are asked to upload their IDs and provide selfie proofs again and again. While these permanent monitoring systems aim to screen and mitigate risks, they create new friction points between users and businesses.

On the one hand, customers are frustrated by ‘double KYC’ checks and give up halfway, causing businesses to lose revenue. On the other hand, regulators continue to tighten KYC-AML rules but fail to reconcile data between disconnected systems. As a result, the balance between compliance and user experience remains increasingly elusive.

The problem is compounded for the 2.6 billion underprivileged populations who do not have access to the internet and cannot use e-KYC. The lack of identity verification systems and the lack of means to determine ‘who they are’ calls into question the meaning of human existence.

Considering the global scenario, companies are adopting blockchains for identity verification. Emerging technology such as blockchains allows users to digitize, encrypt and share their identities directly with relevant authorities without intermediaries, minimizing data theft and increasing overall security.

Blockchains for identity verifications

Blockchains make identity verification compliant and user-centric, while authenticated credentials and sensitive data are shared securely between platforms. With blockchains, companies can remove unnecessary bottlenecks and streamline the onboarding process for employees, students, patients and consumers without compromising legal obligations. At the same time, users can maintain sovereign ownership of their data and choose what data to share or the conditions for its reuse/reverification.

Unlike consortium-based identity verification systems, some blockchain-based protocols take a decentralized approach where sensitive data is cryptographically encrypted and stored off-chain while the hashes live on-chain. Users can then prove the authenticity of their credentials without having to go back and forth endlessly to verify their identity.

Therefore, blockchains not only help protect users’ data sovereignty, but also allow companies to maintain better control over their compliance policies. By allowing users to bypass repeated identity verifications, companies can make onboarding easier and more accessible.

Blockchains have democratic potential because companies can adjust their daily activities based on the scale of their operations.

For example, small businesses can leverage blockchain-based solutions to achieve enterprise-level capabilities without incurring huge costs. With affordable pricing levels, blockchain can reduce administrative burden by automating repetitive tasks and freeing up time for professionals to focus on core functionalities.

Blockchains also streamline workflows for smaller teams while remaining compliant with local regulatory guidelines. Providing a transparent and auditable verification service, blockchains make screening new and existing customers easier with seamless checks on employment, education and criminal background.

Mid-sized companies that cannot work with basic tools, but also do not have the resources to deal with enterprise-level complexity, also benefit from blockchains. The technology provides scalable verification systems that can scale with a growing workforce and organizational infrastructure to improve operational efficiency across departments.

Blockchains are ideal for these mid-sized companies with extensive screening capabilities for large-scale verifications and automated periodic checks. They also accommodate enterprise-level verifications with custom APIs, advanced compliance reporting, multi-party audit trails, and real-time disclosures.

American inventor and philosopher R. Buckminster Fuller once said, “Humanity is acquiring the right technology for the wrong reasons.” With the threat of deepfakes and identity theft looming large, blockchains offer a beacon of hope for users and businesses alike. They show how emerging technologies can be used for ‘the right reasons’ to verifiably prove humanity’s true identity in all domains of existence.

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