Businesses are leveraging blockchain to modernize verification workflows

Identity verification is a fundamental part of daily work. People need it in banks, workplaces, educational institutions, and medical facilities. However, traditional identity verification systems fail due to error-prone mechanisms, long delays, data silos, and risks of non-compliance.

Companies large and small are increasingly relying on emerging innovations like blockchain to verify the identities of employees, customers, students, patients, and more. Blockchain acts as a privilegeless and immutable ledger to store data securely, automating real-time checks and verification systems with cryptographically secured information.

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Traditional authentication systems have problems

According to the Federal Trade Commission, there were more than 1.1 million reports of identity theft in 2024, resulting in $12.5 billion in fraud losses. With the advent of AI-driven deepfakes, identity verification is becoming even more difficult.

A year ago, OnlyFake generated authentic-looking fake driver’s licenses and passports from 26 countries for just $15 using image metadata with spoofed GPS locations, dates, and times. These AI-generated fake IDs have successfully bypassed KYC verification of popular cryptocurrency exchanges and financial service providers such as OKX, Kraken, Bybit, Huobi, and PayPal.

The impact of identity theft goes far beyond the financial realm. According to a report from the Identity Theft Resource Center, identity theft takes a severe psychological toll, with 25% of victims considering suicide and more than 70% being re-victimized by cybercriminals. With 19% of consumers losing up to $1 million, victims are often vulnerable, angry, and lacking trust.

To regain user trust, companies implement multi-layered verification procedures and persistent KYC checks. Users are asked to upload their ID and provide proof of selfies multiple times. Although these continuous monitoring systems are intended to screen and mitigate risk, they create new points of friction between users and businesses.

On the other hand, customers become frustrated with “double KYC” checks and abandon the process, and businesses lose revenue. Meanwhile, regulators continue to tighten KYC-AML rules, but are unable to reconcile data across disconnected systems. As a result, the balance between compliance and user experience remains elusive.

The problem is further complicated for the 2.6 billion disadvantaged people who do not have access to the internet and do not have access to e-KYC. In a situation where there is no identity verification system and no way to confirm who one is, the very meaning of human existence is being questioned.

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

Blockchain for identity verification

Blockchain makes identity verification more compliant and user-centric, while securely sharing verified credentials and sensitive data across platforms. Blockchain allows companies to eliminate unnecessary bottlenecks and streamline the onboarding process for employees, students, patients, and consumers without sacrificing regulatory obligations. At the same time, users can maintain sovereign ownership of their data and choose what data is shared and the conditions under which it is reused/revalidated.

Unlike consortium-based identity verification systems, some blockchain-based protocols take a decentralized approach, where sensitive data is encrypted and stored off-chain and hashes reside on-chain. Users can then prove that their credentials are genuine without having to go back and forth to verify their identity.

Therefore, blockchain not only protects users’ data sovereignty, but also allows businesses to better manage compliance policies. By allowing users to bypass repetitive identity verification, businesses can make onboarding simpler and more accessible.

Blockchain has democratic potential as companies can customize their daily activities based on the size of their operations.

For example, small and medium-sized businesses can leverage blockchain-based solutions to achieve enterprise-grade functionality without huge costs. Affordable blockchain reduces administrative burden by automating repetitive tasks and freeing up experts’ time to focus on core functionality.

Blockchain also streamlines workflow for small teams while complying with local regulatory guidelines. Blockchain with transparency and auditable verification services facilitates the screening of new and existing customers with seamless employment, educational and criminal background checks.

Midsize businesses that cannot operate with basic tools but also do not have the resources to deal with enterprise-level complexity will also benefit from blockchain. This technology provides a scalable verification system that can grow as your workforce and organizational infrastructure grows, improving operational efficiency across departments.

Blockchain has comprehensive screening capabilities for high-volume verification and automated periodic checks, making it ideal for these midsize businesses. They equally support enterprise-scale validation with customized APIs, advanced compliance reporting, multi-party audit trails, and real-time disclosures.

American inventor and philosopher R. Buckminster Fuller once said, “Humanity is acquiring all the right technologies for the wrong reasons.” As the threat of deepfakes and identity theft looms, blockchain offers a ray of hope for both users and businesses. They demonstrate how emerging technologies can be used “for all the right reasons” to verifiably prove humanity’s true identity across all realms of existence.

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