Identity theft is a serious issue, and it may be more common than you’d think. In 2019 alone, consumers filed 650,572 reports of identity theft with the Federal Trade Commission (FTC). Since that figure only includes reported cases, you can be sure the actual number is even higher.
With identity theft affecting so many people, how can you make sure it doesn’t happen to you? You can take several steps to lower the risk — one of the most promising ones includes Bitcoin. The immutable and encrypted nature of blockchain transactions makes them ideal for preventing identity theft.
To understand how you can prevent identity theft, you should know how it happens. People can steal your identity in various ways, from phishing to social engineering. One of the most common methods, though, is through online credit card fraud.
You only need a few numbers and a name to use a credit card online. Since many people save this information with online retailers, cybercriminals can access it by hacking these sites. Once they have those figures, they don’t need any more information to use people’s credit cards.
With credit cards, hackers don’t need access to your bank account to spend your money. Credit payments involve a third party removing your money for you, so all cybercriminals need is credit card info. This vulnerability is part of why six out of every 100 adults fall victim to identity theft each year.
Credit cards are the leading online payment method, but Bitcoin is far safer. Despite being digital, Bitcoin works more like cash than credit, so it doesn’t have the same vulnerabilities. When you pay with Bitcoin, you send the payment yourself instead of a third party removing it for you.
Because Bitcoin payments use this method, you need to possess the money to spend it. You can’t hack into an online retailer and get a user’s information to spend their bitcoins. Like with cash, you can’t pay unless you have the money in your hand.
By merely using Bitcoin instead of credit, you’re protecting yourself from identity theft. If someone gets your credit card info, they can pretend they’re you and spend your money. To use your bitcoins, they’d have to steal the money itself, not your identity.
Bitcoin still has some security loopholes, even if they are small. If someone were to hack a public key encryption system, they could certify a fake encryption key, tricking people into giving away information. Researchers from the Massachusetts Institute of Technology (MIT) have found a solution to that problem, though, using Bitcoin’s blockchain to their advantage.
Auditing the blockchain would point out a fake since you can’t spend the same bitcoin in multiple transactions. Using this concept, the MIT researchers propose a system where every Bitcoin transaction has to prove that bitcoins have changed hands. All this process would take is a quick look at the blockchain.
Since it only needs a small amount of information, this system wouldn’t have to download each block in its entirety. It would only download about 600 bytes per block, making it a fast and easy process. A security system like this would make Bitcoin even more identity theft-proof.
Since it’s decentralized and immutable, blockchain technology has a lot of potential in the world of security. By its very nature, Bitcoin is resistant to identity theft, thanks to the blockchain. When you use Bitcoin instead of credit cards, you’re taking steps toward protecting your identity.
As blockchain technology grows, these advantages will grow with it. Bitcoin’s potential in defending against identity theft is too considerable to ignore. These security benefits are just one of the reasons why Bitcoin may be the currency of tomorrow.
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