While it could be argued that Non-Fungible Tokens (NFTs) have been around since 2012 in the form
of ‘Colored Coins’, the first ‘boom’ was due to blockchain-based virtual game – ‘CryptoKitties’.Ever since, we’ve seen the rise and fall of similar projects across the Opensea marketplace. Although wacky art and meme projects are the first that come to mind, NFTs also have the potential to serve as a use-case in the security domain. However, in the unregulated world of cryptocurrency, this may be slightly concerning for businesses as there is a lack of central authority.
Similar to how COVID-19 forced vendors tomature their security offerings, the current push for regulation is forcing crypto influencers, like Ethereum’s founder, VitalikButerin, to overcome external verifications. In order for businesses to stay current, they will not only need tounderstand the everchanging landscape of cryptocurrency, but also how ID verification techniques are necessary and will continue to evolve. As barriers totypical verification techniques such as AML (advanced machine learning) and KYC (Know Your Customer) become stronger, common vendors will need to develop their current strategies in order to adapt to the new landscape.
NFTs and their potential
Anonymity and privacy are key values formany crypto influencers and investors. In order to maintain privacy, Buterin proposed the idea of private NFTs that use ‘stealth addresses’ to hideowners’ identities, essentially hiding the identity of an NFT recipient from anyone except the new owner.
Since NFTs act as a certificate of authenticity for digital assets, it is no surprise they are attractive mediums
for ID verification. Each NFT or token has a unique, original set of characteristics that cannot be duplicated on the blockchain. However, according to the recent Forrester report around IDV, the process differs depending on the
type of solution required, whether that be a KYC process or a Business Partner Onboarding one. Although the first step of Business Partner Onboarding is identical to ‘consumer digital onboarding’, the second step involves verifying the verified identity is authorised to open an account to conduct business on behalf of their organisation. Therefore, it is unclear how NFTs would be able to adapt to each use case process.
So, although ID verification and NFTs seem to have the same goals in mind when it comes to security, the lack of central authority breeds questions around trust, legitimacy, and accuracy.
Customer-first approach is key
Despite crypto’s ability to provide security, decentralisation can raise an eyebrow for many businesses. The main
essential when it comes to security is regulation; in the event of a malicious attack or intervention, the central authority is able to become involved and deliberate – this is not possible with unregulated systems.
Although there are many potential security use-cases that will begin to arise, such as ID verification using
NFTs, cryptocurrency’s urge to stay separate from the government and central authorities makes it an inviable solution. Instead of jumping into these technologies, businesses need to select an option with effective, accurate and trust-worthy ID verification. Given the security of their customers and users must be at the forefront of their minds, regardless of the sector.
Security is the goal
As the scope for ID verification continues to widen, it is important for businesses to assess their identity verification needs and put their customers first instead of simply jumping on the bandwagon of new, flashy technology. Without a central authority to confirm the legitimacy of an identity, businesses may suffer when it comes to governmental procedures regarding verification. As well as being able to intervene during a malicious attack, a central authority can provide organisations, as well as their customers with increased confidence when it
comes to IDV. This is because the body is a central knowledge hub and point of contact for concerns above and beyond.
So, while new IDVL processes may look like an easy option at first, problems could begin to arise later down the
line. As regulations begin to take effect, it will become increasingly necessary for businesses to select a trustworthy solution, which takes care of verification in a quick and effective manner, whilst staying current against any developments in the industry. For customer security to truly be depicted as a concern for businesses, they need to be implementing widely trusted and approved solutions.