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Blockchain for Fraud Prevention: How Blockchain Works?

Blockchain technology has been around for a long time, and it is still growing. A lot of people wonder how does blockchain secure data and how blockchain works. Regardless of all its benefits, there are a lot of mixed feelings towards blockchain technology. It doesn’t matter how mixed the reviews of the technology are, the role of blockchain against fraud and the role in the global economic landscape is great. 

The growth of blockchain first came into the limelight with the rise of Bitcoin. If you’re not into cryptocurrency, you should know about the blockchain for fraud prevention. 

How Blockchain Works?

At first glance, blockchain looks complicated, but the core concept of how blockchain works is really simple. A blockchain is a type of database, to completely understand what is blockchain technology, you need to understand what is a database. 

A database is a collection of information that’s stored on a computer system. Any information that’s stored on a database is stored in a table-type manner for easier searching and filtering of data. Now you may wonder, what is the difference between a spreadsheet and a database. 

The major difference between a spreadsheet and a database is that a spreadsheet is made for a single person or a small group of people. These people can store and access limited information. In comparison to that, a database is designed to store much larger amounts of information, that can be quickly accessed, filtered, and changed quickly by any number of users at the same time. 

Huge databases achieve this functionality by using data on servers that are built on powerful computers. While a spreadsheet database can be accessed by several people, it is often owned by businesses. Now that you understand what is a database, we can move on to “how does blockchain secure data”.

How Does Blockchain Secure Data?

One of the major differences between a typical database and a blockchain is the way the data is structured. A blockchain collects information together in groups that are known as blocks, these blocks hold a set of information. Blocks have a specific amount in which information can be stored, when the storage is filled, they are chained to the previously connected blocks, all of which form a chain of data, which is known as the blockchain. 

So the question remains, how does blockchain secure data? Major blockchain features and benefits account for the issues of security and trust in multiple ways. First, new blocks are always stored linearly and chronologically. The new information is always added to the “end” of the blockchain. 

After a new block has been ended to the back of the blockchain, it is almost impossible to go back and alter the contents of the block unless it is the major consensus to do so. The reason it is considered secure is that it each block contains its own hash, alongside the hash of the block before. A hash code is built using a mathematical function that turns information into a string of numbers and letters. This is how blockchain works in banking and other financial transactions like bitcoins.

Types of Identity Theft

Another common type of online fraud is identity theft, the growing rate of identity theft is alarming. Most people aren’t even aware that their identity has been stolen after the damage has been done. Now that we know how does blockchain secures data, we can discuss how blockchain prevents identity theft. Here are the most common types of identity thefts. 

1. Driver’s License Identity Theft

Anyone that has access to your driving license can make use of your sensitive information and commit fraudulent activities. They can open credit card accounts or use the stolen identity theft if caught for reckless driving. 

2. E-Commerce Fraud

Online identity theft is basically cybercriminals stealing your information like payment details and credentials. Using this information, these criminals can make all kinds of unauthorized transactions. All these transactions will end up hurting your bank balance. This is one of the most common types of identity theft. 

3. Mail Identity Theft

Your mailbox can be vulnerable to all kinds of cyberattacks. One out of 3 identity theft is done via email. Your mailbox contains all kinds of sensitive information including bank information, several login details, or insurance data. This crucial information can be used for all kinds of fraudulent information. 

4. Social Security Number Theft

The social security number is provided to a citizen from the time of their birth. The nine-digit number contains information like financial records, including bank details and a person’s earnings. Now imagine someone gets hold of your social security number, they can use the information for all kinds of purposes. 

If they can use your financial information, they can fill in fake account opening forms or even withdraw money from a person’s account using social security number. More than that, attackers can use your social security number to gain a tax refund. Social security number theft is another common type of identity theft.

5. Synthetic Identity Theft

Synthetic identity theft is a tricky type of identity theft. It is where an attacker mixes stolen information with fake details to create a new fake identity for committing a crime. This newly made identity can then be used to execute all kinds of fraudulent practices. 

How Blockchain Prevent Identity Theft?

Identity theft is a part of online fraud, and it is growing at an alarming pace. A lot of people nowadays are aware of data breaches, but not many are aware that identity theft occurs every two seconds around the globe. In this perilous time, the need for securing one’s identity is crucial, and the way to do that is by safeguarding your documents. Now that you know about types of identity theft, here’s how blockchain prevents identity theft

Blockchain against fraud technology has been taken into consideration since the rise of cybersecurity. The incredible technology holds brilliant potential for securing sensitive data from malicious activities.

Since blockchain contains digital assets including documents that are secured via powerful cryptographic keys. This is one of the primary reasons why it is harder for attackers to manipulate information stored in the blockchain. The data is stored on multiple computers on a blockchain network, so if someone wants to access crucial information, they will have to gain access on all computers which is almost impossible in all cases. Even if the hackers happen to gain access to data, any change they make to the data will be highlighted in the information. This is what blockchain unique and suitable to secure data. Now you know how blockchain prevents identity theft.

Storing any identity information on a blockchain will help both government and the public to prevent identity theft. This is how blockchain works, and the blockchain features and benefits are slowly causing it to come into mainstream adoption. 

While blockchain is still a growing technology, it has countless possibilities for securing data. As the current measures for identity information storage are being attacked and breached, the use of blockchain for fraud prevention is at an all-time high. 

Blockchain Features And Benefits

1. Blockchain Is Distributed

A blockchain is a type of distributed digital ledger which contains transaction data that is hosted on a peer-to-peer network. There is no centralized administrator so there’s no one point of failure that can be accessed for information breach. Instead of a single point, the management and authorization are spread all over the network. 

2. Blockchain Is Unyielding

Another blockchain feature and benefit is that any transaction or information recorded on the blockchain is unchangeable as the information can’t be deleted or changed. While you can create a new transaction to change the state of any asset, the new information will just be added to the chain. 

3. Blockchain can be Permissioned

Businesses of all kinds tend to deal with a lot of confidential data and they can’t have just about anyone access the vital information. So they have to find some way to make sure that outsiders can’t access their data. This is where permissions come into play. You should know that not all blockchain is permissioned. This is why permission networks can be a great solution for fraud prevention because they can restrict who can access the data. 

How DIRO Makes Use of Blockchain For Document Verification?

Till now we have discussed, how does blockchain secure data, how blockchain work, the types of identity theft, and how blockchain prevent identity theft. A major part of all the information and the data breach are documented, most of the online frauds are conducted by using fake or tempered documents. 

A person who steals an identity can open a new bank account and use that bank account for many fraudulent activities. That’s where the innovative technology for document verification by DIRO comes in. It verifies any online original information on the web with automatic user consent and impersonation checks. You can verify any bank statements, proof of address, student certificates and so much more.

Once DIRO verifies a piece of information, it provides a trusted certificate that ensures a document is original. This original document can then be shared in the form of a PDF. DIRO provides the digital document with a unique hash, which then is placed on a blockchain. use this information to verify the documents that are already on the blockchain.

So banks, financial institutions, and others can drop this PDF into DIRO’s verification engine, which verifies the information against the blockchain. DIRO’s original documents are much more secure to share as the information can’t be tampered with by attackers or anyone else. Organizations can use DIRO’s software to minimize online fraud.

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What Is Identity Theft? How to Prevent ID Theft Online?

Identity theft is when someone steals your personal information and uses it for financial fraud. There are multiple types of identity theft and each type can affect you differently. Almost all types of identity theft lead to financial loss. The cases of identity theft are growing every year with the rise of new technology, and people need to learn how to prevent ID theft online. 

There’s no perfect way to protect yourself against ID theft completely. But if you’re diligent in learning how to prevent identity theft, you can save your confidential information from fraudsters. It is always good to learn how to protect your data and act quickly if someone manages to steal your information.

How does Identity Theft happen?

Identity theft is a widely applied term that is used any time someone steals someone else’s personal information. Personal information can be almost anything like the Social Security Number, driver’s license, etc. which can be used to purchase products, create new accounts, and more without authorization. 

As technology and the use of social media are growing, the theft of personal information is always at risk. If you’re not paying attention to your credit file, you may not notice that someone is making a transaction with your details until it is too late. What are identity theft examples you ask? Here are the most common ones:

1. Data Breaches

A data breach happens when fraudsters gain access to an organization’s data. Most data breaches try to gain confidential customer information like full names, Social Security Numbers, and credit card numbers. 

In 2018, there were more than 1,200 data breaches in the USA, and more than 400 million records were exposed. As all of us have more than a dozen accounts with countless services, it is almost impossible to keep you safe from a data breach, however, there are methods companies can employ to mitigate the risks of data breaches. 

2. Unsecure Browsing

Most of us can browse the internet securely, but there are situations where people access third-party websites. Not all websites are secure and sharing personal information on an unsecured website is basically handing out your information to fraudsters. If you use an antivirus, some tweaks in settings can easily help you detect unsafe websites.

3. Credit Card Theft

One of the most common forms of identity theft is credit card identity theft. Let’s say someone somehow got access to your credit card information, they can use it to make unauthorized purchases. Other ways fraudsters can access your credit card information are through data breaches, physical theft, and credit card skimmers in online retail stores.

4. Mail Theft

Mail theft has been around long before the rise of social media and online shopping networks. Identity thieves have been going through people’s identities to sensitive data. Mails contain all kinds of sensitive information like bank and credit card statements or other personal documents. If someone somehow accesses your email account, they can have access to loads of information. 

5. Phishing and Spam Fraud

Some scammers use email and text messages or other electronic communication methods to steal personal information. The common denominator in these kinds of fraud is trying to trick a customer into believing that they are in contact with an organization. 

To put this in context, let’s say you receive an email that claims it’s your bank and it may include a link that directs you to a website similar to your bank’s website. Most of the time these websites will ask you for information like a username and password or credit card information. It is suggested that you call your bank and confirm if there’s an issue with your account. Entering sensitive information on any website can lead to huge losses. 

6. WiFi Hacking

Connecting your computer or smartphone to public WiFi for doing any kind of financial activity isn’t the right decision. Public connections are usually full of hackers looking to steal sensitive information.

If you need to use a public network, use a VPN service, or try to avoid inputting sensitive information like account details, credit card information, etc.. 

7. Mobile Phone Theft

Mobile phone theft can happen to anyone because our smartphones have access to all kinds of information. A lot of people don’t set a fingerprint or any kind of password protection for their apps. If someone steals your smartphone, they can access all kinds of information in your emails, text messages, and financial apps on your phone.

Stealing phones is one of the most common types of identity theft. It is advised to keep your phone locked with a password or a fingerprint. 

8. Card Skimming

Card skimming is one of the least known types of identity theft. Some thieves use a skimming device that can be placed over a card reader on an ATM or a fuel pump. This card reader can be easy to hide. Whenever a customer swipes a debit or credit card on the compromised machine, it either stores the information or transmits it to someone else. After that, anyone can use this stolen information to make unauthorized purchases.

How to Check For Identity Theft?

No one can avoid the possibility of identity theft, but some actions can be taken to learn how to prevent identity theft. To keep an eye out for identity theft possibilities, customers should keep checking their credit reports. In these credit reports, you should always look out for transactions that seem out of place or transactions you don’t remember making. These small anomalies can be a red flag, Here’s how to prevent ID theft online by checking some suspicious signs:

  • You aren’t getting important emails such as bills or checks.
  • You’re getting bills for things you didn’t purchase or services you didn’t use. 
  • You’re denied credit even after having an excellent credit rating.
  • You receive notification of unauthorized bank transactions or withdrawals.
  • Your electronic tax filing is denied. 
  • You receive bills or emails explaining the benefits of health insurance you didn’t apply for.
  • Your account was recently accessed and you didn’t do it. 

How to Prevent Identity Theft?

Firstly people can’t figure out that their information is being stolen by someone else, if they do figure it out, they don’t know what to do. If the credit card or debit card was stolen, you need to contact the card issuer and your bank to put a hold on the card. 

The next step is to go through your credit card report from different credit bureaus to find out any unusual activity. Some banks and credit card providers offer services of credit card fraud alert, you can set that up on your card to prevent identity theft. 

You should also notify the local law enforcement agency to notify them of the crime. In most cases of credit card theft and identity theft, authorities can’t do much but they can write down reports and be on the lookout for suspicious activities. 

Before you report the crime to local authorities, it is suggested that you also reach out to the FTC (Federal Trade Commission) to file a report. The agency will guide you on what steps you need to take and the paperwork to fill out. Being a victim of an identity theft crime can be a horrifying experience, if necessary steps aren’t taken then you can be stuck for months dealing with authorities, trying to get your identity back.