Proof of Humanity: Decentralized identity in age of AI replication

Artificial Intelligence (AI) surrounds us today, whether we realize it or not. It takes the form of Large Language Models such as ChatGPT, your smartphone’s facial recognition function, website chatbots, and countless others. But beyond these practical examples, AI is being misused in damaging ways.

Rogue actors are wielding the technology to forge documents and commit fraud. Meanwhile, AI-generated videos, images, and audio can be used to create fake interactions and representations of real people without their consent.

As a result, the age of sophisticated AI replication has made it far harder for financial companies to enforce traditional Know Your Customer (KYC) methods. How did we arrive at this point? And what’s the fix? Let’s find out.

The vulnerabilities of traditional KYC

KYC standards are used by financial institutions to establish the identity of customers and assess risk factors that could flag up a fraudulent actor. KYC also protects us all from identity theft by making sure people are who they say they are. Traditional methods of KYC will be familiar: facial recognition, biometric verification, government identification, and providing a utility bill as proof of address. Although effective, these methods are under increasing pressure from malicious individuals armed with AI tools. It’s now possible to use the technology to create fake identities, forge supporting documentation, and even mimic human behavior, all to bypass KYC safeguards.

Compounding the challenge is the growing demand for financial services that’s adding pressure on compliance teams, therefore increasing the chance of fraudsters slipping through the net. What’s more, KYC solutions are typically centralized and reliant on third parties, making them vulnerable to breaches.

Is decentralized identity the antidote?

Decentralized identity can provide an antidote for today’s threats to KYC methods.

Decentralization, naturally, eliminates the involvement of sometimes multiple third parties and gives users total control of their identity. Personal data is held in distributed storage to reduce the chance of a breach and interference from bots and malicious actors.

Decentralized identity methods are also permissionless, or more accurately, they ask for permission from users ­— reversing the process of permissioned data sharing. That gives users even greater control over who or what has access to their personal data, including the option to revoke access when needed.

Portability is another major advantage brought by decentralized identity. Universal standards would allow users to ‘carry’ their digital identifiers in a wallet to manage their verifiable credentials quickly and securely across any organization that requests them. Standardization is the next step forward

The prospect of more secure and efficient KYC methods brought by decentralized identity can be realized with universal standardization. Fundamentally, standards-based methods would make sure that any decentralized identity options available to users are as safe and effective as possible. Standardization also underpins interoperability, and interoperability makes it far easier for people to validate their digital identity as they travel across different blockchain networks.

Pleasingly, the steps towards standardization are already being taken by organizations including the Decentralized Identity Foundation (DIF), World Wide Web Consortium (W3C), and the Internet Engineering Task Force (IETF).

The ecosystem is growing

The decentralized identity ecosystem is growing at pace, with numerous entities now building solutions that give users sovereignty over how they validate their identity online.

• The Worldcoin project’s World ID is an open and permissionless identity protocol that enables users to verify their humanness online, anonymously, using zero-knowledge proofs.
• The Gitcoin community has built the Gitcoin Passport, a decentralized identifier that allows holders to collect “stamps” from web2 and web3 authenticators. The stamps act as credentials for the Passport and allow holders to verify their identity across platforms without sharing private information.
• Proof of Humanity is one of the authenticators used by the Gitcoin Passport. Its system combines webs of trust with reverse Turing tests and dispute resolution to create a sybil-proof list of humans.
• The Civic Pass provides on-chain and cross-chain identity management options for businesses, users, and developers that build trust into web3. Access control is possible for organizations working across dApps, DeFi, NFTs, and more, plus automated market makers. Meanwhile, users can gain and own a portable identity to explore the decentralized web effortlessly.

In an increasingly AI-empowered world, decentralized identity options separate humans from machines to help protect us all.

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