Could the blockchain be the answer to banks’ identity issues?

Proving a user’s identity online can be a tricky business. (See “Apple Pay fraud.”) Passwords are hard to remember and easy to steal. Banks know this better than anyone, and yet most bank apps still rely on this old-fashioned and grossly inadequate solution.

A company called ShoCard is looking to solve this problem for banks using the blockchain.  A user’s identity — which in this case is represented by a picture of a driver’s license, but it could be any document or piece of data — is encrypted, hashed, then written to the blockchain, where it can be called up when needed.

The blockchain is a public record of bitcoin transactions, but it has applications that run far beyond virtual currency, and ShoCard is an early example of that. Bitcoin addresses contain both public keys, which are publicly viewable, and private keys, which are known only to the user (hopefully). Users would in effect give banks temporary access to the private side of this blockchain record in order to verify identity. Once that is done, the bank creates its own record that can be consulted in the future to determine that Joe Smith is really Joe Smith.

“It’s kind of the way a bank keeps your signature card on file to check against your signature on checks,” Weitzman said, taking us all back a few years.

The company launched in February and presented at TechCrunch Disrupt yesterday. Two other bitcoin-related companies, Case, a hardware digital wallet, and Wiper, a secure messaging app with a payments component, were also on stage at this week’s show. (ShoCard does not actually use bitcoin, according to CEO Armin Ebrahimi.)

Ebrahimi said that ShoCard is targeting card issuers and will verify the identity of cardholders during mobile transactions. ShoCard is explicitly built for mobile, and also utilizes TouchID. “Our first clients will be credit and debit issuing banks that issue nearly a billion cards,” he said yesterday. The state of ShoCard’s bank partnerships is not known at this time.

Chris Skinner, in his 2013 book Digital Bank, noted that banks are good at identity and security, and should consider expanding their business to include securing all kinds of digital valuables.

But instead, the bitcoiners are knocking on the banks’ doors and offering their services in this very field. Far out.