Securing Cryptocurrency Wallets With Biometrics: A Closer Look
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Cryptocurrency transactions are becoming increasingly mainstream. With high transaction speeds, improved security, and seamless cross-border payments, established brands like H&M, Microsoft, and Starbucks (to name a few) have started accepting crypto.
Consumer interest in crypto has also grown, with more than 560 million people owning digital currencies globally. The best part is that consumers are spoiled for choice when it comes to cryptocurrency options, from Bitcoin and Ethereum to meme coins like Dogecoin and PEPE.
But here’s the thing–whether using crypto as a vehicle for wealth creation or a mode of transaction, people want a secure way of storing their assets. That’s where cryptocurrency wallets step into the picture.
Crypto Wallets and the Rise of Security Threats
Traditionally, crypto wallets use passwords, encrypted keys, and PINs to minimize unauthorized access. However, the growing popularity of digital currencies makes these wallets a prime target for cybercriminals.
According to Venture Beat, in 2022 alone, crypto losses crossed a whopping $3.9 billion due to frauds and hacks. While the figure dropped to $1.7 billion in 2023, the number of hacking incidents grew from the previous year.
Cold wallets offer an additional layer of security, but they’re susceptible to damage and loss. Worse still, owners might lose access to their assets if they forget their private keys.
What if there was a way to add another layer of security to crypto wallets that’s convenient as well?
Enter biometrics. From facial recognition to iris scanning, biometric security measures can help authenticate users with more accuracy. Let’s find out more in this blog.
Biometric Security for Crypto Wallets: Why It Makes Sense
Simply put, biometric security involves the use of biological characteristics, such as facial features, fingerprints, and voice recognition, to verify and authenticate users. Behavioral traits, such as device usage and typing patterns, are also used in biometric security.
Then there’s iris scanning, which uses the unique patterns in the eye’s iris (the colored ring surrounding the pupil) to verify user identity. The technology has been gaining significant traction, with Worldcoin (WLD) hopping on the bandwagon recently.
Despite being one of the newer cryptocurrency projects, Worldcoin has been in the limelight ever since its beta launch in 2023. Binance notes that WLD boasts a current market cap of $972.71 million and a circulating supply of 470.35 million as of September 2024.
Tools for Humanity, the primary developer behind Worldcoin co-founded by Sam Altman, has designed proprietary orbs. These basketball-sized devices scan a user’s eye and create a unique, tamper-proof code based on the patterns in their iris.
The code, called World ID, is then used to verify personhood and distinguish real-life users from bots. That, in turn, helps prevent bad actors from gaining access to the World App crypto wallet. The company even offers WLD tokens to users who get their eyeballs scanned and create their World IDs.
As of this writing, nearly 6.7 million people have had their World IDs created using Worldcoin’s iris-scanning orbs.
It’s worth noting that biometric data, be it iris scans or fingerprint patterns, aren’t transferable, making them less susceptible to theft. Moreover, unlike passwords and PINs, biometric information isn’t as easily attainable. That, in turn, reduces the risk of social engineering attacks.
Also, accessing your crypto wallet with a facial ID or fingerprint scan is faster and more convenient. It eliminates the hassle of remembering passwords and keys, too, and minimizes the risk of losing access to your assets. You can restore access by verifying your identity with a simple scan of the irises or fingerprints.
Besides user verification and authentication, biometric data can be used to authorize transactions in crypto wallets. For instance, a crypto wallet might require you to sign each transaction using a combination of your fingerprint scan and personal information (like social security number). It helps eliminate the threat of fraudulent incidents.
Biometrics and Crypto Wallets: The Key Concerns
The use of biometric authentication for crypto wallets provides improved security, speed, and convenience. However, these benefits come with a caveat.
Unlike passwords, biometric data is immutable. If it gets compromised due to a data breach, you can’t just switch to a new set of biometrics. That, in turn, creates a long-term security risk. Plus, there are concerns about data security and privacy pertaining to the storage of biometric data.
For instance, in August 2024, Colombia’s top consumer protection agency accused Worldcoin of violating the country’s personal data protection regulations. The digital currency has faced scrutiny in several other countries, including Hong Kong, Singapore, and Spain. The authorities are skeptical about how the company stores and encrypts biometric data.
To allay these fears, the company no longer stores any personal data. Instead, the iris-scanning orbs delete the necessary user details right after verification.
Besides the privacy factor, the implementation of biometric security systems is cumbersome and expensive. Also, these systems can be prone to false negatives and positives.
The Way Forward
The growing use of cryptocurrencies for day-to-day transactions comes with an increased risk of fraud and scams. It highlights the need for more secure crypto wallets, and biometric authentication can be the way to go.
However, the enhanced security and convenience of biometric security also bring new privacy risks. It’s up to crypto payment providers and operators to devise cost-effective ways to deploy biometric systems and comply with data privacy regulations.
