Meet ShoCard, a startup that stores your identity onto bitcoin’s blockchain so that you can prove your identity whenever you need to. ShoCard wants to replace cumbersome bank and credit card identification processes with something much more secure and practical. The startup is launching on stage today at Disrupt NY.
“A lot of companies are looking at the blockchain for things other than bitcoin. We’ve created a digital identity card that is as easy to use as a driver’s license but it’s so secure that a bank can rely on it,” ShoCard co-founder Jeff Weitzman told me. “We’re using public and private keys, data hashing, multi-factor authentication.”
This is a little complicated if you’re not familiar with how bitcoin works, but it’s very interesting. Your ShoCard is basically a tiny file that only you can manipulate. When you create your ShoCard, you first scan your identity document and sign it. Then, the mobile app will generate a private and public key to seal that record. It is encrypted, hashed and sent to the network of communicating nodes running bitcoin software for later use.
After this initial creation process, you will use the company’s app to retrieve your information. But the best part of this technological feat is that ShoCard hides all this complexity for the consumer. There are multiple use cases for something like ShoCard, starting with online purchases.
“There are some systems out there now that banks are using — it can be a window that appears from your bank and says you have to log in here and use this PIN code that we gave you three years ago,” Weitzman said.
ShoCard wants to partner with banks to replace these weird redirections when you do an online purchase. It’s a win-win situation: ShoCard gives you peace of mind because you have to approve purchases with your phone, and the credit card company gets a definitive identity check.
There’s an added security benefit, as well. If someone is using your credit card to purchase something online, you will get a notification and you can block the purchase right away.
Other projects have been taking advantage of the blockchain to create an identity layer, such as OneName or World Citizenship. But ShoCard is tackling this issue with use cases in mind and is already in talks with companies that deal with identity management — credit card networks, banks, anti-phishing companies and others.
Working with banks is a smart first step for the startup. Banks have been subjected to “know your customer” laws and already need to thoroughly check your identity when you open an account. They can verify your identity before it is sealed using ShoCard, making this process much simpler for the startup.
I would love to see my bank use something like ShoCard. Yet, the startup still has a big challenge ahead. How do you convince slow-moving institutions like banks to partner with you and switch to a brand-new identity management system?
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Questions & Answers
Judges: Kanyi Maqubela (Collaborative Fund), Minerva Tantoco (New York City), Matt Turck (FirstMark Capital) and Yossi Vardi (angel investor).
Matt Turck: There is a network effect. The obvious problem is always how you get there, the chicken and egg problem. You mention large financial institutions which are notoriously hard to sell to. How do you get this started?
Answer: They have the trusting relationship with customers. We recognize that selling to large enterprise takes longer. Alternatively, tthere are other paths that we could go to use ShoCard, but we still think that banks are the best path.
Kanyi Maqubela: You get a social security card by law, but you only get a passport when you travel, you only get a driver’s license when you drive. What’s the pain point that you solve?
Answer: We are starting in an area where there is a huge amount of losses. There is a financial incentive for the banks. There is currently a system called 3-D Secure that is not widely adopted right now because it’s a really bad customer experience. And there is a lot of fraud. There is a real financial driver there that will help the banks introduce this to consumers. Then we intend to expand the use cases.
Yossi Vardi: Can you tell us a little bit about yourself?
Answer 1 (Armin Ebrahimi): My background is software technology. I worked at Yahoo for 1998 to 2008, I was the SVP for platforms. After that, I was at Buysight, a startup that we sold to AOL in 2012. And both of those experienced I worked with Jeff.
Answer 2 (Jeff Weitzman): After Yahoo I became the president and COO of Coupons.com. It’s really a financial transaction processing company.
Yossi Vardi: How many people are working for ShoCard?
Answer: We are two.
Yossi Vardi: What’s your aspiration?
Answer: We want identification cards to be mobile, similarly to what Apple did with Apple Pay and credit cards.
Kanyi Maqubela: Have you thought about targeting a particular demographic like elder people or people without documents?
Answer: By going through the financial industry, credit card authentication is where the real losses are. There are other use cases. We are using really strong things like two-factor authentication, we’ve hidden it all so it’s easy to understand.
Matt Turck: I find the world of blockchain applications to be fascinating. Do you think that the infrastructure is mature enough for something as critical as security?
Answer: Absolutely. A lot of times people mistake the blockchain and applications on top of the blockchain. The blockchain itself is an incredible infrastructure. There are questions about bitcoin, but that’s an application on top of the blockchain. All of that has been quite mature.
Matt Turck: Are banks convinced on this?
Answer: When we talk to banks, when we talk about bitcoin, they want to stay away from it. We don’t use bitcoin, we use the blockchain. And we don’t use it just to say that we use the blockchain. It allows us to avoid being a trusted third-party.
Minerva Tantoco: Who are your competitors? Would you consider Apple Pay a competitor?
Answer: Most of our competitors are existing identity verification systems. There is a variety of things why we think we are superior to them. In terms of Apple Pay, Apple and Google both have the potential to be competitor, we think we have more potential to do something that leverages their platforms.