Artificial intelligence (AI) and blockchain technology are two big trends that are already impacting the way we live and work. But both bring their own challenges, particularly in terms of security, trust, and identity. That's where tech start-up TransCrypts comes in. It operates a verification platform that puts users in charge of their own data, and it could change the way all kinds of background and identity checks work.
Pantera Capital just led a $15 million round of seed funding for TransCrypts, gaining support from Lightspeed Faction, Alpha Edison, Motley Fool Ventures, California Innovation Fund, Mark Cuban, Techstars, Alumni Ventures, and others.
The digital identity field is worth following, as this type of security is a growing concern for many people. Plus, tracking early-stage companies can be a good way to gain more insights about their fundamentals long before they decide to go public. Here are three reasons to keep privately held TransCrypts on your radar.
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1. Identity theft is on the rise
The Motley Fool's research into identity theft shows that 2025 could see a record number of cases. Indeed, per Javelin Strategy, U.S. consumers lost over $27 billion to identity theft last year -- up 19% from the year before. Unfortunately, technological change has outpaced security improvements, leaving new vulnerabilities for criminals to exploit.
Moreover, AI tools enable ever more sophisticated phishing attacks. The ability to rapidly produce deepfake content allows fraudsters to easily impersonate victims' family members, business employees, or customer service operators from banks or brokerages. Traditional online security methods aren't necessarily enough anymore. TransCrypts uses cryptographic verification, combined with the security of the blockchain, to ensure that your identity can't be manipulated or forged.
2. Blockchains offer real-time, user-controlled verification
The power of blockchain-based identity verification is that it shifts control of personal data from big corporations to individuals. The idea is central to Web3, which many see as the next evolution of the internet. With online fraud on the up and AI supercharging criminals' abilities to imitate us online, the TransCrypts team believes that the immutable ledgers created by blockchains are part of the answer.
"AI is creating a world where we need to verify information and identity in real time," TransCrypts founder and CEO Zain Zaidi told The Motley Fool. "The only way to do that is consumer-empowered verifications. Relying on any third party to verify identities is compliance-laden and too slow. TransCrypts' consumer-empowered credentials allow anyone to verify who they are, that they are human, and their credentials."
TransCrypts started with employment data, and the money raised in its recent funding round will support its expansion into health data, education records, and more. Cutting out the middleman via the blockchain reduces the risk of data leaks. Authorization is immediate, and people's most sensitive information doesn't leave their control.
3. TransCrypts could fundamentally change the credit reporting system
The credit reporting system has gone through many transformations over the decades. At heart, what companies like Equifax (EFX 1.47%), TransUnion (TRU 1.16%), and Experian (EXPN 0.11%) do is to collate data on consumers' financial histories and put it together into credit reports. TransCrypts could disrupt that model, giving individuals control over their financial information rather than credit bureaus.
It is an industry that's ripe for change, and if TransCrypts could take even a small segment of the market, it would be powerful. Allied Market Research recently said the credit bureau market was worth almost $125 billion in 2023, and forecast that it could reach over $385 billion by 2032. In terms of demand, not only did an Equifax data breach in 2017 expose the data of almost 150 million people, but in 2021, a Consumer Reports study found errors in over a third of credit reports.
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Key Data Points
We're facing a digital identity crisis
The digital identity space will become increasingly important as AI gets better and better at appearing to be human. There are a number of projects in this space, from cybersecurity to compliance companies. OpenAI founder Sam Altman even launched a crypto called Worldcoin that requires those who want to acquire the coin to get iris scans to verify that they are real humans and create their "WorldID."
TransCrypts has attracted an impressive lineup of early-stage investors. It has also already developed a successful product for background and employment checks, showing its model works. However, it may face challenges in the form of regulation, adoption, and competition.
One challenge for disruptive tech solutions is that incumbent players aren't always so easy to dethrone. As we've seen with cryptocurrencies and traditional finance, established companies are also integrating blockchain technology into their operations. In TransCrypts' case, both Equifax and TransUnion have announced partnerships to bring identity and credit data on-chain.
For investors, it will be worth monitoring these trends and solutions. Not only could it impact your portfolio if TransCrypts goes public, but it may also affect your long-term view of the industries TransCrypts could disrupt.
