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There are plenty of online schools already. They usually either have you take tests at a local third party testing center, or they watch you through your webcam while you take tests.

Additionally there's plenty of cheating going on in traditional universities. I've even heard of people being paid to take entire classes for other people.

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Agreed. If you're going to cheat, you'll cheat. It might even be easier to detect, e.g. enrollment and registration coming from one IP, but all coursework submissions happening from another. Or other more subtle detection mechanisms could be developed I'm sure.

Taking the big tests at third party testing centers should be the way to go.

However, I would like to point out that an university does not merely comprise of lectures. The research projects, internships and even the interaction with peers cannot be recreated online. Traditional universities still have an edge over this.

If enrollment was high enough, local meetups for some classes would go a long way towards solving this problem.

What I would like to see eventually happen is for learning and credentialing to separate.

I'd like to see a university that was more freeform. What if instead of just offering 4 year degrees, you could take a 6 month AI program, or a 3 month probability and stats course.

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