Today we published our Issues Paper on Tokenising Digital Identity: Exploring the Promise of Blockchain-based KYC Solutions.
Know Your Customer (KYC) is a very specific identity problem governed by specific laws, regulations, and standards. These rules cost financial institutions and customers in time, money, and inconvenience. Banks are at risk of prosecution. Individuals risk invasion of privacy and identity theft.
Initially imposed on banks and financial institutions, the burdens of KYC are now being applied to cryptocurrencies because cryptocurrencies facilitate the movement of money-like value without the traditional financial intermediaries governments have traditionally deputised to police money laundering.
An opportunity exists for a “Self-KYC” solution, where the consumer controls their identity’s creation, verification, utilisation, and deletion. Crypto-ecosystems are probably going need Self-KYC as a decentralised solution to governments extending their centralised money laws to cryptocurrencies. And the Australian government has nominated digital identity as a challenge blockchains might help solve in its National Blockchain Roadmap.
Digital identity is not an easy problem to solve. Nick Szabo, the father of smart contracts maintains that blockchain identity is a graveyard of failed projects because the problem and the technology are relatively incompatible.
“Identity is local, insecure, and labour-intensive. Blockchains are global, secure, automated.”
@NickSzabo4, (Twitter, 18 June 2017, 11:01am) <https://twitter.com/NickSzabo4/status/876243371534057472>
Our ambition is to find the middle ground: to build a form of digital identity that can scale, that takes what is local, insecure, and labour-intensive and “tokenises” it so that it can be global, secure, and automated.
Happily, we have already built a working proof of concept using NFTs issued on the XRP Ledger and a sophisticated smart contract running on our HotPocket consensus engine. We will publish the white paper and demo video soon.