Digital Identity is a topic that is often discussed/debated, but also vastly misunderstood. In one camp are Digital Certificates which are, at best, an incremental approach to solving for the urgent need of a global digital identity that has associated attestations, such as virus immunity, KYC status, etc. Just as ID cards, social security Numbers, and birth certificates haven’t been a viable physical solution for identity, Digital Certificates and public/private keypairs are going to be fraught with security issues, including Sybil Attacks, as there is no way to prove humanness and uniqueness. By leveraging an open, permissionless, public blockchain, users are endowed with the ability to share identity attributes in a private and secure manner, which drives interoperability, portability and privacy-by-design. A solution of a foundational identity, rooted in human, not technical, attributes will serve as the basis for enabling seamless value transfer, both cross-border and intra-border.
A proper Self-Sovereign Digital Identity by definition should be human centric, not controlled, stored, or freely accessed by any institution. Equally important is that it needs to be usable by humans, particularly in developing societies, This rules out a N-digit Identification Number, a Digital Certificate that has an associated expiration date, and a set of verifiable credentials represented in public/private keypairs. The latter also doesn’t solve for uniqueness as any given individual can have more than one set of verifiable credentials and/or keypairs; and without deduplication, no identity system can succeed – least of all when applied to financially regulated environments. All of these proposed approaches lack seamless usability and cannot ensure humanness and uniqueness due to lack of biometric factors. Other core features of a human centric identity include availability to all, including those who don’t own a smartphone, usability without having to memorize a long set of digits, password, or understand public-key cryptography. Everest built and deployed a comprehensive, multi-biometric-factor digital identity solution that is not reliant on connecting to centralized databases, and is accessible to every human being.
BLOCKCHAIN + IPFS DISTRIBUTED STORAGE + ZERO-KNOWLEDGE ENCRYPTION
Blockchain technology is often viewed as a panacea for a wide variety of challenges, and in the case of Identity, it’s a component, but not the complete solution. Data in general, and Identity profile data in this case, shouldn’t ever be stored on-chain. The Interplanetary File System (IPFS) offers a great solution to use for this purpose. Each individual’s data is encrypted and stored in an IPFS cluster and only the IPFS hash is recorded on our PoA private IDChain. This enables greater security, flexibility, and performance; further, it separates the identity attributes from the transactions, thus providing an extra layer of privacy. In addition, the scalable ledger allows transactional and analytical data to be securely stored, indexed and accessed via zero knowledge encryption and usage of security labels for fine grained information sharing control.
eKYC PROCESS and KYC CLAIMS
The Know-Your-Customer (KYC) process that financial institutions use typically involves a significant amount of human interaction and manual intervention. This is something ripe for digital disruption and the foundational solution of digital identity serves as the springboard for streamlining this and reducing operational overhead. Associating the KYC status and attestations with one’s digital identity allows for those claims to be shared across institutions delivering massive economies of scale.
VALUE TRANSFER AND TRACKING
Regulatory and jurisdictional requirements are becoming increasingly stringent, including the recent update to the FATF “Travel Rule” as shown here:
Under Recommendation 16’s Travel Rule, the originators and beneficiaries of all transfers of digital funds must exchange identifying information. The rule will apply to all VASPs, financial institutions and obliged entities. Additionally, the originators and beneficiaries involved in a transfer must be able to guarantee the accuracy of the information they send to the other.
Understanding these requirements, especially in this eMoney, digital, crypto world, is paramount and yet seemingly few fully understand that a digital wallet doesn’t have an “identity” and thus cannot be eKYC’ed. It’s this very reason why we’ve tightly coupled Digital Identity with an EverWallet, and are extending this to import and associate any ERC-20 wallet into the EverWallet collection. The concept of foundational identity that can have multiple wallets associated with it is something that many, including Libra Association, have completely missed the mark on.
Once proper regulatory compliance has been established, real-world use-cases and transactions involving transfer of value (where value is fiat, crypto, subsidies, etc…) are now open for business.
NEXT GENERATION FINTECH OPERATING SYSTEM WITH AN EXTENSIBLE APP SUITE
Tightly coupling a digital wallet with an individual’s foundational identity is the operating system for a proper fintech platform. The additional components that we’ve built as part of the Everest platform can be viewed as an extensible application suite, much like Microsoft Office on top of Windows, which addresses a myriad of use-cases and delivers solutions across verticals. Some examples of what is being built include:
THE NEED FOR DIGITAL IDENTITY FOR A DIGITAL FUTURE
The COVID-19 crisis has now plunged the world into a “new normal” for economic progress that could forever change the way we work, transact and interact in the information age. Three key areas where the world has broken down during this crisis include:
- Distribution of government stimulus to control economic downturns
- Transference and tracking of health data
- Continuing the global flow of money particularly to low and middle income countries
The United States and other countries have attempted to distribute massive amounts of cash directly to individuals and businesses in an effort to keep money flowing through the economy to prevent a catastrophic downturn. The first key element that broke down in distributing these subsidies was actually distributing it in a timely fashion to those who needed it most. Stories abound about dead people receiving subsidies, uncertainty for businesses as to when and if they will be approved for loans, and ensuring that those that receive the funds are in fact eligible.
The second area where these government subsidies will see challenges is ensuring that the money is being used in accordance with the intent and policy for which it was distributed. If a household receives a $1,200 subsidy, the intent was that it will be spent on food, gas, utilities, rent and other such critical items to help keep the economic wheels turning. However if the household simply saves it, the intent of the policy is subverted. Similarly businesses were given large forgivable loans to cover payroll expenses. However fraud and abuse of these loans is already appearing.
The solution to these can be in “programmable money” that can be directly tied to an identity and particular transaction types. For example, a government might distribute funds directly to an EverWallet that is biometrically linked to a real human. This can prevent many instances of fraud or mistaken distribution to dead or otherwise ineligible individuals. Secondly, the subsidies could be tied to a time frame and transaction type. For instance, a $1,200 distribution could be tied to a spending time limit of 60 days. If the money is not spent within 60 days, it is returned to the treasury. Additionally, transactions to approved vendors could be enforced to ensure that the money is not being sent overseas or wasted on unnecessary items. Money can be distributed with more assurance, with better traceability to impacts for which the subsidies are intended, and enable a faster and less error prone distribution of funds.
In closing, times of crisis and uncertainty often are where truly innovative and disruptive solutions are born, and we certainly feel that we’ve developed a platform that will truly digitally transform the antiquated identity solutions and latency-laden financial networks.