Digital identity is one of the oldest and most complex problems to solve in this era of technology. So a major question that arises is: How do you trust someone over the claims as given by him/her without verification?
This comes in line with the customers who want to set up a bank account but have to go through a cumbersome procedure of know-your-customer (KYC). Hence, there is a need to provide for the immutable storage of such data in order to prevent inaccuracies.
Traditionally these proofs have often been provided by government identification certificates, credit cards, correspondence and likewise. Such information is prone to fabrication or even falsification. Since banks are very sensitive about knowing who the ultimate beneficiary of the program is, they assume that: if you are not laundering the money then you are not doing anything illegal so you should have no problem in filling out the formalities and forms and proving your identity to the respective bank. The most frustrating part is the questions asked by the issuing authority because they want to make sure that they are not aiding or abetting anything illegal.
In a Financial Sector De-risking report conducted by IFC, a member of the World Bank Group, they reported that one major activity that is ‘Increased Compliance Costs’ has drastically increased the downward pressure on trade finance. The biggest trade finance impediment identified by banks was AML(Anti-Money Laundering)/ KYC(Know Your Customer) costs which came out to be 93%(as reported by respondents) in a survey conducted by the ICC Global Survey on Trade Finance,2016.
Also, in a report by The World Bank Group on DLTs and Blockchain, it was highlighted that to adopt the Distributed Ledger Technology, the system should comply with KYC and CDD requirements in AML/CFT regulations.
The Breakthrough with Digital Identity using Blockchain.
Metaverse, an open-source public Blockchain aims to provide Digital IDs’ (DID) that is linked to a person’s real-life identity. One has to go through a simple KYC procedure at a bank (through Metaverse) but the bank need not verify the person’s identity if it exists and has been already verified by a third party/Oracle on the Blockchain. For instance, B fills in the customizable field which needs to be proved. The master private key must be used by the Oracle to sign the information as valid. Thus A (bank authorities) can make a request for the field’s information including the Oracle endorsement on-chain. If A is convinced that B’s information valid, services can be provided to B. This feature aims at saving time both for the user and bank thereby giving an edge over the tedious processes as described above.
How does Avatar (DID) KYC go about in real-time?
Digital identities in Metaverse are unique and can be autonomously controlled by the user and hence need not rely on any central entity or third party for identity verification. Metaverse can partner with various banks and the users will complete the KYC procedures as given below:
(1) Verify the identity of any person seeking to open an account
(2) Maintain records of the information used to verify the person’s identity.
(3) Determine whether the person appears on any government-provided lists of known or suspected terrorists or terrorist organizations within the international standards of anti-money laundering and counter-terrorist financing set by the Financial Action Task Force (FATF).
There are two stages of completion of this procedure. In stage 1 there will be a choice to enable Digital ID and a token will be issued and attached to the Digital ID. This is the concept of validating whether something is true without the need to actually look at the data yourself (Zero Knowledge Proof). The result of the verification can be directly presented to the bank rather than the original data is presented itself. In stage 2, the detailed KYC information will be stored in the Blockchain and the user can use his private key to authorize banks to access the certificate if a need arises to do so.
Digital identity will allow people to show that that the ID has been verified instead of actually showing their ID to the respective authority for verification.
Future of Digital Identification is Near
Blockchain technology will solve many of the inefficiencies in digital identification by enabling transparent and reliable solutions to banks, governments, financial stakeholders to share reliable certificates with one another. A transparent and seamless new frontier is near where users can protect finally its own data while institutions can efficiently identify users safely and securely.
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