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Decentralized identities without KYC?

21 July 2021 | Digital identity, News

Sophie Dramé-Maigné

Decentralized Identities without KYC?

Traditionally, digital identities are managed, generated, and owned by centralized service providers. As an Internet user, your Gmail account, your Facebook profile, your Twitter feed, or your Discord servers are all ultimately controlled by a company that can change the terms, censor content, or suspend your account. The blockchain represents an opportunity to shift away from this model and give users control over their online identities and personal data.

This new kind of decentralized identities have been heavily associated with Identity Verification processes and KYC (Know Your Customer). But the scope of self-sovereign identities (SSI) – decentralized identities owned and controlled by the entity they represent – is larger than that.

digital identity

Two types of digital identities

A digital identity is defined by a set of attributes, a record of actions taken, numbers, code, or more generally the collection of information that, together, identify a given entity inside an information system. With SSI, the information system in question is the whole Internet. There is no dependence on or limitations linked to a specific service provider. The entity that owns an SSI can be a person, an organization, a device, or even an application.

There exist several ways of dividing up and classifying digital identities. We will focus today on the distinction between what we will call an offline identity and an online identity. The first aims at (strongly) linking a digital identity to its real-life counterpart. Typical use cases for that type of digital identity include digitizing real estate paperwork, opening a bank account directly online, or buying an age-restricted video game. The second type of digital identity, online identities, lives self-sufficiently in the digital world. Think avid fan fiction writers that want to remain anonymous but still be able to claim their work. In both cases, the properties of SSI guarantee control and ownership to the identity holder. However, both types of identities come with different focuses and requirements.

Offline identities and identity verification

Identity Verification KYC

Offline identities embed information about the identity holder’s real-world persona. In such, they rely on (usually centralized) third parties such as governments, or organizations to certify this information. Alternatively, the information can be self-declared by the identity owner.

Offline identities are used to more easily digitize traditional services. Example applications include banking operations, real estate sales that require verified government ID, diploma certification, age-requirement verification, etc.

In all the above mentioned cases, official documents and government bodies are at the heart of what makes the identity valuable. The current processes for identity verification are costly. In addition, each organization must perform their own verification. SSI would lower both the burden and the cost of KYC by dividing it between organizations.

The focus on offline identities and KYC is the road taken by many SSI frameworks such as Microsoft ION. When developing applications around KYC-focused offline identities, concerns revolve around compliance with legal and regulatory framework and privacy protection. But do offline identities have to be verified to be useful?

Offline identities without KYC?

Unikname believes that linking offline identities to KYC regulations is limiting. There exist many use cases that require a link between the physical and the digital without mandating identity verification. For instance, purchasing something online requires a name and address for delivery. This information is declarative. It does not need to be verified by a third party.

Alternatively, attributes issued by a third party can be useful without requiring identity verification. Let us take the example of physical access in the workplace.

The employee produces its SSI. The employer then links this SSI to a list of privileges. No name or other identifying information needs to be linked to the identity.

All that is needed is to trust the specific party that is asserting claims about the SSI. Here the different badge readers in the building should trust the security office that issues access clearance to new employees.

without KYC

In conclusion

Unikname provides identity solutions for both online and offline identities without KYC. Its focus is on interoperability, universality, privacy, and user-control. Linking decentralized identities to KYC is stifling their potential. Unikname wants to put users at the center of their digital identities while facilitating business applications around decentralized identities.

In this context, users are in control of what information gets associated with their identity and who can access it. The service providers the users interact with do not need to have access to their true identity. It is a new, more respectful way of approaching privacy. It is also more secure as it eliminates the need for centralized databases that are the target of constant hacking attempts.

Striving for more privacy and anonymity online does not have to be synonymous with criminality. Everyone deserves to be aware and in control of the information they leave online. In addition to privacy, the blockchain brings accountability, which makes for an overall more secure and trustworthy system.

To learn more about our use cases, and the business applications of decentralized identities, visit the Unikname Website.

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