At the conception of Bitcoin in 2008, Satoshi Nakamoto ensured user anonymity within the transactions that took place. This was followed up by cryptocurrencies that were created after that and that’s why some people love cryptocurrency transactions but at the same time, there is a lot of skepticism around them. This skepticism is not random at all, as this anonymity has led to regulatory concerns of cryptocurrencies being used for illegal acts such as drug trade, extortion, money laundering and potential terrorism funding. These are not made up acts as in May 2018, a young South African boy was kidnapped and his kidnappers had demanded 15 Bitcoins to be paid before May 27th for his safe return. This is because the kidnappers would not be able to be traced as they would be using a bitcoin address, which prioritises anonymity between transaction parties. This is just one example that shows why identification for cryptocurrencies is essential to regulatory integration and for mainstream adoption. If transactions can be identified, it would be easier for a user to determine who they are interacting with and illegal transactions can be stopped. There are many attempts that have been made in regards to user identification but none have been done in regards to cryptocurrencies. Currently, there have been centralised platforms built which store user information but these have raised privacy concerns from the European General Data Protection Regulation. Thus, the solution could be a decentralised identity framework that is stored, shared and validated on the blockchain. One company that’s working on this is IAME.
IAME is a decentralized identification framework that allows cryptocurrency users to verify each other’s identity without disclosing non-essential identification information. The main aim of this is to ensure that participants are not partaking in any illicit activities on the blockchain.
Why do we even need identification in the first place?
Currently, one of the problems facing cryptocurrencies is regulation in different countries and industries. This is because there is lack of Know Your Customer (KYC) policies around cryptocurrencies. Moreover, there is also lack of Anti-Money Laundering and Counter-Terrorism Financial processes. Cryptocurrencies lack these features because all the addresses are anonymous and all transactions that happen are decentralized. So, in order to enable regulatory policies and mainstream use, there has to be a way for identity verification.
What are IAME’s principles?
IAME was built on the QTUM blockchain and it gives the user the following benefits:
- Identity ownership: users control their identity information
- Data security: Identity information is fully sharded and decentralized
- Transparency: Transactions have Know Your Customer (KYC) policies, Anti-Money Laundering (AML) and Counter-Terrorism Financial Processes (CFT) policies which are all in line with financial regulations.
- Integration: Regulatory and mainstream integration of cryptocurrencies.
How is IAME doing this?
IAME has an identity DApp that gives identity to cryptocurrency users. The IAME framework holds user identities on this DApp. The identity is created by the user through their cryptocurrency address. This DApp will be empowered by the user. If an identity document is used for identity creation, the IAME framework will be responsible of sharding the document, thus the content will be identified by a consensus of IAME users who are responsible of hashing the shards onto the designated blockchains. Since the DApp is user-controlled, only the identity DApp controlled by your QTUM address will know the location of the data shards, thus the user would know the location of their data shards and have control over the people they share their information with.
In essence what happens is that:
- The user goes on the IAME platform and chooses which platform they are to sign up with, this can either be Facebook, Twitter or Google+.
- After successful sign up, the user adds their wallet, this can either be Ethereum, Bitcoin, Ripple, Litecoin or Dash.
- The user then enters their private key.
- Next, the user is prompted to share information about themselves, this starts from their first name and last name.
- They then share their date of birth and nationality and then the platform requires proof.
- The user then adds an identity document by scanning it onto the platform, this can be a utility bill, passport or ID.
- The platform then fragments the document and validates the data provided by the user.
The data that is fragmented is distributed among independent third-parties, and these third-parties are not affiliated to the transacting parties at all.
Third-parties in blockchain?
This is a question that many people seem to have- how is it even possible to have third-parties in a decentralized system? Isn’t the whole point not to have them?
Well, with IAME, the network of the third-party validators was built due to the rationale that an identification validation conducted by a third-party is more dependable and less susceptible to the risk of fraud, than one done by a single institution. The minute a user fragments and identifies their identity in the aforementioned steps, the fragmented data components immediately result in a prompt being sent to the validator platform where predetermined validators take on the task of verification. The validators are rewarded for this. In order to secure this process and avoid validator manipulation, IAME has a symmetric game model that uses tribunal validation. This is when consensus determines the validation and secondary tribunals can also happen when consensus is not initially reached and there is need for appeal. Thus, no one can have control over the validation process.
IAME allows you to verify that you are really transacting with legitimate users. During transactions, the aforementioned third-parties verify the validity of the fractured pieces of personal data, that is very useless to malicious parties at this point. The compilation of the fragments constitute a valid identification to the transactional counterparty, thus verifying the identity to the initiating party.
How am I protected from malicious activity?
The team is planning to build a crime prevention system in order to detect suspicious activities on the platform. The system will be able to detect and flag suspicious addresses. They plan to do this by using Link Analysis and Multi-Dimensional Analysis so as to find patterns and insights within the data set. They will provide tools to distill complex data in order to analyse and detect these suspicious wallets so as to protects users from transacting with them.
Practically, where can IAME be used?
IAME can practically be used in any transaction that is open to cryptocurrencies. Thus, it can be used in DApps, marketplaces, financial institutions, ICO’s, exchanges and regulatory agencies. The IAME token can also be used in different scenarios. It is a QR20 token that is built on the QTUM blockchain and can be used to:
- Deploy your own QTUM based identity app
- Pay third-party verifiers to hash data shards onto the designated blockchain
- Become a third-party verifier for some compensation.
- Have your information validated by higher third-parties for security.
- Request to have potential transactional counterparties analysed so as to avoid transacting with suspicious people.
IAME is competing with multitude identity verification DApps that are in existence today. Their benefit is data sharding, AML and CFT and, the fact that they want to facilitate mainstream integration of cryptocurrencies into the financial world. Moreover, maybe this can finally end the tug-of-war between Mauritian banks and the government as the banks are against cryptocurrencies, but the Mauritius Government’s 2018/2019 budget speech mentioned regulations around cryptocurrencies and fintech within the country. Hopefully, IAME will make banks reconsider their stance. Let’s watch the space.