The Case for Identity in Blockchains

When more than 50% of the population owns a cryptographic identifier (National Identity Card such as the ones used in the European Union, or Biometric Passports), it’s legally and economically irrational not use then to bootstrap a blockchain, a medium of payment and/or digital currency scheme:

  1. Regulations (e.g., FATF’s Travel Rule, AMLD5, …) force identification with real-world identities: exemptions to these KYC rules are rare and for very low amounts (e.g., 50€ for anonymous payments in electronic commerce within Europe).
  2. Latest KYC/AML regulations have rendered illegal almost all permissionless blockchains (e.g., Bitcoin, Ethereum, …): accounts on said blockchains (i.e. self-hosted wallets) are de facto illegal, although trading their crypto-currencies is legal but only whenever you are properly identified on exchanges. Which begs the question: why wasn’t every blockchain account properly identified when it was created from the very beginning?
  3. Foregoing real-world identities in a blockchain introduces Sybil attacks, whose remedies incur in very high costs: Proof-of-Work (e.g., Bitcoin, Ethereum) or Proof-of-Stake (e.g., Polkadot, Cardano). Fortunately, our novel Zero-Knowledge Proof-of-Identity provides Sybil-resistance without any of these costs.
  4. In current crypto-currencies, networks effects are sacrificed in favor of anonymity: however, leveraging the network effects of a large identity infrastructure is much more valuable than the valuation premium of a completely anonymous crypto-currency.
  5. In absence of real-world identity, it’s not possible to safely issue debt: an obvious attack is for anonymous identities to borrow enormous sums that they never intend to repay. In fact, the optimal design of private money is debt backed by debt, thus current cryptocurrencies/blockchains without identity will never be able to be economically optimal.
  6. A common critique of crypto-currencies is they are unbacked by any asset: however, a crypto-currency using real-world identities is backed by the intangible value of said identities (e.g., the market value of a stolen biometric passport is approximately $10K in the black market, depending on the issuer country).

Only in our blockchain you will find an integration of real-world identity that overcomes all these issues.