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February 04, 2014, 05:56:55 PM |
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Hi all,
I'm looking for support from the community.
I have been working on a proposal for a API that would allow wallets, individuals, companies and institutions to be able to verify personal/business identities that are behind blockchain addresses.
My initial work however was clearly along the wrong path: I was thinking old-school of a centralised system that is able to verify identities for a fee etc... but the premise of what I believe is needed is still relevant:
One of the greatest challenges for bitcoin is adoption. For adoption to happen retailers and individuals need a system that allows them to feel safe. What makes them feel safe is the knowledge that the person/address they are dealing with is known on some level and that there is the possibility for reverse-payments. In addition they need bitcoin to match what they are used to. That is, instant verified payments (not waiting a minute or two).
The proposal is simple (how it is implemented is a question for advanced devs that can create a de-centralised system):
A blockchain that sits alongside the bitcoin blockchain which holds KYC records referenced to bitcoin addresses.
How it would work: (The key here is that it is all optional. Nobody needs to identify a particular address, but it facilitates trust between individuals.)
PERSONAL USERS
A user of a wallet that has several addresses, may want to register their first, last name and email address against those addresses for users to use as verification.
In a transaction involving two parties, the user sending the funds can use the first, last name and email address that has been used in his communication with the seller to verify that those identifying pieces are in-fact used with that bitcoin address. The response from the system (I call it idSHA - I've registered the domain) simply responds either verified/not verified without releasing any identifying information. Only the person uploading identifying information is able to see that information.
The person sending the funds is able to also later verify that address if the transaction proved genuine (i.e. they are able to rate that address much like an ebay trust rating system).
Personally uploaded identifying information, some of which can be automatically verified (such as email and phone), adds to that users identity KYC trust rating. An individual looking up a bitcoin address would see that addresses KYC Trust Rating and User Rating.
The User Rating would only marginally add to the overall KYC rating as it would be trivial to get a bunch of people together each sending transactions to each other with the simple purpose of creating a strong User Rating.
COMPANIES
For companies, they can identify their address as a business/organisation/charity type address along with information that will be publicly available and viewable. To demonstrate that they are a valid identity, they would request verification from a third party KYC registration service. In some ways working like a Escrow, the Company would upload a identifying document such as a Company Formation Document. They would also present a third party as having access to that document for verification. Once the third party verifies that document, the KYC document is added as verified to that companies wallet address. The document can then only be seen by the original provider of the document however it adds to the companies KYC Trust Rating and can also be seen as verified. (i.e. an individual could specify - does this company have a valid company formation document - The response would be Yes and also show the third party that verified the identity).
ADVANCED KYC FOR AN INDIVIDUAL
Institutions and certain businesses need to follow much more stringent KYC rules to check the identity of customers. Therfore, in the same way that a company can submit to a third party to verify their identity, an individual could also do the same with a company using the same method. Depending on the type of verified company that is verifying the information, this will affect how much KYC Trust is added.
REVERSALS
If a company is found to be fraudelenty verifying identities, they can be removed from the block and all of its verifications removed.
A Variable can be set for companies indicating that they accept payment reversal requests. If a reversal is requested and the company does not honour the request, this can be used to negatively impact the Company Trust rating.
NOTIFICATIONS
Wallets could be used to notify the idSHA when a payment has been sent to the Bitcoin Blockchain. This could be a much speedier transactional system simply for identifying that a transaction has been sent.
HOW DOES THIS SOLVE INSTANT PAYMENTS AND INDIVIDUAL TRUST WHILST ALSO RETAINING BITCOINS FEATURES
It does not sit within bitcoin. It sits alongside it as a separate identity trust and notification system.
In my wallet, I could specify some rules such as: If a user sending me BTC has a User Rating >80 and KYC/idSHA Trust of >50, consider transactions <1BTC as good once identified.
These two trust levels allow me to know that I am sending money to an address that belongs to a genuine individual/company/organisation and that if the person were to run with my money there may be a possibility to identify that user through any verified information. i.e. If they registered with an email address, phone number or third party KYC validation company etc...
There are also plenty of ways to Monetize this service to create the incentive to grow this service as a de-centralised system.
I look forward to your comments/feedback/suggestions.
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