Yesterday, we saw a huge announcement from the leading cryptocurrency exchange in the United States, Coinbase, who are now embarking on a year long study that aims to totally transform the way users of blockchain technology control their data and personal information.
One of the biggest ironies in cryptocurrency is that whilst transactions are anonymous and hidden in most instances, the actual buying of cryptocurrency through registered exchanges like Coinbase require users to give up a lot of personal information, including images of their Passport or identification, as well as giving up contact details and in some instances, even bank details.
Also known as ‘Know Your Customer’ the problem here is that signing up to exchanges is time consuming and quite complicated. Once a user submits this information, it then needs to be checked out for legitimacy, so often it can take days for an application to use an exchange to be approved, assuming you meet all the stringent anti-fraud checks.
Another issue this presents is that exchanges and wallets then need to securely store all of this personal information, meaning they are vulnerable to data hacks going forward. This, is a concern for the exchanges themselves and their customers. Data handling is a hugely sensitive subject in the news at the moment, we only need to look as far as Facebook and Cambridge Analytica to see why too.
So, it really is within the best interests of Coinbase to try and simplify this whole procedure, whilst adhering to important anti-fraud checks and laws. This is where blockchain technology comes to play.
First reported by CoinDesk, Coinbase have established a research team, led by B. Byrne, the Product Manager of the Coinbase identity team. Byrne and the team wish to simply allow internet users to own more of their own identity online, so this moves past just their own customer base and seems to have implications for a far wider audience too.
The team will be exploring the use of decentralised applications within the blockchain in order to build bridges between Coinbase products, the exploration of dApps will build the backbone for this study. According to CoinDesk:
“In Byrne’s mind, the best way to start lies in identifying a small segment of Coinbase users who would gain real value from controlling more of their personal data, rather than Coinbase repeatedly collecting and storing their know-your-customer (KYC) information across the platform’s products. Over the next 12 months, Byrne said his team aim to scale these experiments from just a few users to a meaningful group of dapp users. In addition to tech-savvy power users, Byrne said identity solutions could have the most immediate impact for customers that aren’t getting access to things because it’s too hard as is.”
How will it work?
As stated, this experiment is expected to last over a 12 month period, starting with an exploration of Coinbase Wallet users in order to find a suitable demographic to build the research upon. This will then move towards developing and testing a decentralised identity solution that will help benefit that small group of users. Once testing is complete, a final application might then be rolled out within Coinbase products that uses a decentralised applications to allow people to control their own identity checks through the blockchain.
This is more than just Coinbase
As stated, this experimentation phase has big implications for more than just Coinbase, therefore the research team won’t be going at this alone:
“Byrne said his team is talking with projects like the W3C Credentials Community Group. W3C co-founder and crypto veteran Christopher Allen told CoinDesk the group aims to launch a Decentralized Identifiers (DIDs) Working Group in January that can recommend standards through the Massachusetts-based World Wide Web Consortium.”
“Even if Byrne’s team develops identity solutions that reduce cross-platform friction or increase customers’ privacy, these solutions will probably rely on public tools and protocols that exist beyond Coinbase. Without commenting on any specific resources or priorities, Byrne agreed Coinbase would need to commit to keeping the infrastructure for future solutions, healthy. Byrne also expressed curiosity about how Coinbase could someday take a more active role in community efforts.”
What will come of this?
Well, this is where we are left to speculate, as Coinbase have not yet made clear what will come of this experiment. I suppose as with any experiment, they cannot predict the results so therefore, the current hypothesis from Byrne et al. is rather vague. The team are expecting to develop some sort of decentralised identity management solution that will give users far more control of their personal data, though the full scope of this solution is yet to be understood.
In an ideal world, we imagine a dApp being created that can be used to verify a users identity across an unlimited number of platforms, by simply just entering a private key, or a block address or something similar. This would be fantastic and would do great things for the adoption of cryptocurrency and most importantly, for the confidence of those in the industry that have to tackle data handling issues on a daily basis.
We’ll keep our eyes on this one, it’s a very exciting prospect with some huge real world implications to look forward to.
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