Bermuda’s blockchain regtech opportunity: disrupting identity

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The “On the Internet, nobody knows your a dog” cartoon. It’s iconic and as relevant today as it was when it was first drawn back in 1993.  Verifying someone is who they say they are remains a tremendous challenge of the internet and business in general. The trouble of not being able to easily identify someone on the internet is that we need to create heaps of inefficient and ineffective process to overcome it.  We can change this.

When you try to open a bank account, especially as a company, you have to complete endless amounts of Know Your Client (KYC) documentation to prove who you are.  In reality, it is mostly security theater.  Providing a copy of a utility bill to prove your address is rather worthless when you consider how easily one could be faked using photoshop.  Worse, you keep having to sign and submit the same information and declarations over and over.

All of this amounts to a tremendous amount of friction and waste.  A whole host of bureaucracy is added to attempt to overcome this identity problem that adds a great deal of cost but not much value.  This is an area ripe for disruption.

How do you verify that you are who you say you are?  Today you have a variety of forms of identification.  You likely have identification issued by a central authority such as a government in the form of a passport and drivers license.  You perhaps also have an online identity with a site like facebook.

The trouble with a passport or drivers license is that it really isn’t very internet or business friendly.  The best you can do at the moment is take it to a lawyer, have them photo copy it and certify that the paper copy is authentic.  Though, even then people usually always want to see the original and make their own copies.  There is simply no valid digitial representation of your government id.  Worse, in cases such as a refugee fleeing a global conflict, your identity may lost, revoked or in some other way no longer be valid.

In terms of digital representations of identity, the best we’ve got so far is federated identities like Facebook Connect.

You might “log in with facebook” all over the internet which provides the advantage that you don’t need to create a new login or identity with each provider.  You can manage the “claims” that each app or provider has to your data and the ability to revoke claims or control at almost any time via facebook.

However it also brings with it the disadvantage that you still don’t really own or control your identity, facebook does.  If facebook locks you out or deletes your account then you also lose access to every other place that you use your facebook identity.  Facebook also theoretically has access to pretend to be you at every place you use it as a login.  Finally, it isn’t really backed, verified or authenticated by any authority other than facebook so it is really only useful for places that don’t require stringent verification that you are really you and not Sparky the dog with a human name or someone pretending to be you.

Identity plays a major part in every interaction across traditional services and the digital world.  The problem is that you rarely can use the same identity across services spanning the traditional and digital worlds.

So that’s today.  Let’s talk the future.  What if you were the ruler of your own identity? You’re its creator and it’s keeper.  Alone, it doesn’t mean all that much, but the invention of the blockchain and distributed ledger technology, a considerable amount more is possible.

Perhaps you use a service created around or that allows you to create your own standardized Self Sovereign Identity that is recorded on a blockchain.  You then go to the Bermuda government and ask them to certify your identity as valid, encrypting and tying your personal information like your citizenship, date of birth and marriage status to your identity.  You own your identity and you control the ability for anyone to access this information. You can provide the rights to view as much or as little of this information to anyone who can verify that it was signed and validated as accurate using the Bermuda government’s digital signature.  You then have control over who and what has the rights to access your personal data.

You go to Belco and ask them to tag your utility bills against your identity to verify your address.  You go to your bank and ask your bank to tag your credit profile against your identity.  You ask your lawyer to tag your will against your identity.  Any provider you interact with can encrypt details and information about you against your identity and if you so choose, you could have multiple identities.  Again, you control who has claims to each piece of information stored against your identity and each bit of information can be validated by independent authorities like Belco, your bank or your law firm.

With your own secured and validated identity, instead of having to sign worthless pieces of paper and constantly provide proof that you are who you say you are, you can simply provide claims to information stored against your digital identity.   Your data only needs to be verified a single time rather than over and over. The cumbersome Know Your Client processes disappear into a verifiable digital transactions.  Even better, using smart contract mechanisms you can avoid the need to divulge unnecessary information.

Rather than having to show your id and divulge details like your date of birth (which puts you at risk of identity theft) to prove that you’re old enough to order a drink, a digital query could be made against your identity simply verifying that you’re older than 18.  There is no need to know your exact date of birth.  Similarly when trying to buy a car.  A car dealer could verify against your identity that your bank has pre-approved you for a car loan.  The dealer doesn’t need to know anything about what you earn or what your credit profile is, only that your bank has verified your identity as approved.

Where is the opportunity for Bermuda?  Bermuda has the unique position of being small enough to be able to enact change quickly while also having a mature business environment that could readily embrace and would probably welcome this change.  Bermuda could set itself at the forefront of innovation by reforming our regulatory frameworks to embrace these technologies and concepts to significantly reduce the friction of doing business.  The friction of KYC and other regulations on the ability to do business globally is a tremendous impediment to growth.  If we can reduce that friction, we can get a jumpstart as a center for regulatory innovation and improve our position as a modern international free port.

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