SSI and DeFi: use-cases for your average Jake

Exploring Self-Sovereign Identity and use-cases in DeFi

Jake looks at the 10th pet food newsletter email in his inbox and wonders where he went wrong.

Of course, the web store required him to create an account to place an order, with his personal details. They took his email address and ran with it. He wonders why the store has to know so much about him- just to deliver dog treats!

Like many of us, Jake wishes there was a way for him to have control over who has access to his personal information. Fortunately, SSI comes as a solution to this!

What is SSI?

Self-sovereign identity (SSI) refers to a concept in the digital movement that an individual should have the sole authority over their personal data, identity, and associated privacy controls.

Essentially, it means that the individual is the one who controls their identity and personal details. This, instead of third-party entities like governments or corporations.

The identity remains entirely under individual control regarding how, when, and to whom that data is shared. Blockchain technology is often used for SSI.

SSI gives Jake the agency to choose who knows what about him- he manages his own identity.

Let’s explore SSI within Jake’s tedious real-life problem:

Privacy benefit & online shopping

Our Jake usually creates an account with each e-commerce store he buys dog treats from. But let’s say he wants to drown his sorrows about an overflowing inbox with some wine.

To order it online, he has to disclose his name, address, phone number and credit card information. Sadly, this exposes his sensitive data to potential breaches and misuse (mind the inbox!).

If Jake had access to SSI-allowing services, his verified identity and payment details would be securely stored in his digital wallet. Whenever ready to order his wine online, the system would confirm his verified age (necessary for his purchase), shipping address, and complete the payment transaction.

Sounds good to Jake, because it wouldn’t expose his personal details to the online store! Basically, the store would only get the confirmation that the payment has been made, and to ship it to Jake’s address without actually seeing his personal data.

Why should Jake dream of SSI? Because it would significantly reduce his exposure to identity theft, unnecessary data sharing, and potential data breaches. That means enhanced privacy.

Imagine besides spammy emails, also having your account pwned!

Great, so SSI makes things safer and less annoying. But we’re talking about Jake, and he is quite tech-savy. He’s holding ETH, but let’s say he wants to participate more in DeFI.

Let’s explore other use cases of SSI in decentralized finance:

Streamlined Peer-to-Peer Platforms

In the traditional borrowing and lending systems, an intermediary like a bank is required to facilitate transactions. However, DeFi lending platforms leverage blockchain technology to enable peer-to-peer borrowing and lending.

That’s better than TradFi, but Jake wishes that the process could be as simple as sending a text. These Gucci dog jackets are not going to buy themselves.

SSI can greatly streamline this process and build trust on lending platforms. Digital identities, once created, can be used to quickly verify borrower’s information and provide proof of collateral almost immediately. It does that by storing verified credentials in a digital wallet.

As a result, it reduces the dependency on credit history and standardizes assessment criteria. No more wading through paperwork for the borrower and reduced risk for the lender.

Privacy and Compliance Benefits of Rarimo’s Part:
Data Privacy

The integration of SSI and DeFi is not without its challenges. For example, when it comes to the use of KYC (Know Your Customer).

On the one hand, there’s the looming threat to personal privacy. Data submitted on-chain becomes publicly available, (since transactions on public chains are open for visible to anyone).

On the other hand, the utility of credentials issued by identity providers is limited, because they can be used only on the chain of issue.
Emerging solutions such as the Rarimo Identity Protocol address these challenges by using ZK proofs.

This is a cryptographic method of identity verification that doesn’t compromise sensitive data. These proofs enable on-chain identity verification, with users in control of the data they choose to share.

Rarimo’s approach offers a significant step towards cross-chain identity verification by synchronising the necessary verification data across all connected chains. This gives users flexible choice in the use of their Web3 identity, unconstrained by chain restrictions.

This would allow for an SSI that is also portable, allowing Jake, our story hero, to use it across chains and services.

Regulatory Compliance

Awaiting EU’s MiCA and other such regulatory frameworks, SSI can assist in meeting the requirements in DeFI. It provides a secure and tamper-proof identity system because it ensures that all users are verified and transactions are transparent. Rarimo Identity Protocol addresses challenges related to privacy and compliance, offering cryptographic methods for identity verification and ensuring regulatory compliance in the DeFi space.

This is great news for Jake. He’s learnt so much about DeFi and he wants to tap into the Total Value Locked in the space ($41.36b). He wants to create his own start-up, which can now be compliant and efficient using SSI, and especially Rarimo.

We’d recommend all Jakes (and Janes!) to look into RariMe, an identity management solution that’s intuitive and user-friendly. And for developers, the Rarimo Identity Protocol offers a smooth way to integrate identity verification.

To conclude…

Self-Sovereign Identity is a revolutionary concept that grants individuals control over their personal data and privacy. By utilizing blockchain technology, SSI allows users like Jake to selectively share their identity and personal details, reducing the risks of data breaches and unnecessary data sharing.

SSI has the potential to greatly improve privacy and security in online shopping, streamlining transactions, and reducing the dependence on intermediaries.

With SSI, Jake can have a more secure and efficient online experience and he can explore opportunities in the booming DeFi industry. He is thinking about starting a dog insurance business on-chain, but of course, he wants a way to verify the legitimacy of the candidates in a privacy-preserving way.

Beyond this, the possibilities are endless. Solutions like Rarimo offer user-friendly and intuitive identity management tools, making SSI accessible to all.

Don’t stop here. Discover more about SSI and Identity at https://rarimo.com.