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Decentralized ID (DID): A solution to centralized KYC

Performing KYC and AML checks is a must for any project that intends to follow a proper governance and comply with regulations. The current security token platforms run as centralized entities on a decentralized blockchain, in fact they introduce centralization functions such as compliance validators (KYC/AML), off-chain processing etc. Those type of features are necessary not only to overcome the technical limitations of existing blockchain but to simplify the issuance of security tokens. However, the introduction of too many centralization might end up neglecting the value proposition of the blockchain in the first place.

DIDs provide a standard way for individuals and organizations to create permanent, globally unique, cryptographically verifiable identifiers entirely under the identity owner’s control

A DID is stored on a blockchain along with a DID document containing the public key for the DID, any other public credentials the identity owner wishes to disclose, and the network addresses for interaction. The identity owner controls the DID document by controlling the associated private key.

Because every DID has an associated public-private key pair, anyone with a DID should be able to digitally issue and sign verifiable claims and other documents. So long as the verifier has the DID of the issuer (which in most cases is contained in the credential itself), it is a simple matter to look up the issuer’s public key on the blockchain and verify the signature on the claims. This is so straightforward that it should become the default behavior of any software that uses digital credentials.

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