Ruling the metaverse: Part 2
Regulation vs Moderation
In our previous article, we talked about what we think the metaverse is. We also talked about how, despite its allure, it will need regulating in some form if it’s to go mainstream and achieve its full potential for individuals, commerce and society. In this follow-up article, we want to be more specific about where we think Concordium fits into the regulation versus moderation debate and, in particular, how developers and organisations can contribute to building a new virtual society of Metaverse.
Made for the metaverse
Knowing Concordium’s platform, we get really excited about the truly unique attributes it offers, especially in the context of potential regulation, moderation, privacy and accountability. It is important to note that at Concordium, we’re here to help “Metaversians” do whatever it is they want to do in a metaverse, but in the most secure way possible. Moreover, we want to make sure that we ease compliance with upcoming regulations knowing as we do that they will come.
This is where our blockchain offers a unique balance between two competing tensions: the need for privacy (the freedom to do what you want to do) and the need for accountability. And we need accountability, because accountability ensures trust. And trust is the foundation for our society.
Freedom with accountability
And this is one of Concordium’s on-chain attributes: it offers its users this balance between privacy (freedom) and accountability. As Peter Parker’s Uncle Ben said, “with great power, comes great responsibility” and Concordium gives you the power to develop, build and transact in the metaverse in a responsible, secure, and compliant way. And more importantly, you have privacy because we’re using zero-knowledge proof (ZKP) so that your attributes stay between you and the identity verifiers. So your transactions are completely private and protected, unless you abuse the system, in which case if a court of law deems it so, third-party independents will be able to identify you and ask you to account for your actions. And as many believe, “knowing this hopefully acts as a self-regulatory mechanism, which just makes you interact differently”.
KYT: the evolution of KYC
I think it’s important to understand exactly how Concordium maintains a balance between privacy and accountability in transactions. For me, the best way to illustrate this is to describe our identity layer. So to transact on the Concordium’s network, you must identify yourself through an independent identity verifier (IdP). What we’ve done is create an identity layer that plugs into these identity providers. All we see on the Concordium blockchain is an ID stamp and whether you’re enabled to transact or not.
KYC (Know Your Customer) is a term that is well known in the financial industry and has been used commonly in blockchain terminology as well. The idea behind it is very much similar to what is required in the financial industry, being verification of the person and his identification. KYT (Know Your Transaction) is an evolution of this term. The idea behind it is that Concordium doesn’t actually know the person. We know that account ID has been verified and using zero-knowledge proof we can ensure that the person meets some criteria we have set. In this way we enable our users to remain sovereign over their own data. They can decide what data can be shared with which application.
On the other hand, if you’re enabled to transact but are suspected of criminal activity by a Government institution, or law enforcement agency, they can ask for a court order to have your anonymity revoked by a third party identity revoker. Bottom line, if regulation so requires we have already built a process into our blockchain which can support such a request.
Because everybody on the Concordium network is identified, you have the tools to ensure that anyone you’re transacting with is 100% legit. And most importantly, because our chain is compliant by design it means that you know our blockchain will meet the demands of regulators worldwide when these regulations are decided.
Nailing down security
Another concern for people is the security of their data and whether it can be compromised. In effect, they want to know if there are any blind spots when it comes to value exchange using cryptocurrencies in a metaverse.
Well, we should start by saying that the financial services industry needs to understand that users are more aware of their own rights. They want to be in control. And there is some willingness and readiness from the major companies we’re talking with to position “self-sovereignty” as a major benefit for their customers, as well as a real commercial opportunity for them.
These organisations need to understand that, as a layer-one blockchain, we don’t know who’s transacting on-chain. We just know they’re authorised. We don’t know or store any data about their gender, their age, or where they live, for example. We just know if they’re enabled to use our chain or not. So we’re not vulnerable to hackers or data breaches because we have no data worth stealing. Sure, we have a database of accounts, but we don’t know who’s behind these accounts because we don’t have the keys to unlock that information.
Another question we hear often is how will this new mechanism of value exchange exist or even work in a metaverse? Our first reaction is that we all need to step back and take a breath, because nothing’s been built in the metaverse yet. So the jury’s still out on the exact form transactions will take in the metaverse. But what we can say is that many regulators understand the direction the industry is heading in and the desire for customers to have more control. Customers, users, transactors, whatever you call them, they want financial privacy and freedom, but they also want their individuality respected while living in a collective space.
Last word
When we look around at the diversity of blockchain projects happening, the biggest challenge always seems to be the one about on-chain identity and privacy. Concordium’s approach to both provides, we think, a truly unique and more than satisfactory solution.
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