What the CRD Tech Says: KYC update.
(May KYC update)
Hello guys,
In this update, we will talk about some specific tasks which we are focusing on right now and we will also mention the overall technical progress of the CRD Network.
1. Compliant DeFi
Regulation and legal requirements are going to rule the crypto industry in the coming years. This is happening whether we like it or not, and so it’s best to be prepared for it.
Right now crypto is in the process of adopting regulations. It’s also increasingly difficult to have the anonymity that was previously taken for granted. Nowadays, there are plenty of active market players which provide chain analysis services where they trace all coin movements/addresses, analyze them, and show (or assume) the end beneficiary.
To counter this, there are solutions which are trying to hide coin movements (like XMR, zCash, etc) but their market share is very small compared to giants like BTC and ETH; and most of their “competitors” right now are also non-private and transparent. So you can’t really keep your holdings secret.
You still can arguably feel ‘safe’ by withdrawing small crypto amounts via OTC (LocalBitcoins and similar services) but once you need to withdraw something like 50k+ USD you would have a rough time explaining the source of funds to authorities, along with proof of purchase, etc.
For situations where you bought/earned crypto via centralized exchanges, the whole process might be straightforward. But it is a totally different story when we are talking about DeFi projects.
DeFi by definition is decentralized, and currently, there is no single entity to confirm your identity or assure regulators that you are a ‘good guy’ in a straightforward manner.
And this is where we step in.
The CRD Network will provide an environment where you would be able to interact with DeFi and other projects using your standard wallet, like Metamask, and we will be guaranteeing your compliance with the regulators. This is how it would work:
1) You register on the CRD Network
2) You pass Know-Your-Customer (KYC) protocols in our app
3) You authorize your Metamask
4) You choose ETH addresses you want to use in a compliant manner
5) We issue Proof-of-KYC into the ETH mainnet for selected addresses
^ at this point forward, we (and other partners who will adopt our model) can confirm your identity and your ETH address.
6) You participate in DeFi services via our app (at first we will support 1inch swaps and some lending solutions (AAVE or COMP)
7) You earn crypto via DeFi
8) When you need to withdraw your earnings, we can guarantee to the bank (or to whom it may concern) that your transactions were made by you by using your previously verified KYC details and associated ETH addresses.
With respect to the CRD Network’s compliant DeFi protocols, this is what we are building right now.
That said, I have had to simplify it a bit to make it easily understandable. Truth be told, it is not that simple to just post Proof-of-KYC into ETH mainnet.I mean, we technically could do that, and it would be quite simple to do it. But this method leaves the whole service not really all that transparent.
After all, who will guarantee that we will not publish a fake KYC “pass” for a random address? If we get hacked, who will guarantee that our system would not tamper with records in someone’s favour? DeFi is about transparency and accountability.
This is why we are building A Hyperledger Besu ETH Private network and masternode system to validate all important actions within the network by independent nodes. Each important action, such as validating a KYC process, would be recorded there with all associated timestamps and hashes. In other words, it would allow auditors/regulators to trace each KYC request lifecycle, as we would be able to show all chain of events, including responses from KYC providers for various checks we made.
You can find the basic structure diagram of our KYC validation system below.
The core idea is that we operate in two networks simultaneously — in the ETH public net and in the ETH Private network (Hyperledger). Then, within these systems, there will be various sets of masternodes with different access settings. Some types of masternodes will be able to validate records only, other types will be able to read some extra data.
It’s worth stressing that we will be operating a supernode that will be populating a database with new records, and in this sense, the system certainly is not ‘trustless’ or ‘decentralized’. However, we must be a centralized system by design, as we represent a legal entity that is responsible for the data; but the Hyperledger setup will allow us to keep the whole process immutable and transparent.
Basically, all past transactions are stored in the blockchain and synced with masternodes. It would not be possible to revert old data this way; as we operate on a PoS private network, and nodes will ensure that no previous data will be altered. This way, even if we would want to change anything in the blockchain, all traces will stay in the system which ultimately restricts us from changing anything.
This is an overview of the current set of masternode levels we are implementing right now.
This solution would also allow us to promote this Proof-of-KYC for independent DeFi projects, as they would be able to confirm that their users are compliant. Presently, this looks like overkill, as DeFi doesn’t care about compliance. That said, we believe that DeFi will be tamed and regulated in the very near future and we should future-proof our project before the regulatory crackdown happens to remain on the right side of the law.
We will be sharing more updates on Hyperledger development in the coming future.
1. Current tech progress.
Here is the updated roadmap:
We are running a bit late to publish a live service for KYC processing.
Right now the onboarding process is almost done, and we are still finalizing the KYC onboarding protocol.
The thing with building a KYC protocol is that we need to do various checks (like sanctions, politically exposed persons list, identity check, document check, phone check) and this can be a bit complicated. Our goal here is to build a universal KYC system that will allow you to bypass third-party KYC checks once we add more partners to the network.
In other words, we want you to pass KYC only once, and then get an auto-KYC pass on any other future services.
We plan to finalize the standard KYC process by the end of next week.
That said, we’re unsure if we will open it before finalizing the Hyperledger solution, as we would want to keep traces of all KYC actions there.
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In addition, we are also working on smart contracts in ETH which will be used for interacting with DeFi via our services. The estimated launch for these tasks would be sometime in mid-June.
That’s it for the update, please feel free to ask any questions in comments or in the new Telegram group https://t.me/CRD_official_EN.
-p
