Progressive Decentralized Identification for Developing Markets
Graduated Levels for Operational Grassroots KYC/AML in the iO₂ Oracle Marketplace
Decentralized identification (or DID) is a smart contract hosting important, immutable and validated-data of an agent, claimable only by the agent with a specific private key. In the developing world, beyond the fringe of legal and institutional systems, DID is able to provide neutral evidence and records to the agent reinforcing, easily created locally or by-passing authority of institutes.
We always keep our identity card, driving license, credit cards, top-up cards, debit cards and door access cards in our physical wallet. Many of them have documented our personally identifiable information (PII) data, which exercise different levels of security and trust. Digital identity works similarly. We may possess multiple digital identities either for multiple different services, or representing our divergent characters in different digital environment.
Thanks to blockchain - it opens up a unique technological advancement towards self-sovereign identity. We are now entitled to own and control our personal data, apply them towards other conditional applications to different markets and services.
However, economic inclusion gaps in some developing regions have been arisen due to accessibility, ability, or socioeconomic and geopolitical hardships. They are major barriers to make deployment of DID in these areas difficult.
Compared with developed markets in the western world, developing regions have remarkably different needs for and barriers to trust-based systems such as KYC and AML. Their people do not possess the required economic literacy, digital literacy, and data literacy for modern practice.
KYC - “Know your customer”- refers to due diligence activities that financial institutions and other regulated companies must perform to ascertain relevant information from their clients for the purpose of doing business with them. AML, standing for “Anti-money Laundering”, is a set of procedures, laws or regulations designed to stop the practice of generating income through illegal actions. Yet in developing markets, business transactions are overwhelming regardless of the incompetence of KYC and AML systems — that means the show must go on.
How can we create an identification system, which is able to uphold the safety and security standards set out by KYC/AML, also be relevant, adaptive, and equitable to the evolving nature of developing markets?
Our Vision of DID
We aim to create a DID system for developing countries which can facilitate their population to claim information about themselves (who they are), their assets (what they have), their abilities (what they know) and their demand (what they need) in a trustless environment. Our target is to make DID be the solution to problems of certifications and qualifications in informal societies.
We propose a “Progressive Decentralized Identity Solution”- a multi-level KYC/AML system which can be flexibly adapted to the evolving and indeterminate nature of developing markets.
The lowest level requires no KYC/AML. It only obtain some basic transaction information, such as location and product category. The next level adds a phone number, the next adds a physical address, the next involves a triangulation of local authentication, and so on until reaching the highest standards set by federal regulatory bodies.
The larger scale of the transaction is, the higher level of identity management services required. With this progressive KYC/AML system, people are able to connect with foreign markets and international trades, having access to larger markets of capital, goods, and services. Grassroots communities will then increase their economic, digital, and data literacy skills, giving them further self-agency and competitive edge in their own markets.
We believe this trustful-to-trustless environment is the key to transforming informal economies into formalized and developed economies, and ultimately overcoming global sustainability problems such as poverty.
Our Vision of Oracle Marketplace
Oracle is a blockchain jargon to describe external data getting into the blockchain space. In many mainstream fintech cases, many of oracle types are robot-driven, for example the price of cryptocurrencies from one exchange market to others. In our work of developing community social finance and impact measurement, oracle types are beyond robots or systems but actually generated by agents on the ground, either people or IoT devices, to report specific quantifiable impact in the real world.
The application of blockchain technologies to social finance not only provides automation of existing institutional capital deployment, but also creates platforms to allow micro- and nano- scale social finance participated by everyone, including grassroots community members.
Oracle marketplace, a platform to request data from the ground to signal smart contracts, is essential to drive all kinds of decentralized social finance technologies to automate decisions and transactions. In short, it is a marketplace for smart contract authors to request claim and validation from selected crowd.
In 2017, we published a whitepaper at China Development Research Foundation annual conference about the concept of ‘intelligence agent’ or IA as a compensating concept to artificial intelligence or AI, when AI is applying in developing regions without high quality data input from the frontline. In the article, we stressed data literacy construction and enhancing bilateral data flow between people and machine was able to encourage more valuable, trustworthy and ethical data. IA is coincidently matched the concept of human oracle.
DID for Oracle Marketplace
The biggest impact of deploying DID in developing context is to return data sovereignty to ordinary people. In vulnerable communities, money is scarce but information is highly needed. Direct payment of money to exchange data from those people is the conventional practice now. This type of intelligence platform is highly inefficient and costly, and according to our experiences there are a few reasons for that,
- A lot of money is spent to make sure each data input is by a real person with certain identity
- A lot of money is spent to make sure each data input is honest
- A lot of money is spent to make sure all the data input activities in the history are auditable
Therefore, iO₂ DID is particularly designed to fulfill different levels of validations for the oracle marketplace, therefore the signals sent from the individual or consensus of individuals to the smart contracts are legitimated.
Below are the big categories of DID claims for all iO₂ users to be qualified to participate in impact data contributions and validations:
- Informal political situation: affiliation claim
- Informal economic situation: asset claim
- Informal Labor Capacity: skill claim
- Auditable demand: need claim
- Governance: preference claim
Lastly, iO₂ DID is also particularly designed for vulnerable community members, but it is able to be used by everyone in the world.
Level Zero Oracle Marketplace DID
On iO₂ oracle marketplace, everyone is able to register as a user to create its DID. iO₂ tokens will be added to the wallet automatically as the by-default value unit in informal communities. The meaning of this value unit can be interpreted by local communities, and here are some cases we experienced in our pilots:
- Coop in China: iO₂ token initially replaces one of the credit systems within the coop to document stewardship of individual
- Poverty community in Hong Kong: representing unit of time to document mutual help among each others in the community
- Community in Myanmar: rewards of participating in community voting
Level Zero oracle marketplace of iO₂ DAO is representing a general layer of users. Any iO₂ DID holder is able to request data from any other or a group of users. It is a decentralized network of information acquisition for everyone to use. Only liquidity of data transaction is documented but actual data acquired by users belongs to the particular users.
There was a series of debate internally between accountability of user’s unique identity and freedom for users to have multiple identities. We decide at level zero, it is allowed for users to create multiple unvalidated identities or accounts. Therefore, all data analytic works and signals to smart contracts should consider such premise if data is acquired from level zero users.
These are two examples of Level Zero Oracle Marketplace. It will work in both P2P data oracle request and preliminary social investment due diligence work. For example, villager A is able to ask villager B from another region about price of tomato to reasonable set price of his one. Another example is that, an institutional impact investment bank would like to understand general income level in a region in Africa from 1000 local residents.
Level One Oracle Marketplace DID
All level one claim is to adopt to internal rules of community, informal groups or simple certificates by organizations. All claims and validation signatures will be stored in smart contracts on blockchain network. Individual user is able to use private key to prove the ownership of such smart contract. No personal identifiable data will be stored in the smart contract.
1. Affiliation Claim. iO₂ DID user is able to claim his/her relationship to an organization, a community or a group. The claim to belong to a group should be either validated by a peer from the group or validated by leader of the group.
For example of validated by authority, in our project in Myanmar community impact bond voting, only iO₂ DID validated by villager MP is allowed to vote for the bond issuing. Another example of validated by peer, in our project in China ‘Goods for People’, the sharing group affiliation claim only need another group member to validate.
2. Asset Claim. iO₂ DID user is able to claim their procession, including goods and land. Both claims should be validated by group leaders and peers at the same time.
For example, in our project in Laos, farmers is able to create his own token, print it out and put it on bags of seeds to be stored in centralized coop facilities. The ownership of the seed is validated by all other coop members and the village chief. The digital token is fungible and programmable, therefore it is able to become the guarantor for P2P lending or microfinance from the coop. Another example is land asset claim. In our case in Papua New Guinea, coop members can claim land assets by dropping GPS dots. The claim is validated by neighbors and village chief.
3. Skill Claim. iO₂ DID user is able to claim their skillset, validated by either their colleagues or employers. This helps vulnerable community members to informally create their resume and allow them to bargain salary when changing jobs.
For example, farmers working for a huge plantation can ask employers to validate their skillset and length of service. When farmers move from one plantation to another, they are able to reveal their experience for better salary.
4. Need Claim. iO₂ DID user is able to claim their need. The need will automatically documented in the smart contract. It is optional for the need to be validated by local NGOs or foundations. The immutable need data will avoid canceling of real need due to corruption or prosecution.
Other claim options include,
- Education level
- Impact generation
- Social credit
- Other digital IDs
iO₂ Intelligence Ecosystem
It is important to accommodate iO₂ DID claims to specific use cases. Some of them should comply local law or institutional rules. Therefore, we are able to keep adding to the list of claim and validation mechanism. Higher level oracle marketplace DID will serve more institutional smart contracts for social finance.
We aim to build the decentralized intelligence network, a platform coop of data and intelligence shared by all iO₂ DID users. It provides the decentralized version of toolkit of data request and validation to facilitate both online SaaS platforms, or smart contracts of social finance in the communities.