What is Identity?
Identity is a complex topic that doesn’t have a single solution. That is because identity isn’t singular. We are not one thing, now and forever. We are dynamic, evolving, contradictory, and multitudinous!
Digital identity, while having the dream of encapsulating the essence of what is “us,” can only capture smaller, distinct pieces now. Each of those pieces, while connected, actually interact in different layers of our identity.
Three of those layers are our social, compliance, and risk identities.
To the layperson on the street, when you talk about identity, they think of what makes them who they are. We can categorize this as social identity. This identity layer is composed of your social graph, what you do for fun, how you style your hair, what NFTs you own, and what personas you adopt. It’s not all self-attestations (I can’t simply say I am in BAYC without actually owning an Ape). However, this layer is about the presentation and social constructs’ rules for inclusion (and exclusion).
When you talk about identity to people in DeFi, you usually speak about KYC (Know Your Customer) and AML (Anti-Money Laundering). However, there are other aspects like accredited investor status, country, age, and the fact that you are only one person. These are the compliance layer of identity. Individuals can adopt many different personas and have a complex social identity full of contradictions, but the compliance layer is imposed upon them.
Compliance identity requirements come from governments and serious institutions because they have regulatory burdens that must be met.
The third layer here is risk identity, such as credit score, income level, or employment status is used to assess what levels of risk an institution is willing to take on. A credit score above a certain threshold may qualify you for a loan or get a better rate. Risk identities aren’t always regulation-free (see credit reporting agencies) but are more context-dependent.
While many see social identity as the one that evolves the most, compliance and risk identity don’t stay the same and can’t be viewed as a one-and-done.
Identity solutions will constantly be evolving in the DeFi space. The Quadrata team will continue to be at the forefront of this movement and add new attributes for compliance and risk identity layers, such as credit score and accredited investor status. If you would like to learn more about how the Quadrata Passport can help with your compliance and risk identity needs, please contact us!
Written by: Travis Nelson
