Why Identity Matters (Day 275)

The Internet has always been anonymous. It is a liberating feeling that I can post messages without worrying about being judged because I can remain anonymous. True freedom of expression.

But the true identity matters in at least three use cases: social media, self media, and financial applications.

In a real-person social media, such as Facebook, WeChat, it matters if you are who you claim to be. It is relatively easy to verify as there are information you can verify easily that imposters can't provide.

As self media becomes the new distribution channel, having your identity verified becomes essential for influencers. Anybody on the internet can claim to be Justin Bieber, but there can only be one real Bieber. With the verified accounts, trust and credibility can be retained online. The verification is not trivial, however, we can only rely on the platforms to verify the identity of the account owners.

For financial institutions, identity verification has always been an important part of compliance. It is arguably the most effective way to stop criminals by removing the financial gains from their activities. Transacting online has become the norm nowadays, especially post-pandemic.

With the rise of the cryptocurrency, it becomes a challenge to enforce identity verification, as all crypto wallet addresses are created by computer programs without any restriction, and the transactions are also handled programmatically without any central authority. It is entirely unfiltered, so-to-speak.

In the cases of social media and self-media, the identity verification is voluntary, the identity verification for financial services is mandatory. While the cryptocurrency empowered the people to gain reliable financial access in regions with hyperinflation and political suppression, or in parts of the world where financial infrastructures are still lacking, it also enables criminals to use it as the financial tool to circumvent the existing checks and monitoring systems.

Similar to gun control, a gun could protect or could murder depends on how it's been used--or misused. Therefore, registering the gun owner would at least allow the enforcement agencies to track down when it's been misused. That applies to the financial institutes, too, with more complicated compliance and regulatory requirements.

With the blockchain technology, cryptocurrencies are able to transact without costly middleman, despite the high "mining costs" and "gas cost", it is still a major technological advancement over the existing systems. As the Internet allows us to get rid of the middleman in information access, cryptocurrencies allow us to remove the middleman in the financial systems and greatly improve the efficiency in our economy.

However, in order to connect the existing financial system legally, at the minimum, we need to verify the identity of a crypto wallet owner. This process is no different from verifying your identity when you open a bank account. When this becomes a "normal process" and more people onboard to the cryptocurrencies, the true power of the blockchain technology can eventually be unleashed.

The APIS is building compliant wallet services and bringing the more efficient decentralized finance (DeFi) products to the masses.

To learn more about how you can create KYC'd wallets using the APIS project with the Molecule Protocol, please feel free to PM me on Twitter

Image credit: Lemonway