Identity verification is coming to Solana-based decentralized finance (DeFi) apps courtesy of Civic Technologies.
Solrise Finance, a decentralized fund management and investing platform that uses the Solana blockchain, has partnered with Civic to create a decentralized exchange (DEX) with permissioned access based on digital identity verification, the companies announced Thursday.
Adding a flexible digital identity layer to DeFi creates a permissioned environment that’s going to be attractive to institutional players, according to Civic CEO Chris Hart. This stands in stark relief to the permissionless nature of DeFi, where all you need is a wallet address and some assets to participate in a bevy of bank-like functions.
Indeed, a solid commercial use case for digital identity has perhaps been lacking, Hart added – until DeFi came along.
“Looking back two years, there was a lot you could do and you didn’t need identity,” Hart told CoinDesk in an interview, adding:
It’s a far cry from the days of Civic’s 2019 work on beer vending machines.
Nuts and bolts
Civic Technologies uses technology from nonprofit Identity.com to vet users. Its know-your-customer (KYC) process starts with the usual email address, phone number verification, photo ID scanning, plus a 3D face-map, after which a Civic Pass is issued.
That pass is then synced up with entry rules for a given decentralized application to check if users have been sanctioned by the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC). The digital ID is reactive so that it can be frozen or revoked if the entry rules are breached.
In the case of Solrise DEX, this could result in pruning the order book and removing orders dynamically, said Hart. For the time being, Solrise DEX Pro won’t be available to U.S. citizens, he added.
“Civic Pass enforces the rules mandated by the dapp creator, Solrise in this case, under which market participants – trading firms like Alameda Research and others – are willing to participate,” Hart said, adding:
Why it matters
Grafting some form of KYC onto anonymous pools of DeFi liquidity is a problem being tackled by others in the sector looking to bring in institutional money.
For instance, Aave, a DeFi platform, has announced the launch of Aave Pro, which will create a list of approved users to create regulation-friendly lending pools.
However, Civic is striving to create a toolkit for developers in the DeFi market, or any decentralized app, irrespective of what protocol or blockchain, said Hart, adding:
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.