CryptoCurrency

DeFi, “Cash Legos,” & Decentralized Identification: A Chat with Ontology

DeFi, “Money Legos,” & Decentralized Identity: A Chat with Ontology

Decentralized finance, or DeFi, has taken the world by storm.

All through 2020, tokens which are native to DeFi techniques have exploded in worth; the quantity of capital ‘locked’ within the DeFi ecosystem has additionally risen astronomically. This has correlated with a rise within the variety of customers within the DeFi area.

Nonetheless, the fast-rising reputation of DeFi could make it simple to neglect how very younger the ecosystem is, that’s, till there’s a hack, software program exploitation, or an information leak that reminds us.

Just lately, Finance Magnates spoke to Erick Pinos, the Americas Ecosystem Lead at Ontology, about how decentralized, on-chain identification can be utilized to make the DeFi ecosystem safer, in addition to to increase the variety of use instances for DeFi platforms.

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Finance Magnates · FMTV: Erick Pinos, Americas Ecosystem Lead at Ontology

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The next is an excerpt that has been edited for readability and size. To listen to Finance Magnates’ full interview with Erick Pinos, go to us on Soundcloud or Youtube.

What’s Ontology?

Pinos defined that Ontology’s work focuses on enterprise-level blockchain use instances that largely focus on decentralized identification.

“We work so much on use instances like decentralized certificates, decentralized medical information; we work with autonomous autos, decentralized credit score scoring – use instances that want a component of identification that work on a blockchain layer.”

“So, our technical stack has a base layer, a public blockchain that may additionally work with personal blockchains. On high of that, there’s a decentralized identification layer, which lets us go into these use instances of the provision chain, and these use instances of identification and data-sharing and data-privacy that assist us sort out these markets very successfully.”

Constructing Defi platforms with ‘Cash Legos’

Pinos stated that in the intervening time, “probably the most sensible implementation” of Ontology’s blockchain has to do with the DeFi ecosystem.

“An enormous factor of DeFi is the power to make decentralized monetary transactions which are extra complicated than simply the fundamental ‘ship and obtain transactions’ [use case]; by way of decentralized finance, you’re capable of do issues like decentralized lending, exchanges, insurance coverage, borrowing. You possibly can lock tokens up and do streaming funds.”

“You can too stack issues on high of one another and type decentralized autonomous organizations which are accountable for issuing [tokens], for figuring out the charges for loans and for borrowing. There’s a number of alternatives for innovation.”

“I consider them as ‘cash legos,’ as a result of you may stack them on high of one another,” he stated. “There’s a component of composability with entry to totally different APIs.”

Nonetheless, “one factor that’s actually lacking is the identification factor, which allows a complete totally different stage of issues,” he stated.

The Function of Identification in DeFi

This factor of identification might have a profound impact on who has entry to a number of the monetary companies out there by way of decentralized finance platforms. “A number of it proper now could be collateralized,” Pinos defined.

“Since you don’t know who anybody is, there’s no stage of belief or repute,” he stated. In different phrases, decentralized platforms grant their customers anonymity, however with whole anonymity, it’s inconceivable to construct a repute of belief or any image thereof, like, say a credit score rating.

On account of this lack of repute, DeFi platforms “need to over-collateralize their customers’ exercise.” That approach, “if somebody runs away with cash that they borrowed, they get their stake of their collateral slashed, it will get repossessed,” Pinos stated.

“With the introduction of identification, you may have parts of repute, you may have parts of with the ability to connect ‘real-world’ gadgets to it,” he continued.

For instance, “with the repute factor, you would have decentralized lending the place you don’t need to over-collateralize. As an alternative, you may collateralize usually. In case your repute is basically good, chances are you’ll not need to collateralize in any respect; it’s like your credit score rating. You’re thought-about ‘reliable’.”

Primarily, introducing identification to the DeFi sphere permits for the creation of “decentralized credit score scores,” Pinos stated, including that “that is what Ontology is engaged on.” Ontology’s decentralized credit score rating known as “OScore.”

Can Decentralized KYC Checks Preserve Private Information Extra Safe?

Pinos additionally defined that on-chain identification can permit DeFi platforms to combine decentralized know-your-customer (KYC) checks, which Ontology can be engaged on growing.

“For those who confirm your self as soon as, you now have an on-chain certificates that authenticates you for future transactions it is advisable to do the place it is advisable to KYC your self,” Pinos stated. “So, quite than having to re-KYC your self for each single service, you may KYC your self as soon as after which re-use the certificates.”

“So, it sort of works collectively,” he went on. “A few of these tokens and companies are open for anybody, however with the introduction of KYC, you’re capable of provide the power of those extra superior use-cases,” together with issues like tokenized mortgages.

How does decentralized KYC hold customers’ information protected? Pinos stated that the truth that customers solely need to confirm their identification one time eliminates a lot of the danger related to coming into KYC information into varied platforms; there are merely fewer factors at which information may be intercepted.

Certainly, “proper now, there’s a scenario [in the financial space] the place it’s a must to confirm your identification many various occasions for every service that you simply wish to use,” he stated. “You must re-upload your passport photograph to all of those totally different web sites, and each certainly one of them is doing KYC in a barely totally different approach.”

“So, now your passport image is on the servers of all of those totally different web sites,” he stated. “Half of them go bankrupt, and now they only have copies of your passport sitting on these bankrupt servers. Who is aware of who will possess them and repurpose them sooner or later?” he added.

Utilizing Zero-Data Proofs in Decentralized Identification

Nonetheless, a decentralized, blockchain-based KYC identification acts way more like a blockchain token; it could solely be despatched and acquired with its proprietor’s permission.

It’s because the decentralized identification makes use of verifiable credentials. These are “a part of a decentralized identification system the place every individual has a decentralized identifier that identifies who they’re, and also you signal it” with a non-public key.

“You employ your personal key to signal your credential to confirm that it got here from you,” he continued. “That creates a hash of the credential, which is a verifiable proof that the credential is true. You possibly can then share that hash. Once you share that hash with somebody, you may authenticate your self and show that you simply signed it at a sure time.”

Pinos additionally stated that the incorporation of zero-knowledge proofs into decentralized identification will “actually change the sport.”

“Zero-knowledge proofs permit you to break aside your identification and share particular parts of your identification to totally different people,” he stated.

“The basic instance of what this implies is once you go to a bar to indicate that you’re over 21, it’s a must to give the bartender your driver’s license.”

Nonetheless, the motive force’s license has much more data on it than simply your age – data that the bartender now has unfettered entry to: “your age, your peak, your weight, your private home deal with, and all of this different data that they don’t have to know.”

Subsequently, “if you happen to can simply share that one information level with them, whether or not you’re over or beneath 21, and you’ve got a hash hooked up to it that mathematically proves that the data is true, that’s all you want.”

“It creates a significantly better system the place you’re not sharing your complete identification each single time. As an alternative, you’re sharing simply sufficient information that’s wanted for each single occasion to confirm your self so as to use a selected service.”

“We’re Transferring towards a Serverless [Ecosystem].”

Decentralized identification additionally permits customers to maintain their information “localized”. In different phrases, the KYC information leaks that we see a number of occasions a 12 months within the crypto area might grow to be a factor of the previous.

“The opposite factor of decentralized identification is the localization of knowledge,” Pinos stated. “We’re shifting in the direction of protecting the info saved regionally.”

For instance, “in our case, a number of the certifications that Ontology makes use of for KYCing and for the OScore – these are saved regionally in your cellphone.”

In different phrases, “somebody couldn’t hack Ontology and have entry to the entire KYC information, as a result of we don’t have it,” he stated. “It’s on the customers’ telephones. It’s all localized.”

“As extra firms transfer in the direction of utilizing that as a approach of storing information, and as these decentralized storage techniques proceed to take maintain, it’s going to get more durable and more durable to hack [personal data],” Pinos stated, “as a result of hackers wouldn’t discover something – the info isn’t saved on centralized servers anymore.”

Certainly, “we’re shifting towards a serverless [ecosystem],” Pinos defined. “This makes it so much more durable for hackers to search out targets.”

 

The next is an excerpt that has been edited for readability and size. To listen to Finance Magnates’ full interview with Erick Pinos, go to us on Soundcloud or Youtube.

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