The IOTA Foundation, alongside its partners, has developed a Web3 Identification Solution selected for the European Blockchain Sandbox.

Initiated by the European Commission in 2023, this project provides a controlled environment to test and validate new distributed ledger technology (DLT) solutions while collaborating with regulators across the EU.

Transforming KYC Processes with Web3 Identification

The Web3 Identification Solution aims to overhaul traditional Know-Your-Customer (KYC) processes, which often suffer from inefficiencies, high costs, and privacy concerns. By leveraging DLT and tokenization, users can maintain control over their personal data while efficiently and privately identifying themselves across Web3 environments.

The identification process begins with users completing a remote identification via IDnow, Europe’s leading identity verification platform. This process adheres to EU Anti-Money Laundering (AML) and KYC standards.

Next, the identification is tokenized by walt.id, a key provider of open-source decentralized identity and wallet infrastructure, and stored in the user’s Bloom wallet as a soulbound token.

How the Soulbound Token Works

The soulbound token can be recognized by Web3 decentralized applications (dApps) and other services to verify the user’s identity without revealing personal information. This reusable token eliminates repetitive identification procedures, enhancing user experience and privacy.

With this reusable token, the necessity for repetitive identification procedures is eliminated, thereby improving the user experience and privacy.

When requested by an authorized party, identity details can be disclosed, and the token can be revoked. Furthermore, identity information can be issued as a W3C Verifiable Credential, allowing for permissionless sharing in off-chain scenarios.

HAVN Network provides a dedicated EVM-compatible KYC chain architecture linked to the Shimmer network, ensuring regulatory compliance and facilitating efficient interchain communication and transaction validation.

Implications for KYC and Privacy in Web3

The selection of the Web3 Identification Solution for the European Blockchain Sandbox marks a significant step forward, fostering regulatory discussions around KYC and privacy within the Web3 context. This is particularly relevant given the increasing interest in decentralized finance (DeFi) by authorities.

Enhancing the IOTA Ecosystem

Beyond the Web3 Identification Solution, the IOTA ecosystem has been bolstered through a partnership with Pyth Network, a major provider of low-latency price oracles. Announced by the IOTA Foundation, this integration brings Pyth’s oracle services to the IOTA EVM to enhance data accuracy and security, supporting a robust decentralized finance landscape.

This collaboration is particularly beneficial for decentralized exchanges (DEXs), lending protocols, and derivatives platforms. Pyth Network, offering price updates multiple times per second, supports over 300 applications and 50 blockchains, ensuring continuous availability of precise data.

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