At the forefront of innovations in blockchain technology lies digital, decentralized identity verification. It breaks the traditional norms where fraud, data breaches, and identity theft are common, thereby averting the costs, complexity, and reputational harms in businesses. By combining the decentralized nature of blockchain technology with distributed storage, users have complete control over their identity. As a base model, a user is issued a digital token pointing to a repository with their information. This information is concealed and accessed temporarily from the decentralized storage, helping manage its access to third parties requesting it. Not only does this benefit individual users, but it also stretches out to industries and governments alike.
As an individual user, a digital ID eliminates the need for physical documents, provides enhanced security in your online adventures, and prevents fraud. Thanks to advanced verification techniques and machine learning algorithms, businesses (spanning healthcare, banking, and others) can confirm your identity for sensitive data like transactions and interactions. In turn, this protects your sensitive data, even in successful hacks. For instance, if a hacker steals personal information, they’d never be able to open a bank account using your details. This enhanced security is achieved through multifactor authentication methods.
In the industries’ case, digital identities improve customer experience. Businesses streamline their customer onboarding through a simple account creation process. By saving the time taken through the orientation process, businesses allow customers to focus on using their digital products and services. Leveraging real-time authentication, enterprises speed up their procedures and, as a result, propel revenue uptick. A good use case is when customers use multiple financial services from the same service provider. Once their identity is confirmed, there’s no need for redundant KYC procedures.
Governments demand regulatory compliance (adhering to laws, regulations, and guidelines) across all industries and businesses. With a prime goal of adhering to general data protection regulation (GDPR), companies can use digital verifications to protect and manage personal data, avoiding breaches and costly legal consequences. It also enhances a company’s reputation by showing a solid commitment to customer protection. Additionally, governments streamline their service delivery and assistance to individuals who lose their identity documents to natural calamities or possible disasters like family violence.
In this article, we’ll introduce Atala, a digital identity verification provider in the Cardano ecosystem. We’ll cover its operation model, the challenges of realizing a seamless verification, and a proposed solution to combat this. We’ll also cover the specific steps involved in building this solution and the value this provides to the Cardano network. Let’s delve straight in.
An Overview of Atala Prism
Since its inception, Atala Prism has been designed to provide flexibility, modularity, interoperability, security, and privacy. These building blocks conform with Cardano’s unique core values: scalability, security, and decentralization. As such, Atala provides robust infrastructure products that integrate with other components (digital products) to power scalable solutions. It also follows open-source standards such as the World Wide Web Consortium (W3C) and leverages end-to-end encryption techniques in its software design.
Similar to how we use physical credentials, Atala Prism is a digital store for all important documents, including government-issued IDs, health insurance, diplomas, etc. This allows you to share specific credentials with organizations of choice anytime. By imitating physical protocols used to validate your identity, digital identities follow a framework (set of standards) to ratify the authenticity of identifiers. In this case, decentralized identifiers (DIDs) and verified credentials standards are widely acceptable proof of personhood, yet keep your information safe and secure. In addition to this, Atala Prism follows a seamless operation model, just like “log in with Google or Facebook” accounts.
Building on the Cardano blockchain, Atala Prism facilitates the expansion of your ecosystem by creating trust frameworks, UX patterns, and protocol designs. This model aligns with developer visions of allowing users to own their data regardless of their location, whether you’re dealing with educational credentials, land title deeds, medical records, or even credit reports. When you want to share your information, Atala provides secure peer-to-peer communication channels, enhancing its security.
Envisioned to pioneer trust globally, Atala leads other identity providers by working with governments, innovators, and enterprises. By the numbers, Input Output Global is championing Atala Prism’s growth, with over 500 developers completing Prism’s SDK training and over $3 million ADA given to these innovators as of 2023. Moreover, over 80 teams are building prototypes on Atala Prism, with over 20 projects shipped to commercial launch.
The Challenges in Digital Identities
At the time of writing, builders (developers, to be specific) lack fully compliant know-your-customer (KYC) tools, which poses a significant challenge in developing and deploying solutions on Atala Prism. Despite empowering developers to build solutions for real-world applications, this fragmented, inconsistent landscape leads to potential fraud risk and regulatory compliance issues. In this context, four items are at stake: regulatory compliance, trust and security, operational efficiency, and market access.
Without compliant KYC tools, solutions built on the Atala prism may not meet legal standards, attracting severe financial penalties, among other repercussions for organizations. To instill and uphold user trust, businesses need an effective KYC that secures data during the process. If platforms and systems are built without a powerful KYC, they are prone to identity fraud, compromising their integrity. For an ever-growing basement such as blockchain protocols, onboarding new users through manual processes (as seen in the PI blockchain, which is quite a different network but serves as an example from our perspective) is slow, cumbersome, and resource-intensive, both technical and human. And for many business collaborations and market opportunities, compliance with KYC, if absent, restricts growth and expansion.
Revolutionizing Digital Identities: A New Era of Security and Trust
As seen in the above video, IAMX has developed a prototype showcasing a proposed remedy, a modular framework to standardize KYC procedures on Atala Prism. This solution provides efficient global identity management and verification. Using a modular structure in Atala’s architecture offers flexibility, scalability, customization, and growth since each module can be used independently, with new ones added when needed. It also reduces the time taken to verify identities and increases the pass rate through mutual authentication. In this case, Atala Prism will leverage advanced techniques like geotagging, digital document processing, and wallet identification. With a modular structure, each module can be developed, tested, and fine-tuned independently. This development model allows for greater adaptability based on project requirements.
Nevertheless, Atala Prism, as is, has worthy-of-note projects leveraging the Cardano network, particularly in Africa. As one of the high-profile implementations of Atala Prism, IOHK partnered with the Ethiopian government to revolutionize the education system. As quoted by Ethiopia’s minister of education, Getahun Mekuria, the Cardano network is on a path to improve the quality of education. On giving over 5 million students Cardano IDs in 3500 schools and 750,000 teachers access to the system, authorities can track every student’s performance.
IOHK also trained 22 female developers from Uganda and Ethiopia on how to write Haskel code, Cardano’s native programming language. Through this initiative, Ethiopia can resolve the issue of fake certifications and uphold its credibility, which is seemingly unrecognized in the West. Only then can Ethiopian graduates secure jobs and further study opportunities at high-tier universities like Oxford.
Key Stakeholders
In partnership with NMKR, an NFT infrastructure provider on Cardano Network, and IOG, the pioneers in blockchain engineering, they have developed CIP 0066, an NFT verification solution. The team has also collaborated with MME AG and KYC Spider AG to build a regulatory-compliant framework for identity and Web3 products. It’s quite a talented band of tech enthusiasts.
The IAMX team consists of information technology (IT), fintech, and blockchain experts with a specialty in digital identities and compliance solutions. Members include:
- Julia Froenicke, Head of Product and Partnerships — A top voice in United Kingdom fintech publications. She brings over 20 years of advisory in marketing, business, and content development in fast-paced environments for small market enterprises (SMEs), having served in multiple language backgrounds: German, English, Spanish, and French.
- Tim Heidfeld, CEO and Co-founder — Tasked with managing funds and controlling quality, he brings over 13 years of rich experience as a manager-founder in e-commerce, telecommunications, and electronic marketplaces. Notable companies he has led include Telekommunikation GmBH Handy.de, Preis24, SIXT, Scout24, and Allianz24.
- Dennis Mittmann, Chief Technology Officer — A software development lead. Dennis has over 20 years of experience developing high-traffic web applications and has been an active blockchain developer since 2011. With such a diverse background, he is also responsible for designing comprehensive, scalable, and secure future-proof digital products.
- Tim Bruckmann, Chief Marketing Officer and founder — A digital identity solutions pioneer with a heavy focus on compliance, he comes from an e-commerce, telecommunications, and online marketing background. With successful NFT real ventures on his record, he coordinates the team and oversees external communications.
- Sebastian Hepp, Compliance Lawyer — A financial law expert with a specialty in contract law, corporate law, and FinTech/DLT. Holding advanced qualifications in blockchain, regulatory compliance, and business law, he develops custom strategies for business models.
Project Funding and Timelines
To bring this project to life, IAMX requested a total of 250,000 ADA. While the funding is spread across different workloads, as highlighted below, any excess funds are to be channeled to the official platform launch and marketing efforts, hence maximizing the impact on the Cardano ecosystem.
- Customizable onboarding tool (Chatbot) — ADA 20,000
- Testing and Integration of modules —ADA 80,000
- Wallet and monitoring of transactions — ADA 20,000
- Deployment of DID on Atala Prism — ADA 60,000
- Monitoring, updating, and maintaining systems — ADA 20,000
- Publishing DID manuals — ADA 10,000
- Testing final solution with Atala Prism — ADA 30,000
- Contingency and miscellaneous — ADA 10,000
In the timeline realm, the project is divided into five milestones, with each taking approximately one month. Here is a breakdown:
- Chatbot — April 2024
- Module integration, testing ID verification, Liveness check, Proof of Address, AML, Media check, and Enhanced Due diligence — May 2024
- Wallet and Transaction monitoring — June 2024
- Atala Prism DID deployment — July 2024
- Overall customized module-based solution — August 2024
Implementation: Assembling the Pieces
In accordance with Project Catalyst’s grant documentation, at least four milestones are needed for grants over ADA 150,000. IAMX adheres to this and has five milestones to bring this project to life. Let’s explore each of the milestones in detail, covering the build steps and expected results.
1. Customizable onboarding tool (Chatbot)
As a key landmark, the end of this phase comprises a fully functional and customizable chatbot. Any individual using this KYC solution should be able to text and rule the chatbot. This process begins with a prompt question from the chatbot. When a user responds, the bot proceeds to the next question. Expected answers include texts, multiple choices, or an upload of documents based on the task at hand.
In confirmation that this phase is complete, the IAMX team will create a walkthrough video for the entire process, including the start page, step-by-step interactions, and an end page for when the process is finished. Although the chatbot will not be open-sourced, for privacy reasons, there will be technical reports to show interaction data. These interactions are captured as timestamps, the types of questions asked, and the completion status. Both video and technical reports will be available in IAMX’s GitHub documentation.
2. Module integration, testing ID verification, Liveness check, Proof of Address, AML, Media check, and Enhanced Due diligence
Building from the preceding step, this stage involves shipping complete functional modules that have successfully integrated ID verification, liveness check, proof of address, anti-money laundering, media verifications, and due diligence. As a result, once a user initiates the process, they will be provided with KYC results upon completion. For closure, this step will have walkthrough videos and technical reports accompanied by anonymized data in the form of timestamps, questions, and completion status. The modules in this step are not open-source as well.
This step provides several benefits, like standardizing the KYC process and ensuring all users go through the same process while keeping the system compliant with both local and international identity regulations. It also enhances security, prevents fraud, and improves the overall user experience and trust. Looking at the business sector, all enterprises can enact a robust KYC solution, reinstate their reputation, increase operational efficiency, and thus expand their market access. Additionally, it ensures accuracy in digital records and protects users’ data, a factor that many consider while doing their risk assessment and management before investing in services.
3. Wallet and Transaction Monitoring
As the third of the steps, users will have a seamlessly functioning user interface with functional wallets and can monitor transactions. This module entails creating dashboards that display balance, transaction history, and notifications for the UI part. The wallet functionality is all about implementing a secure digital pouch that allows users to store, send, and receive assets, building on core blockchain concepts like key management, encryption, and transaction signing. And to monitor transactions, blockchain explorers come into play, fetching transaction details and status updates, a good way to track incoming or outgoing transactions. Builds of this step are not open source.
To mark the end of this milestone, users will have enhanced functionalities that extend the preceding step results. By then, users will have complete control over their digital assets and the ability to monitor their financial activity. If needed, users will look through transaction history, ensuring transparency and trust in the system. From the technical standpoint, IAMX will link to the documentation walkthrough on GitHub, catering to both video and written reports (expect some markdown docs).
4. Atala Prism DID deployment
This phase circles to shipping a fully functional Atala Prism decentralized identifier (DID) management module and completing verifiable credentials, wallet, and wallet connectors. By implementing DIDs, users access self-sovereign identities as directed by Cardano’s guidelines. It is all about developing mechanisms to issue and verify digital credentials associated with DIDs. For closure, the system will also be interoperable with other systems and standards, allowing the use of DIDs across other platforms and services. It is also worth noting that the creation of DIDs and verifiable credentials are not open source.
The end of this phase is signed with the ability of developers to create, manage, and verify DIDs using the Atala Prism framework. This could include educational certificates or government IDs, and the list continues. With that in place, users have control over their identity, asserting security through enhanced cryptographic techniques and in a simplified process. The IAMX team will arrange in-person and online workshops to showcase the modular KYC Atala solution and offer hands-on training for implementation. These events are open to all participants in the Cardano community and will also be recorded and made available online to those who can’t attend in person. As expected, they will also share technical reports and open-source code repos on GitHub.
5. Overall Customized module-based solution
To wrap up the project, this final stage delivers a fully compliant identity system with global support for Know Your Customer (KYC), Know Your Business (KYB) and Know Your Transactions (KYT), serving approximately 200 countries with 1000 anti-money laundering (AML) sources. Atala Prism’s landscape will be modular as of this phase, with all services operating seamlessly. The identity platform will be able to integrate with other modules and third-party services. It should also scale to handle a large number of users, which is a core component of Cardano, and be adaptable to different landscapes or regulatory environments.
Rather than hacking way through the inconsistent Atala Prism landscape, whether you are a curious tech enthusiast, developer, or business, you will be able to leverage the new solution, which offers efficiency, customization, compliance, and a seamless user experience in digital productions. This means conjuring any solution tailored to your specific needs to satisfy customers, complying with legal standards regardless of the background, and reducing the need for multiple separate tools. The IAMX team will share documentation of the video walkthrough, technical reports, and links to the open-source code for access to all Cardano builders. Moreover, they will demonstrate a complete working solution with three individuals from different nationalities.
Iterations: Improving the KYC Solution
With the aim of understanding the framework’s effectiveness, the IAMX team will gather feedback from developers, evaluate adoption metrics, and monitor the number of KYC processes conducted using the solution. In terms of adoption rate, this approach is key to enhancing Atala’s identity platform and is crucial to Cardano’s overall growth. Key metrics are examined as follows:
- Adoption rate — IAMX will track the number of developers and businesses using the identity platform for KYC endeavors.
- Feedback — Through surveys and Interviews, the team will gather feedback from projects and developers building on this infrastructure.
- Number of digital identities created — IAMX will monitor the number of digital identities created.
Bringing It All Together
By modularizing Atala Prism, the Cardano ecosystem ramps up its growth and adoption thanks to streamlined KYC processes. This framework is a baseline for developing reusable identities that are usable in the context of Know Your Customer (KYC), Know Your Business (KYB) and Know Your Transactions (KYT) processes on the Cardano network. Being an all-round solution, businesses, developers, and users are all beneficiaries of this innovation. Developers can create decentralized identities in over 204 countries, including emerging ones.
In the short term, this project enhances Atala Prism’s functionality, attracting more businesses and developers into the Cardano ecosystem. Overall, this leads to a thrust in increasing the number of decentralized applications (dApps) and usage of the Cardano blockchain. In the long term, Cardano secures the lead as a privacy-preserving digital identity solution. You’d then expect more partners and users to join the Cardano family, propelling its growth and success.
For the existing projects that have created modules like wallets, this modular KYC solution offers the ability to integrate the remaining modules seamlessly, bridging their digital products to a fully compliant digital identity management system on Atala Prism and Cardano. Looking into the future, IAMX plans to anchor the findings from this project to refine the modular workflow and expand the framework. This approach inspires other projects in the Cardano blockchain, fostering growth and innovation within the community. It also presents Cardano as a competitive digital solution in the overall blockchain, cryptocurrency, and web3 community.
To learn more about Atala Prism, please check out their proposal on Project Catalyst, GitHub profile, and official website.
