The implementation of a digital identity system, especially in the crypto ecosystem, will allow operations to be carried out in a more secure manner
The crypto ecosystem is growing by leaps and boundsThanks to the ease and freedom to operate, fewer requirements than the traditional financial system and greater secrecy of operations,
This last feature, although it was one of the main reasons for its adoption, also generates disadvantages: an increase in digital crimes and the impossibility of promoting other financial products such as loans.
In this framework, the idea of generate a Digital identity system, a kind of “crypto ID” based on blockchain allows to provide Cryptocurrency accounts are collateral on its owner.
Crypto Digital Identity: How Does It Work?
,The digital identity process in crypto is key to validating people. who still do not have access to traditional banking information,” he pointed out iProUP Guillermo Navarro, partner at Buildenlex Abogados and expert in technology law.
“For a whole generation, the topic is something common and everyday. The name is important in P2P systems: Setting parameters for crypto accounts could be a success“, Add.
As an example, Navarro argues that A digital currency account can be used as collateral to execute in case of default via a smart contractTransparent and auditable.
However, the lawyer cautions that, as with any process, you have to look at the fine print and how it coexists with traditional regulations. That is, it is feasible, although there are legal details to take into account.
Crypto Digital Identity: What are its benefits?
Mariano Maestrena, director of HeirloomDAO and representative of Draper University in Argentina, told iProUP He Digital identity is a topic of debate in the ecosystem.
and adds: “It will be designed to work with centralized exchanges like Binance or similar, Decentralized ones do not require permits to operate nor can they impose restrictions. In this sense, he argues that he understands the device as a tool. Access credentials with preloaded information about the person’s identity that you want to use Exchange.
,The main advantage is its versatility: Don’t fill in the same information or go through the verification process every time you want to use a new exchange. Simply, you login with the digital credentials and it works without any issues“, he explains. And he comments that “it enables the second authentication factor required to use the account, thereby increasing its security.”
Meanwhile, Navarro highlights Speed and build a reputation to access better rates and terms than someone who has no information, Also you have to take care Savings in processing costs and almost instant execution. From a legal point of view, this has many advantages, as non-payment makes the collection process easier,” he says.
in conversation with iProUPNicolas Verderosa, attorney and cryptocurrency expert, summarizes Benefits of Digital Identity System,
- Security: “People should authenticate with a Unique digital identity before making any transactionwhich minimizes the risk of fraud”
- Transparency: “requires users to provide personal information, resulting in more transparent operations and provides tracking of funds,
- Cost: “The Transactions are faster and cheaperwhich translates into advantages for users”
Digital identity will allow you to fill the form only once and share the registration data across multiple exchanges
Crypto Digital Identity: What Are Its Disadvantages?
As a counterpoint, Maesterena believes that this type of system may require a significant amount of personal information, which may make some people uncomfortable. They argue that a digital identity system is a target of cyber attacks: If it is unsecured, it exposes the personal and financial data of the people.
In parallel, Verderosa explains following disadvantages,
- Privacy: “By providing personal information, you lose the anonymity that many value in the cryptocurrency market”
- Cyber security: “A digital identity system is more vulnerable to computer attacks”
- technical difficulties: “Implementing a digital identity system is complex and costly, which hinders its adoption”
Of all the options, Navarro explains how The main disadvantage is the loss of privacy and anonymity of operations, something that was always considered to be a strength of the crypto ecosystem.
Crypto Digital ID: How Do You Combat Scams?
In this section, experts differ. On the one hand, Maesterena explains: “Digital identity contributes more to control than securityInstead, Verderosa argues that it helps curb cryptocurrency scams by requiring users to authenticate before transacting, making it more difficult for scammers to do so.
However, Verderosa believes that a Integrated system for all exchanges is viable in the medium termHowever, this requires cooperation of companies and regulators to set standards.
“It can improve security and transparency in the cryptocurrency market, and will also Useful for applying credit scoring tools and other financial servicesYes,” he analyzes.
Digital Identity Will Force You to Give Up One of the Most Precious “Crypto Rights”: Privacy
Maesterena comments that “making this globally complex is complicated, as it implies that all jurisdictions agree on what information they require from users.” but must consider A viable regulation of this kind at the national level,
Finally, Navarro cautions that digital identities and the control they provide are something it has been working for many years, But there is also a dispute about who owns that data. At this point, be aware that “Procedures should be in place for portability of financial informationsomething that banks in the traditional system refuse to share”.
,If the parameters can be set to be managed by the same network, it will have value, If it is a closed system, it has less chance of success,” he concluded.