A new version of identification certificate has been developed by the blockchain startup Netki to enhance reliability and confidentiality of transactions. And also to help users comply with the law.

The product was presented by CEO and co-founder of Netki, Justin Newton, in an interview to CoinDesk.

According to him, the current BIP70 protocol, which allows the participants of a blockchain transaction to exchange information related to the payment, only implies one single identity confirmation: the digital wallet provider of the recipient should send its certificate. With the new BIP75 protocol, the sender of the payment may also provide their certificate to the recipient. Thus, both parties, if they want, can pass each other information about themselves before the transaction.

Also, in spite of the alleged goal of the protocol to help users to disclose more information about themselves, it actually enhances privacy. A payment request is an essential part of transactions. Now, the request will be encrypted before it gets on the SSL/TLS layer, that is, on the blockchain layer, to prevent a third party from getting access to the details of the request. According to the authors if the project, it is not right to “build any identity into an open permissionless network.”

BIP75 considerably reduces the danger of breaking the provisions of the Office of Foreign Asset Control (OFAC), notes Newton. Cryptocurrency exchanges and digital wallet providers will now know who they are dealing with and will be able to avoid financial contact with the countries and organisations under sanctions from OFAC. For instance, that can keep money service businesses from transacting with the terrorist organisation ISIL, claims the financier.  

Besides, the new protocol makes it possible to follow the recommendations of FinCEN’s “Travel” rule. When transmitting funds equal or greater than $3,000, information should be provided regarding the sender, recipient and their financial institutions (in this case the latter may refer, for example, to a cryptocurrency exchange).  

Finally, due to the growing transaction transparency, traditional financial institutions will now be able to interact with the open blockchain, which was impossible under the previous protocol.

A pilot version will be launched in the next few months, and the final version of the product will be available by the end of 2016.

Andrew Levich