Thread by @fraser_again

This thread articulates the problem well enough but I'd argue it incorrectly equates

1."#identity data able to be consumed by the chain"

and

2. "identity data must be on the chain".

The answer is less data on-ledger not more. First, an example using #TornadoCash .👇

https://twitter.com/orageux101/status/1558391733599506432

Hopefully everyone is aware of what happened to #TornadoCash over the last week and most terrifyingly, the developer being arrested.

The main outcome for us to focus on is a tonne of addresses are now denylisted by a mix of protocols, DEXs and CEXs.

The balances in those accounts can be assumed to be dead since it's now extremely difficult to extract that value.

Now if these accounts were linked to real-world identities, suddenly, off-chain assets could become fair game too.

Instead, an approach like the one @centre_io's Verite proposes where only a signal that an account has passed through a given KYC regime is stored on ledger introduces drastically fewer privacy risks:

docs.centre.io/verite/pattern…

This would allow for the introduction of "regulatory compliant #DeFi" like myself and @worner_martin outlined here:

cheqd.io/blog/ssi-for-r…

Worth caveating that we're not saying all #DeFi should head in this direction. There will always need to be a space for #Degens but adding an identity layer does have benefits, e.g. reducing or eliminating wash trading, so we expect it to become a horse's for courses situation.

Finally, worth me saying that @SecretNetwork's privacy tokens could well be key to the work we're doing at @cheqd_io in ensuring that whenever individual's are paid for access to their data, we don't leak any information about them through transaction histories.