Identity

Identity verification: the foundation of asset activity on Polymesh

Anonymity is a key principle of many blockchains, but this ethos makes it very difficult to meet compliance requirements around identity verification and to fulfill KYC obligations.
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On Polymesh, users who wish to interact with asset tokens must become verified with a customer due diligence (CDD) provider.

Become verified

The challenge with identity on blockchain

Why is it a challenge?

Most general-purpose permissionless blockchains are built for pseudonymity, from both a technical and philosophical perspective. Unfortunately, pseudonymity makes it incredibly difficult to establish and validate identities in a way that meets most regulatory requirements involving identity. While it is possible to add identity-related solutions as layer-2 add-ons, this only leads to unwelcome complexity in the end-to-end solution.

The Polymesh solution

Polymesh brings benefits that other chains fail to offer by building identity into its core. Issuers and financial intermediaries can examine the blockchain to confirm questions regarding participant identities necessary for regulatory compliance.

Polymesh implements a federated root of trust for onboarding users via permissioned Customer Due Diligence (CDD) service providers and completion of an Initial Identification Process (IDI Process).
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Identity on Polymesh improves compliance and security, since token holders cannot subvert rules by using multiple identities to hold assets. Users can act only through their on-chain identity, and all on-chain identities are referenced through decentralised identifiers (DID).
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Further, issuers and institutions do not need to re-identify users, nor do users have to re-submit their information. This streamlines the identity verification process while significantly reducing costs.

Ultimately, Polymesh’s purpose-built infrastructure is more resilient and less vulnerable to attacks targeting its reputation system (i.e. Sybil attacks) and facilitates better compliance.

Polymesh's identity framework

Polymesh creates a single identity on-chain for each real–world individual or organization and then attaches attestations to their identity as needed. This modular two-stage approach to identity verification allows for efficient onboarding as well as specific checks.

A two-tiered approach to onchain identity

STAGE 1

Initial Identification Process (IDI)

Every user must first validate their identity through an Initial Identification Process (IDI Process) via permissioned CDD service providers. This process involves verifying a user's name, date of birth, and place of residence in real time.

STAGE 2

Attestation

Attestations are on-chain evidence that an attribute of a user's identity, such as residency or accreditation, has been verified as true by a trusted third-party provider. Attestations can be attached to an identity as needed

Identity verification for all participants

Polymesh requires a verified identity for any token interactions except POLYX. This selective approach prevents pseudonymous entities from accessing regulated assets while maintaining open access to core network functions like POLYX transfers and staking.

Building identity into the core of the
chain brings a number of benefits.

Sybil Resistance

Each individual or entity can only have a single identity on-chain, preventing attackers from creating many pseudonymous digital identities to gain undue influence over the chain.

Simplified Compliance

Unlike on public blockchains, tokenholders on Polymesh can’t subvert rules by holding assets under multiple digital identities.

Known Participants

Transactions need to be determined by known, trusted entities. As a permissioned chain, transactions on Polymesh are validated by verified and licensed financial entities who meet specific criteria.

Polymesh unique identity system

On Polymesh, there’s no prohibition against operating multiple Polymesh accounts with distinct DIDs. That said, there are regulatory compliance obligations falling on investors depending on their jurisdiction. Suffice to say, it’s generally not permissible to use multiple accounts to obfuscate reportable holdings of a regulated security.
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Polymesh's unique identity system enables self-report linkage between multiple accounts as a means of detection to reduce this risk.

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