ERC725
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Practical smart contract development with Solidity and Ethereum developer Fabian Vogelsteller released ERC (Ethereum Request for Comment) 725 on GitHub, a web service for source code management for software development projects, in October 2017 as a concrete step towards realizing self-sovereign identity. ERC725 is a proposed standard for self-sovereign identity in Practical smart contract development with Solidity and Ethereum, and Vogelsteller explains its benefits as follows:
"Currently, all players (including financial institutions and other service providers that require personal information) acquire fragmented personal information and perform user identity verification separately. By introducing the standard, all players can perform automatic checks, eliminating the need to hold detailed personal information as long as the issuer of the right is trusted. The reason why we are currently acquiring excessive personal information from users is because there is no appropriate system in place."
Efforts by leading financial institutions
Financial institutions hold large amounts of detailed and sensitive information and are widely recognized as authoritative institutions. On the other hand, this means that, due to the nature of the services they provide, thorough KYC is required. Financial institutions use a code called the Legal Entity Identifier (LEI) to identify trading parties, but in January 2018, regulations on financial services were tightened in the EU, requiring all corporations and funds engaged in transactions to obtain an LEI. However, some major financial institutions, including UBS, began projects to enable mutual use of the data they hold, citing the inefficiency of each financial institution individually verifying the LEI.
The project is called MADREC (Massive Autonomous Distributed Reconciliation), and it allows each financial institution to share the results of LEI verification they hold on Microsoft's cloud, Azure, by writing them to the Ethereum blockchain. Therefore, the LEI itself does not leave the financial institution that holds it, nor is it shared among financial institutions. The reference data recorded on the Ethereum blockchain is also hashed, ensuring anonymity and privacy.
What is Self-Sovereign Identity? - New Possibilities Brought by Blockchain | InfoCom Newsletter