The Privacy Protection ID is the key to crypto-natives accessing the value in the TradFi

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The reasons for adopting cryptocurrency are as numerous and diverse as the people embracing digital currencies and blockchain technologies. Some are interested in exploring a new business class fit for the digital age. Others are looking to diversify their investments or engage with platforms that reflect their values ​​and priorities.

For many, financial freedom and privacy are top priorities. Often, these features have drawn people primarily to cryptocurrencies, and a growing number of decentralized finance (DeFi) platforms are rapidly expanding access and opportunities for millions of people.

Meanwhile, traditional finance (TradFi) products, including mortgage lenders, personal and corporate loan providers, and stockbrokers, have not fully transitioned to cryptographic or blockchain standards, requiring technology bridges to connect traditional and DeFi products and services. This is both a risk and an opportunity, which threatens to undermine privacy in exchange for access.

That’s why the cryptocurrency industry needs a privacy-protecting ID that allows access to these TradFi services while keeping control over the ID in the user’s hands. DeFi protocols that allow sharing of information that proves eligibility without revealing sensitive information may be the answer. This type of mechanism often uses zero knowledge within it.

DeFi protocols can protect privacy

The current Ethereum-based DeFi ecosystem is vast, with dozens of platforms providing a comprehensive, alternative approach to the financial system. These companies often embrace the privacy ethics of the cryptocurrency industry, but identity verification still plays an important role in the process.

Not only do DeFi platforms need to follow strict customer knowledge (KYC) protocols, but lenders also need to know that borrowers are likely to repay a loan and that terms are fair to all parties.

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Additionally, identity verification helps address a number of issues plaguing the development of the DeFi industry, including institutional interest, increased customer enrollments, and cybersecurity issues.

Of course, the decentralized and public infrastructure of the blockchain makes DeFi prone to what Nasdaq describes it as “economic espionage and surveillance without their knowledge or approval”.

By leveraging zero-knowledge evidence, some blockchain protocols are offering a way for institutional and retail users alike to avoid exposing their transaction data.

While the idea of ​​zero-knowledge testing is not new was introduced by computer researchers in 1985 the concept was recently reinvented to support the growing DeFi ecosystem. This mechanism allows one party to verify something about another party without revealing any additional information, making it a powerful verification tool for the DeFi and TradFi platforms.

The path of privacy

When DeFi platforms and traditional financial institutions can perform identity verification without compromising privacy, the opportunities to truly remake the industry are endless.

For example, mortgage companies can expand their lending framework by relying on digital assets, including ETH, BTC, USDC, and other popular tokens as collateral. Additionally, borrowers can leverage off-chain data, including credit scores, to facilitate responsible lending and fair lending without compromising privacy.

This can significantly set the playing field as well, by expanding access to home ownership to millions of people who don’t have the credit to acquire a traditional mortgage agreement. Undoubtedly, these financial services will expand to incorporate auto loans, capital goods, and personal and business loans.

With more and more consumers making privacy a top priority, DeFi or traditional financial services firms can leverage these privacy controls as a competitive differentiator that fosters growth and expansion at a critical time. To meet this growing demand, financial services firms would do well to implement privacy protection IDs to support crypto natives accessing DeFi and TradFi services.

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Meet customers where they are

Personally identifiable information (PII) is an incredibly valuable asset, and after years of jaw-dropping data and privacy breaches, many customers are understandably prioritizing privacy above all else. As a result, they are turning to DeFi solutions to facilitate their financial future without compromising information integrity.

DeFi platforms have the opportunity and responsibility to meet consumers where they are, bridging the gap between cryptocurrencies and traditional financial services without compromising integrity, security or usability.


Ryan Berkun is the founder and CEO of Cashier, DeFi’s unsecured lending protocol. Ryan is a former student of the a16z cryptocurrency school, angel investor and mentor at CELO, a mobile first blockchain optimized for peer-to-peer payments. Previously, Ryan focused on Web 3.0 infrastructure for projects like Tezos, 0x, and Livepeer.

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Disclaimer: The views expressed by The Daily Hodl are not investment advice. Investors should do their due diligence before making any high-risk investments in Bitcoin, cryptocurrency or digital assets. Please note that your transfers and transactions are at your own risk and any losses you may incur are your own responsibility. The Daily Hodl does not recommend buying or selling cryptocurrencies or digital assets, nor is The Daily Hodl an investment advisor. Please note that The Daily Hodl participates in affiliate marketing.

Featured Image: Shutterstock / Yurchanka Siarhei

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