Bitmain, the world's largest crypto mining firm, has opened the code for its privacy-centric know-your-customer protocol (KYC), called Coconut.
Coconut uses Intel’s Enhanced Privacy ID for authentication and separates the management of identifying information and information needed to conduct business. Coconut is a response to industry fears that KYC demands might potentially compromise user identification, allowing for unfettered tracking of customers and their activity. In the words of the code’s explaining document:
"As one of the major features of blockchain is that all transaction records are public, transparent and permanent, there are concerns that organizations could potentially track and analyze customer behavior on blockchain once they have implemented KYC. This will raise serious privacy issues and obstruct the spread of blockchain."
The separation of the identity authentication and the business make it so that companies could potentially integrate the software and offer exchanges and other blockchain outfits “authentication as a service.” Exchanges are not always fully aboveboard, and users in the modern market are expected to hand over all of their personal information just to do business. As Bitmain says, this raises concerns, and so Coconut is one potential answer – the ability for independent, trusted verification services for both clients and businesses that need to authenticate their users for legal purposes.
The move to open source the code indicates that Bitmain may not necessarily be offering such services as part of its core business model moving forward. It allows other companies with an interest in identity verification, either exchanges or wallet providers or companies that want to offer the service independently, to have a starting point if not simply use the software as is. The code is released under the permissive Apache 2.0 license and appears to be done in Java.
Bitmain says on its blog:
"Although there are numerous identity authentication schemes in the industry, most of these schemes focus on the use of blockchain to store and verify users’ identity information, or they attempt to carry out authentication in an absolute decentralized manner, which, considering today’s reality, seems to be part of a cryptopian future. The failure of the existing schemes to address the issues today has prevented them from being adopted widely. Coconut aims to use technical means to solve the problems in the service layer instead of the network layer."
A trend seems to be developing of companies open-sourcing crypto-related code that was previously proprietary or closed-source, with Square having recently open-sourced its Bitcoin cold storage system.
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