Joseph Weinberg on digital identity compliance at Shyft Network

0:00i'm ashton addison from block west capital for investmentpitch media in the crypto coin show and today on blockchain interviews once again we have back joseph weinberg co-founder of shift network joseph welcome back to the show thank you so much for taking the time and it's a pleasure to see you again great to see you as well ashton thanks for having me

0:18you're welcome so much has happened in the space since we last spoke uh i would love to there's so much to cover but let's just start with for the people that haven't seen our previous interviews what is shift network what is your team focused on in the solutions that you're driving into the blockchain and cryptocurrency space yeah so shift is a multi-layered kind of

0:38public blockchain protocol it is a layer one and it is a smart contract layer too it's really focused on identity and identity related use cases we kind of look at it as what's called a general purpose access station architecture really it's around how you provide data across a variety of different use cases what we call trusted data architecture in order to build a variety of use cases

1:02around users counterparty interactions and discovery architecture um so whether it be an identity from a government perspective decentralized kind of a traditional contract you know um attribution for that into the variety of other areas wow so much to cover uh it you know when you build an architecture that's sort of

1:29multi-purpose uh especially as the cryptocurrency industry is just expanding so quickly it's hard to keep up especially on the compliance side because it's like a constant battle of like the innovators and the cypherpunks creating new technology and then the regulator's trying to keep up and you know um absolutely yeah so and you mentioned some important

1:51things there obviously digital identity i think it's going to be super important moving forward as more people have all of their information on there but there's also you know kyc aml other compliance governments regulation you have the fatf how do you focus on all of these different things all at the same time and is there a priority yeah like i think the cool thing is that

2:14like everything kind of starts with identity right like even if you're running a bitcoin transaction or an ethereum transaction like your keys are effectively an obfuscated form of identity right and so um everything that we had designed and built was really around this concept of like there's this core identity these are public and private keys and then all

2:32the things that we build up from a general purpose perspective allow us to say okay we can target a use case or another use case build small modifications to it and use that infrastructure really really quickly um and that's kind of been like a really successful model i think um you know we've also looked at it as like what is the core way to bootstrap identity and i

2:52think that you know people have been trying this for years you know whether it's civic there's so many different approaches to this we always kind of looked at it as saying you know regulations will effectively force adoption um and so if we can kind of make sure that we have infrastructure for the crypto ecosystem that maintains privacy centralization and security at the user

3:11level and provide that to the largest exchanges as an example they already hold all of our user data like exchanges are the biggest on borders of customers and so if we can work with them in really really interesting ways we can kind of bootstrap that decentralized identity infrastructure and solve this huge problem of fatf and travel requirements and kyc sharing and stuff

3:32um so that's kind of where we've chosen to focus you know work within the ecosystem and allow that to be a scalable architecture in the future for other applications um so yeah that's kind of how we look at prioritization very cool and i'm glad you mentioned that about the exchanges i think uh a lot of people don't realize that yeah that's where you know everything is

3:52happening in terms of if you're putting your identity in there to have compliance if somebody is you know say somebody gets hacked and some hackers have some funds they're going to try to liquidate them they're probably going to try to send it to the exchange you know how does the exchange know if the funds are are legit or if it's from you know counterfeiting or if it's from hacking

4:12and if the person is legit and who they say they are and i know that your team's been working with exchanges and regulators for a while and that you've developed out this fatf as well which i think would be helpful for the audience if you could sort of explain that a little bit and how that fits into the transactions they make yes the financial action task force is

4:34effectively an inter-governmental organization um they are effectively made up of countries all around the world and what they do is they write universal standards so uh you know what is kyc how do you define it how do you make it regulated in the context of all these different countries as a framework all these different attributes they're kind of like a global regulator

4:54if you will and so it's a way of universalizing you know this this requirement and so um they basically of course deal with you knowing terrorist financing a lot of the bad stuff that happens in the financial system uh and then they of course put their sites on crypto about three years ago two and a half years ago um and basically came to all of the

5:14industry and said we're going to implement something called the travel rule this is the requirement that banks have today when you're sending a swift transaction you know i'm sending identity information with the money um and in the traditional system that's a there's a reason for that they kind of just said we're gonna slap this identity requirement into the crypto space so if

5:34i'm moving a bitcoin transaction from me to you on finance to bitfinex um we now need to move ashton and joseph's identity information with those transactions um and that's a big departure from how crypto works today right like we don't really need that identity requirement um but of course regulations are coming and uh and so that's kind of the the

5:55where we are today in the centralized exchange land um and so we've been working on a solution with them called veriscope for the last two and a half years uh as a solution to this it's really simply put a decentralized version of swift uh swift is what moves crypto our payments in the traditional system uh and it really acts as this discovery and coordination layer for any

6:16crypto transaction allows exchanges to grow to each other is on the other side how to make sure we don't you know diminish privacy of the user how do we make sure we don't centralize the ecosystem uh in a lot of really terrible ways which is what the financial system kind of does through compliance and makes it so that we have this open data architecture to transmit

6:37information all around the world um safely securely and maintaining decentralization um so that's kind of the focus and what has been going on on that side of the initiative we have about 50 45 to 50 exchanges today um financial institutions that are working on the projects as well um and actually we're starting to see a lot of third-party applications right

6:58now starting to build new solutions on top of this general purpose infrastructure for this data transmission requirement so really cool stuff yeah very cool and yeah to have all those exchanges on board already is a great step in the right direction i'm curious though about that you mentioned attaching identity information you know a lot of people already have their know

7:22your customer like information in in the exchange so like that would be easy i guess to transfer to another exchange um but does the same go for if you're withdrawing to a private wallet or if you just have a private wallet and you're sending it to somebody else in another country or maybe you're just sending it to another wallet of your own does that apply as well

7:43no luckily not like we and that was the big thing that we were arguing for to make sure it didn't happen um you know kyc requirements are only uh in in in regards to entities that are regulated and and so the big battle that we've had as industry you know veterans and space is to make sure that that stays that way and that you know i don't attach identity

8:06directly to my personal wallet um because it doesn't really help and we think that's a you know overstep from a regulatory perspective and so um this is only as it pertains to exchange to exchange transactions it's interesting to note about the exchanges you know a centralized powerhouse of information and they also have everybody's personal information

8:29and you mentioned there uh like protecting people's privacy you know we've seen in the past exchanges get hacked but it's always like you know the coins were withdrawn or the money was lost but they also have everybody's personal information and you you talked about creating a swift that's decentralized i know that the crypto people like to talk about how you know

8:48how swift is broken and the centralized system it doesn't work very well and we need a uh a crypto version of it you know i'm i'm guessing that it's not just the same thing but decentralized but there's also been a lot of tweaks there to fix it and hopefully be more like cryptocurrency and transferring bitcoin around the world really easily i would think

9:08yeah it's kind of this idea that like we tried to implement the same approach which is like you're like not your keys not your coins and so we use the public and private keys and the signatures of ethereum and different types of security models on the public and private key side we use that as effectively a way of saying i'm in exchange i'm about to do a

9:29withdrawal i'm writing this request for information this this effect of this encrypted you know transaction requesting information on some bitcoin withdrawal um and then there's a bunch of smart contracts that mediate uh this kind of rule set or the requirement between how these counterparties find each other discover each other transmit data on some user

9:51request users consent from a gdpr perspective so they use the public and private keys to sign messages so it really like eliminates any type of central coordination and it means that there is the users still have ultimate control over users data so like you can't move my data unless i agree to it uh and we know that this is done over a p2p network fully

10:14encrypted and very and very distributed across everyone so um it's a really like elegant architecture to solving this and a variety of other problems that's great to know yeah and you know we've been even just with our interview show here we've been speaking to shift for years now and i know you've been working on the platform for a long time and i feel like the

10:36industry has grown so much since we started speaking you know exponentially amount uh more people trading now and way more exchanges that didn't exist before how has your team balanced you know the growth of the industry and like trying to build compliance software that and that you know will keep up for five years from now when there's again exponentially more people

11:01in the industry yeah we kind of took this like 10-year view right like when we started this you know four years five years ago almost everyone was like this is crazy this doesn't make any sense like there's no way this is gonna happen right and i think only over the last like two years did it start becoming clear and really only over the last year did people go oh

11:20okay this actually really makes sense the cool thing is like we have about a four to five year build ahead of everyone now and so we kept it open we kept it generalized and we're kind of helping to find the rules with regulators as we go because we've already thought about this for so long and so you know it's great to see the users start to come and test

11:42and you know the exchanges are starting to work through how this thing actually functions um and we look at this towards you know we've built infrastructure for d5 we built things for nfts as we really just see this world that you know won't stop from a regulatory perspective but we can balance it so it's it's exciting to see it all like happening and you know hate

11:59to say we told you so but i don't know i love it yeah um and i like he mentioned uh building out the protocol for define nfts i also just recently saw that you created the fatf compliance layer for polka dot as well that's super exciting i you know i've been looking at the pair chain lease offerings polka dots fairly early stage and launching their ecosystem compared

12:25to ethereum um are you staying on top of that and all of these other trends about like new up and coming protocols it's very hard to it's like amazing explosion of innovation across everything um like we kind of looked at it more as like we really care about the applications in the use cases uh you know this is evm infrastructure so any place that runs ethereum like virtual

12:47machine compatibility uh you know talking about solana talking about avalanche talking about polka dot like should we want shift to be everywhere whether it's layer ones or layer twos uh and the cool thing is we built this architecture so that you can be on any one of these systems uh and your assets your identity information all these rules work no matter where

13:07they are and so we really see this is like a cross-chain interoperable world uh there's not about competition at the base layer we care more about application accessibility on the secondary for tertiary layers and so that's kind of where we're at um and as use cases come to us or or the the customers come we'll continue to deploy across more places and so uh yeah you

13:26should see a few more deployments in this coming year um you know more use cases and stuff on that end too definitely looking forward to that and you know you mentioned at the very beginning how it all really fits into like a digital identity right and we've been talking about digital identity and blockchain space and how it's going to be great because we'll be able to own

13:45our own identity and we'll be able to use it on cross-platform cross-country who knows where what you know what the limits are but i've yet to see you know a login where where it has one of those you know sign in with facebook sign in with google sign in with your actual digital identity on the blockchain you know when is that going to come out when you know

14:07some my grandma will be able to use her blockchain identity to log into multiple exchanges you know it's funny i think that and that was like our core premise that we thought differently than every person who's tried to build identity and i think there's a reason why it hasn't worked like for for a good reason why a lot of you know mobile wallets didn't work for so

14:27long like you really need to make the product so much better than the wallet you have in your product in your pocket today and that took a decade right um it takes time because like people are just like this isn't that much more useful than the credit card i have today right as an example and i think identity is largely that like there is no forced requirement to

14:47do so and so the user experience has to be just 10x better and so yeah that's why we looked at it and we said like listen regulations will force adoption here we don't necessarily like it we're going to try to make sure privacy is maintained through that process but this is something that actually forcibly requires adoption and that's a really interesting model to piggyback off of

15:08right when you think of it from a strategic bootstrapping of a decentralized identity network that's about as interesting as it gets and so we think that that's probably the models that will continue to push identity um and that's kind of where of course like we're really focused and so it's not necessarily the best no one necessarily loves regulation you know

15:26the wild wild west was really fun but institutional adoption is coming and we gotta you know catch up with the times and so in that context we think that you know using this type of architecture and infrastructure to to see these systems in a time where regulations are forcing you know change is probably where this actually happens and so then we look at things off of

15:48that system credit reputation infrastructure credit scoring architectures institutional defy architecture there's a ton of things that now uh become possible through this like identity kyc backed identity primitive on these networks like shift so yeah well said yeah uh i i think you're right it's it's gonna take time uh but when it does and it is 10x better then

16:12uh i'll be the first one to start using it there we go you and me both um now you there's so many things that we've spoken about and i know your team's working on multiple things but i would love to get a glimpse of some of the things that your team is working on for 2022 with shift network and and what you expect to come out with yeah so we've been doing a lot of testing with

16:35exchanges over the last you know year or so um and we're really just trying to get that right like i think when you think about the amount of transactions that have to become compliant it's it's one of the biggest infrastructures that will like kind of be deployed in the space you know it's over 5 million transactions a day which is like you know bigger than ethereum uh you know by

16:53far uh and so getting this right and from a security perspective is like incredibly difficult and challenging and you know in almost 200 countries and so that's been a big focus and making sure that thing works and lasts you know as long as the space well uh hopefully forever as long as we don't get banned as a crypt as an ecosystem that's like a big focus um we have a lot

17:13of infrastructure that'll get deployed against that so i'd say this is in january and february a lot of roll outs across that on the exchange side um we have a lot of financial institutions working on global network deployments which will uh come out in the next few months too um and this is really this idea that like we're crossing the chasm between

17:31the crypto wild wild west and this institutional adoptive curve and and so how institutions started adopting this regulatory infrastructure just accelerates crypto adoption across the space right and so um so that's kind of the the goal in the mission we've had um we have other really cool you know pretty big tech companies that'll be doing a lot of interesting stuff in the

17:49next little while as well um and we've been really focused on an institutional uh defy layer for i would say the last year um so that'll start rolling out into q1 um and this is again about how do we bring more people into the space so whether it becomes institutional staking like on an east 2 side institutional bond markets you know we're kind of building this this this

18:10layer on top of all of crypto today that gives us this opt-in compliance primitive so that any application in d5 can maintain composability maintain the exact structure that defy has but allow for all this capital that sits on the sidelines to become available to use this ecosystem and so that's the biggest initiative i'd say we have internally now um and yeah that'll

18:34be definitely in q1 of this coming year and other stuff as well but those are the big focuses right now great thanks joseph looking forward to that and for the viewers that want to follow along with all of these updates and just learn more about shift what is the best way for them to learn more yeah at shift network on twitter um we just launched a discord so we're

18:54starting to really focus on the community side and i think that that just as that shifts that work as well on the discord side and so really started to kind of focus on the retail area as we as we've now finished a lot of the institutional side of things um telegram i think is the same i'm at joseph weinberg on twitter uh feel free to reach out any time so

19:14amazing thank you so much joseph great to have you back on the show all the best with shift in 2022 and i know that we will follow up again in the near future absolutely ashton thanks for having me