Digital identities

In the current financial landscape, regulators mandate financial institutions to verify the identity of all their customers through the Know-Your-Customer (KYC) requirement, which clashes with the permissionless nature of blockchains because anyone can create a blockchain wallet anonymously. Due to this requirement, tokens issuers haven’t been able to comply with security laws.

DCLEX introduces Digital Identities (DIDs) and Smart Contract Identities (SCIDs) to bring tokenized securities to DeFi in a fully compliant way. Digital Identities are non-transferable NFTs that permit holders to interact with tokenized stocks on-chain.

• Digital Identities: Upon successful completion of the verification (KYC) process, users can claim their Digital Identity to their Ethereum wallet. DIDs include users' tax residency information.

• Smart Contract Identities: Issued to DeFi protocols upon review and approval of their source code.

Compliant Stocks in DeFi

The combination of Digital Identities and Smart Contract Identities establishes a fully compliant environment for tokenized securities in DeFi, as valid digital identities are required for both the sender and receiver of transfers. Additionally, DCLEX can invalidate DIDs and SCIDs, enabling the application of sanctions and the restriction of cyber-criminals and malicious protocols at the smart contract layer.

DCLEX aims to establish this innovative Digital Identity architecture as a standard for other applications. While DCLEX exemplifies the use of Digital Identities in tokenized securities, its potential applications are vast and extend beyond current imaginations.

Digital Identity Specification

• Interoperable: Digital identities are ERC-721 standard, enabling them to be reused by other applications seeking compliance.

• Account recovery: Unlike wallet private keys, digital identities can’t be lost. Users can re-identify themselves on DCLEX to recover their Digital Identity to a new wallet.

• One DID per person: Each user is limited to one Digital Identity. Duplicate DID claims will fail due to matching database entries.

• Immutable: Digital identities are non-transferable and cannot be burned.