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Veriscope is a blockchain-based solution powered by the Shyft Network, intended to allow crypto exchanges to comply with global regulations, most notably, the FATF (Financial Action Task Force) Travel Rule.
In 2019, the FATF, an intergovernmental organization focused on preventing money laundering and other malicious financial activities, implemented the Travel Rule in crypto. This rule requires exchanges (referred to as VASPs) to collect personal data on participants in financial exchanges exceeding 1,000 USD/EUR.
Veriscope aims to “solve” global regulatory compliance for VASPs, including the Travel Rule. We believe that Veriscope will accelerate the global adoption of cryptocurrency throughout regulated markets and promote new products and services to enter the space. Below, we have included some simple explanations regarding Veriscope and how it works. For more information on Veriscope, head to our website.
Veriscope is, for all intents and purposes, a product; Shyft Network is the blockchain on which the product is deployed.
Here are some reasons why Veriscope works best on the Shyft Network:
1. The consensus mechanism (Shyft Network Node Federation) guarantees throughput (the rate of successful messages over a communication channel, i.e., a blockchain), and stability, two essential elements when offering enterprise-level services.
2. While Shyft Network is Ethereum Virtual Machine (EVM) based, it has smart contract enhancements that make it an easier solution to integrate.
A compliance framework is nothing more than a set of base-layer functions; these enable more case-specific products to be developed, all within the original capabilities and rules. In Veriscope’s case, the framework enables the identification of addresses between two or more participants. This is what we call discoverability, and its main use is the creation of compliant data channels.
To put it in simpler terms, a framework is a collection of general rules and abilities (functions) that can be modified or applied to more specific use cases.
The framework helps VASPs identify each other, and set up a secure side-channel so they can exchange the required information; this information is never actually stored on Veriscope itself. It is entirely peer-to-peer. Veriscope also protects against data mining due to a customer’s consent mechanism, meaning only customers can permit access to their data.
As a crypto user, you’ve probably heard that regulation is coming. Some jurisdictions have been tremendously open to Bitcoin, like El Salvador, while entire regions have signed off on severely damaging regulation, like the EU, where even non-custodial wallets are becoming subject to regulation. Because crypto is getting regulated across the globe, it inevitably is coming to everyone (even you) at some point — and that’s not a bad thing! Regulations like the Travel Rule are meant to protect customers and crypto overall from money laundering and other malicious activities.
Additionally, as an end-user of centralized exchanges, you are often already requested to provide personal identifiable information, i.e., your ID and proof of address. Solutions like Veriscope help exchanges protect your data when complying to the Travel Rule.
When people use crypto to do wrong, it takes away from the industry’s progress. Compliant transactions help crypto move forward safely and securely. Ultimately, this allows regulators, governments, customers, and exchanges to work together more efficiently, with less friction and confusion.
Remember, the key is global adoption.
Smart contracts are digital contracts (aka programmable computer code) stored on a blockchain that automatically execute when predetermined terms and conditions are met. Veriscope’s smart contract suite helps establish the predetermined terms and conditions between exchanges, so that they can be confident they are communicating with trusted parties.
An attestation is a message on the Shyft Network blockchain that proves that data is legitimate and has been vetted by a trusted third party (for example, an exchange). You can think of it as a stamp of approval that ensures that necessary data is verified and accurate.
This automated system allows exchanges to seamlessly detect other VASPS based on their crypto wallet addresses.
VASPscan obtains transaction data that helps exchanges announce to the network that they are about to initiate a cryptocurrency transaction controlled by an exchange whose info they are not aware of at that given point in time. If hidden treasures lie beneath the sand on a beach, VASPScan is like a metal detector.
We want customers to be confident that their data is verified globally, and not just within the crypto ecosystem. Veriscope’s partnership with global law firm DLA Piper, which, upon request from the exchange, will receive transaction data from exchanges, and then review and confirm it, is a first for compliance and crypto. This partnership sets to bridge the gap between crypto and the traditional world so that the highest level of trust is capable for all involved parties.
Well, there you have it! We hope that after reading this article, you now have a better understanding of Veriscope, the Travel Rule, and our innovative technology. Any more questions or topics you need cleared up? Shoot us a DM on Twitter or drop into our Discord and we’ll be there to help.
Thanks for reading!
— Shyft Network and Veriscope