The European Blockchain Sandbox provides a controlled environment for testing and validating distributed ledger technology (DLT) solutions. The aim of this project is to test new technologies in collaboration with regulators across the EU and overcome potential barriers to these technologies. The selection of the IOTA Foundation’s Web3 Identity Solution for this project is a significant achievement in terms of the innovation and potential of the solution.

So, what differences does the Web3 Identity Solution offer from traditional authentication methods? The answer is actually quite simple. Web3 Identity Solution aims to transform traditional Identity Verification (KYC) processes, which have long faced inefficiency, high cost and privacy concerns.

Current KYC processes can be time-consuming and costly for both users and institutions. Additionally, personal information collected during these processes also poses cyber security risks. Web3 Identity Solution offers an innovative solution to these problems using DLT and tokenization technologies.

The working principle of the solution is quite interesting. During the authentication process, users perform remote verification with IDnow, Europe’s leading authentication platform provider. This verification is carried out in accordance with EU Money Laundering (AML) and KYC criteria.

The credentials are then tokenized by walt.id, a leading open-source decentralized identity and wallet infrastructure provider. This token is stored in the user’s Bloom wallet as a “soulbound token”. The concept of a Soulbound token refers to a token that, unlike traditional credentials, is under the user’s control and can be used to verify their identity without revealing personal information.

One of the most important advantages of Web3 Identity Solution is that it protects user privacy. Users do not have to share personal information by using the soulbound token to verify their identity. This both reduces users’ privacy concerns and minimizes cyber security risks.

Additionally, the reusability of the soulbound token significantly improves the user experience. Users do not have to authenticate again and again on each new platform. Thanks to the Soulbound token, the authentication process is completed in one go and users can easily use their identities in different Web3 applications. If an authorized institution requests credentials, this information can be securely disclosed using the soulbound token. The token can be canceled when necessary.

Web3 Identity Solution also integrates hybrid blockchain technology, thanks to a collaboration with HAVN Network. HAVN Network provides a proprietary EVM-compatible KYC chain architecture connected to the Shimmer network. In this way, regulatory compliance is ensured and inter-chain communication and transaction verification processes are facilitated.

IOTA Foundation’s Web3 Identity Solution is not an innovation on its own. The IOTA ecosystem has recently taken another important step. The IOTA Foundation has formed a partnership with Pyth Network, a leading provider of low-latency price information providers. Thanks to this partnership, Pyth’s oracle services have been integrated into the IOTA EVM. This integration supports the evolving decentralized finance (DeFi) ecosystem by increasing data accuracy and security.

Pyth Network provides price updates in multiples of a second and supports over 300 applications and 50 blockchains. In this way, DeFi applications such as decentralized exchanges (DEXs), lending protocols and derivative platforms can constantly access accurate and reliable price data.

In conclusion, the IOTA Foundation’s Web3 Identity Solution and its partnership with Pyth Network are important developments for the future of the cryptocurrency market. These developments contribute to the creation of a secure, transparent and user-friendly Web3 environment. Projects such as the European Blockchain Sandbox are paving the way for future financial technologies by accelerating the testing and adoption of these innovations.