The KEY Token Economy

Trust and Reputation in the SelfKey Ecosystem

Trust and reputation are the pillars of any robust identity system and mechanisms need to be in place to incentivize good practice and behaviour, avoid identity fraud, and rule out the possibility of false attestations and identity data misuse.

By utilizing smart contract technology, KEY tokens enable trust and help eliminate potential threats that could jeopardize the confidence placed in the SelfKey Identity System by participants.

In this article, we will discuss how KEY tokens help strengthen the SelfKey Network for identity owners, certifiers and relying parties.

Identity Owners

Proof of Reputational Stake

Access the network

Identity Owners must place KEY tokens in a locked smart contract to access the network. This process is known as staking. KEY is staked for a certain period, and can later be withdrawn.

A Sybil attack occurs when a bad actor creates multiple false or stolen identities to gain influence in an ecosystem and staking KEY acts as a Sybil-attack prevention mechanism. Each identity created requires such a stake. Any bad actor caught creating false identities loses their staked tokens, but the smart contract automatically releases staked tokens when valid identity owners leave the SelfKey ecosystem.

Access Marketplaces

As with accessing the network, users must place a certain amount of KEY in a locked smart contract to unlock marketplaces. This acts as a second layer of security and increases reputation.

Access products and services

Certain products and services, such as citizenship by investment, offered through the SelfKey marketplace involve one of the most sensitive identity transactions in addition to a comprehensive due diligence check from relying parties.

To ensure the application’s authenticity and seriousness, Identity Owners must place KEY tokens in a smart contract. This acts a time-locked escrow to apply for certain products and services, and after fulfilling certain terms and conditions, the smart contract will automatically release the tokens back to the Identity Owner (or in the future, potentially as payment for services).

Payment Unit

KEY tokens can be used as payment units within the SelfKey Ecosystem. Identity Owners can use KEY to pay for verification, certification and notarization services or other products such as bank account opening fees. They can also be used to purchase certain products and services in the SelfKey Marketplace. However, the focus is on KEY as a method to stake and gain access to the network, as opposed to payment.

Certifiers

Bonded Notaries

Lawyers, notaries, accountants, solicitors, consulates, bank managers, governmental authorities and utility companies, among others, are eligible to become certifiers in the SelfKey Ecosystem.

To become a certifier, eligible people are required to place a quantity of KEY in a locked smart contract. This is the same as notaries work in the physical world since notaries must post a surety bond with the government. Bonds such as these give weight and value to attestations, and they also incentivize good practice.

Certifiers also provide services under the terms and conditions established by the SelfKey Foundation. If their behaviour or performance does not meet the agreed upon terms and conditions, their staked tokens are at risk. Furthermore, if a certifier makes an incorrect or false attestation, those tokens are lost and are used to compensate the relying party that relied on the proven incorrect attestation.

If a certifier decides to stop providing services in the ecosystem, their KEY tokens will be returned automatically.

Relying Parties

Trust Framework

Identity Owners trust relying parties with their data and identity documents to access their products and services. The KEY Token is used as a mechanism to incentivize relying parties to act in accordance with this trust framework.

Relying parties are required to place KEY in a locked smart contract to offer their services within the SelfKey Marketplace. If a relying party misuses identity data that has been provided by identity owners, it would lose tokens placed in the locked smart contract, which would represent an irrecoverable economic loss.

SelfKey aims to provide more freedom allowing identity owners to truly own their digital identity and to transact with certifiers and relying parties in a reliable manner. The KEY token protects reputation, acting as a trust mechanism that allows participants to safely exchange value within the SelfKey Ecosystem. Staking tokens acts as an incentive across the SelfKey ecosystem that deters bad actors on all levels.

If you wish to know with more details the SelfKey proposition, we invite you to read the whitepaper and our previous blog posts. If you have doubts, questions or just want to chat about it with the SelfKey core team, we invite you to be part of our Telegram community. To stay up to date on the latest news and announcements, join our announcement channel or subscribe to our mailing list.