Crypto networks are a mix of radical on-chain transparency and anonymity (who is behind a wallet) at the same time. This combination has helped unleash entirely new market incentives and behaviours and is a core pillar to the ethos and functioning of crypto — and arguably future societies and markets that strive to be open.

But sometimes you want or need to know who is on the other side of a trade or contract. Enabling verified / compliant identities might allow for new applications, agreements, less over-collateralization, easier integration with real world legal systems and assets, etc. But how do we do this while preserving the ethos of anonymity?

Enter Violet Protocol. Violet is a L2 identity protocol where individuals and institutions can maintain a legally compliant identity (KYC, AML, PEP, etc) and enrich it with other on- and off-chain data. Violet then creates white-listed wallets in L1s and / or serves as an oracle for compliant addresses. Anonymity is always preserved and only “unlocked” at the L2 under circumstances parties can determine (if required). Violet is a middleware layer that completes the authentication and authorization layers of the stack, as well as an off-chain oracle for real-world identities. Essentially on-chain compliance as a service.

Thesis

We believe that “doing identity right” while preserving anonymity has the potential to allow crypto to i) navigate regulatory headwinds ii) broaden access to e.g. DeFi and other “new economic life forms” both for institutions and individuals and iii) to enable better economics within protocols. But why stop there? With a real incentive structure to populate and maintain an L2 identity — private data wallets with broad applicability across chains and even off-crypto applications become possible.

We are excited to be backing Markus and Philipp on their mission.

BlueYard invests in founders with transforming ideas that decentralize markets and empower humanity.