There’s a wealth of personal data for compliance-minded crypto startups to cross-check – if only they can bridge it over to Web 3.
Doing that without sacrificing user control is an appetizing prospect for Burrata, a new identity startup building developer tools that on Thursday said it raised $7.75 million from payments company Stripe and crypto venture firm Variant.
The seed round also included IDEO CoLab, Slow Ventures, Baller, Stratos and a bevy of crypto personalities and anons.
The promise of decentralized identity is a more seamless internet with fewer clunky passwords and identity checks. Plenty of companies are trying to solve it, sniping competitors’ execs and raising serious venture cash in a race to rethink KYC.
Solving for the personal identifiable information (PII) equation in crypto is critical if the industry is to further grow, Burrata co-founder Ian Place, a Chainalysis vet, told CoinDesk.
The industry’s worth some $2 trillion now, he said. If it is to 50x that, it must first nail down compliance.
That’s no easy task: small crypto projects lack the cash and headcount to navigate compliance burdens that established corporations readily weave, Place said. Decentralized ideals further complicate matters; DEXs and dapps with servers full of personal data are anathema to the Web 3 ethos.
Even so, vetting PII is table stakes whenever money’s involved online. Identity, credit scores and social network reputation metrics “will help make the Web 3 markets much more efficient,” and accessible to the non-crypto crowd, said Osama Khan, who previously worked at customer data platform Segment.
Burrata’s solution is to issue “digital identity tokens” composed of those data points. Once set up it sticks with the user’s wallet, letting them pass through KYC gates without re-verifying or forking over their data.
Khan said Burrata creates the tooling and infrastructure necessary for projects to check all their compliance boxes without standing up PII servers. They can reject problematic users while avoiding centralized record-keeping. Likewise, users can “revoke” their token at any time.
“This is 100% consumer-owned data,” he said.
The company – a Delaware C-corp – is for now investor- and founder-owned. “But there’s a token warrant,” Khan said, leaving the door open for “progressive decentralization” down the road.
Doing a Burrata token too early could get in the way of the project’s development and economics, he said. And users won’t have to pay to access the service, so a token isn’t entirely necessary.
“Once we have some of that core tech figured out, we’re gonna definitely look into progressive decentralization,” he added.
Early next year a handful of Burrata integrations should start to go live, the developers said.
“Identity is a key ingredient for the growth of DeFi,” said Jesse Walden of Variant. “Not only does it invite more institutional participation, it’s also an unlock for democratic governance of user-owned networks, which could help ensure fairness and neutrality as they scale.”
The business imperative of Web 3 compliance was enough to get CMS Holdings on board as an investor.
“Compliance is the salt of the earth,” the crypto investment firm’s Twitter account told CoinDesk in a message. “Always money in a banana stand.”