Shyft Network

What is Shyft Network

Shyft is a distributed, multi-layer Blockchain-based network enabling users to securely obtain, store, inquire about, and work with regulatory-compliance-satisfying data.

Shyft reduces the costs of compliance due diligence mandates [e.g. Know Your Customer (KYC); Business (KYB); Anti-Money Laundering (AML); Enhanced Due Diligence (EDD), etc.], while maximizing data security and protecting identity beyond the capabilities of traditional, non-blockchain-based compliance systems. In this manner, compliance becomes cheaper, faster, and more secure.

Shyft also features a Creditability system, providing consumers with a reputational score based on compliance and historical transactional activity, which is especially useful for the unbanked.

Problem Statement

Recent developments in financial technology require industry participants such as financial institutions and regulatory bodies to quickly adapt to evolving technology or risk disruption and/or catastrophic failure (e.g. terrorism financing).

As a result, compliance obligations for financial institutions are increasing in number, complexity, and rigor Costs of satisfying these obligations continue to rise exponentially. Anything less than strict compliance can result in significant legal penalties and / or reputational damage.

For banks and large institutions, compliance represents a substantial drain on resources. For smaller institutions, it can stifle even basic operations. For example:

Financial institutions have to cope with maintaining cost-effective, risk-reducing compliance by implementing temporary solutions. The current approach is to simply raise headcount and deploy larger and larger amounts of capital to meet new mandates. This approach is crude, unscalable, and, over time, has demonstrated diminishing returns.

Additionally, compliance processes can be repeated multiple times by subdivisions of an organization due to “data siloing”, effectively multiplying costs. Data silos are repositories of data which exist specifically for and remain under the exclusive control of particular divisions of an organization. One division’s repository is often inaccessible to other divisions and/or incompatible with other division’s systems, despite this data being useful to both divisions. These inefficiencies stem from a lack of flexibility and poor interoperability between the organization’s technological and bureaucratic systems.

So far, costs described have concerned conducting compliance procedures and not the protection of the data procured. As can be seen from widely publicized incidents, data breaches are increasing in frequency and size.10 Organizations, especially large bureaucratic enterprises, trail behind in the IT security/cybercrime arms race.11 The recent Equifax breach, which compromised 143 million user records is an example of the potentially catastrophic risk inherent to centralized databases. In our opinion, no good (traditional) fix exists.

Solution

Blockchain-based distributed ledger technologies have the potential to streamline, cut costs, and reduce risks inherent in traditional compliance systems.

Over the past seven years, projects ranging from digital governance to supply-chain shipping have been developed. Organizations are retrofitting existing product lines with blockchain technology. Proofs-of-concept are appearing in traditionally risk-averse institutional environments to more efficiently mirror vast swaths of data. Additionally, blockchain tokens are being used to incentivize users to act deterministically within ecosystems.

For most - if not all - blockchains currently operating, collection of any user data, let alone collection of data that satisfies regulators is at odds with surrounding ecosystems.

The lack of blockchains focussed on compliance data, coupled with what we saw earlier—financial institutions spending significant resources to tackle compliance— means there is a significant opportunity for a blockchain that automates compliance.

We aim to build such a distributed compliance data system—the Shyft Network.