Tgrade Finance: Trusted Circles and a New Way to KYC

Josh Lee

• 3 min read
Tgrade Finance: Trusted Circles and a New Way to KYC

This blog post was originally published on Keplr's Medium blog on August 8, 2022.

The Keplr team announces a new interview series spotlighting each of Keplr's integrated chains. Through this series, we aim to foster deeper knowledge and interest in our ecosystem, starting with the teams that are shaping our interoperable future through Keplr Wallet.

Today we learn from Martin Worner, co-founder of Tgrade Finance, about the Tgrade platform and its solution to KYC compliance through Trusted Circles and Proof of Engagement.

About Martin Worner

Martin has a 30-year career in capital markets and technology, covering many asset classes at Morgan Stanley, UBS, and then running a technology company serving banks, asset management, and hedge funds around the world. In 2017 he looked deeper into blockchain and in 2018 started the journey which led to meeting Ethan Frey and Simon Warta, setting the path to Tgrade.

What is Tgrade Finance?

Tgrade is a blockchain designed to help businesses solve real world problems.

What Inspired Tgrade? What Problem Does It Aim to Solve?

Tgrade began with ideas about consensus which evolved into Proof of Engagement and a version of a DAO called a Decentralised Social Organisation, which builds consensus off-chain and records the decisions on-chain.

The key problem Tgrade addresses is KYC compliance for regulated businesses. Regulated businesses need to know the origin of funds to comply with "Know Your Client" legislation, which is not possible with standard blockchain addresses. Tgrade's solution: leave compliance off-chain in existing processes and link identity to a blockchain address via Trusted Circles.

What Are Trusted Circles?

Trusted Circles are a core part of Tgrade that enable people, businesses, and communities to create whitelisted groups and issue, swap, and send tokens to participants of the Trusted Circle. Having this mechanism means a regulated business can prove to their regulators that they know who they are transacting with, identify bad actors, and apply appropriate sanctions using governance tools.

Trusted Circles also make Tgrade MEV resistant. They can be used where there is a need to have a collection of known/identified addresses. Tgrade is IBC-enabled, so it connects with other chains — in the future, using multi-chain IBC-enabled smart contracts, the Trusted Circles become whitelists that interact with many other Cosmos chains.

What is Proof of Engagement?

Proof of Engagement (PoE) came about when asking: if we could design the best consensus algorithm in the world, what would it look like? PoE addresses issues with PoS and dPoS around concentration of power and incentives for the wider community. PoE incentivizes collaboration through Engagement Points and maintains a diverse validator set. It also incentivizes vloggers, bloggers, community builders, and evangelists to be actively engaged and contribute to Tgrade.

Challenges and Plans for Tgrade

One challenge is that Tgrade is business-focused and adoption will be slower than DeFi protocols. However, in the medium term, a rich ecosystem of businesses running on Tgrade will mean a significant user base and a range of digital assets being issued. Regulatory clarity (such as MiCA in Europe) will help businesses adopt Tgrade.

On Regulation and Blockchain for Business

The argument for designing a regulatory-friendly blockchain is to help shape the narrative and show regulators what is possible. The alternative is to have "regulations done to us," which leads to the introduction of intermediaries. Businesses building on blockchain bring their customers as they solve real world problems — this does not diminish unregulated, trail-blazing innovation. There is room for regulation-friendly ecosystems alongside permissionless innovation — it is not a zero-sum game.

Upcoming Plans and How to Get Involved

The initial phase of Tgrade was building a robust platform to support businesses. The next phase will be customer-driven, with requirements from businesses driving the roadmap.

Engagement Points are available to anyone contributing to Tgrade — through community building, validator tools, blogs, documentation, or business development. If you introduce a business to Tgrade and they begin building, you are eligible for Engagement Points.

Tgrade is already IBC-connected with Osmosis and exploring collaboration with projects like Cheqd, e-Money, Cudos, and others running CosmWasm.