XRP Ledger Unveils New Identity Tools with DIDs and Proposed XLS Specs

• The proposed XLS-70d specification enables on-chain credential management, making KYC verifications and licenses verifiable on the XRP Ledger.
• The XLS-80d and XLS-81d specifications introduce permissioned domains for regulated access and a compliance-focused decentralized exchange (DEX).

Ripple’s XRP Ledger (XRPL) is taking the next step forward to better security and regulation as it adopts DIDs and introduces three new proposed specifications. All these are directed towards the increase in adoption among the institutions. So, these developments introduce tools for safe digital identity verification and controlled environments of transactions.

The DIDs represent a radical departure in the management of digital identities as they put control with individuals and institutions. In the traditional sense, centralized entities like governments or social platforms issue and maintain digital identities. However, the beauty of DIDs is that they allow users to fully manage their identities without requiring any intermediary, thereby improving privacy and ownership, reported CNF.

Thus, in 2022, the World Wide Web Consortium (W3C) issued a global standard around four core features: decentralization, persistence, verifiability, and interoperability. With this, developers of XRPL developed a format of an identifier, designed based on W3C standards for use by account holders. Furthermore, the XRP Ledger recently activated the price Oracle amendment after enhancing its DeFi capabilities, per the CNF report.

These three new technical standards have been proposed to support such integrations: XLS-70d, XLS-80d, and XLS-81d. These specs improve the capacity of the XRPL further and increase compliance hugel The voting is still ongoing wherein the developers and the validators go through the standards to provide an official amendment into XRPL.

XLS-70d: On-Chain Credential Management on XRP Ledger

One of the biggest entry barriers that institutions face in DeFi is a lack of clear mechanisms of compliance. XLS-70d answers this problem, allowing for the direct storage, issuance, and verification of credentials on XRP Ledger. An on-chain system like this has now even shifted from the earlier off-chain management of these credentials, opening up KYC verifications, licenses, and accreditations to safekeeping in the blockchain.

Through XLS-70d, institutes can validate credentials and ensure trust and adherence to the DeFi ecosystem at every transaction. This recommendation may make dApps more compliant with regulatory requirements since users can now present verified credentials.

XLS-80d: Permissioned Domains For Regulated Access

XLS-80d introduces “permissioned domains” within the XRPL, whereby a user can create a confined space whose access depends on particular credentials. It will be useful for specific applications like governmental portals or private financial services, where users will require verified KYC credentials. These include domains limited to government ID holders or accredited investors who meet the AML and KYC standards.

XLS-81d: Compliance-Focused Decentralized Exchange

Building on permissioned domains, XLS-81d launches a permissioned DEX, which enables regulatory-compliant trades. Given that this feature is AML/KYC compliant, an institution can now trade on the DEX while still meeting regulatory standards. These changes to existing on-ledger objects are supplemented by other XRPL tools like authorized trust lines and asset freezing, such that trades are tied to compliant domains.

If approved by the validators, through XRP Ledger’s amendment process, it will be an important move forward for the network to attract institutional participants. Amendments need at least 80% validator support during a two-week voting period to become fully operational on XRP Ledger.

As per the CNF report, the XRP Ledger development team is also exploring several use cases of the platform that are beyond just payments.