If you have basic knowledge of what DeFi means, then you might wonder what DeFi KYC is. In this article, we will discuss the importance of DeFi KYC. Let us start with the concept of DeFi in brief.
What does DeFi mean?
Decentralized finance or DeFi is a public decentralized blockchain network where financial products are available for investors. Blockchain based DeFi software enables peer-to-peer transactions for lenders, borrowers, buyers, and sellers. It eliminates the need of middle for performing transactions.
Why DeFi KYC is necessary?
DeFi Crypto is increasing at a fast pace and business enterprises announce new projects every month. At the launching of decentralized finance, it aimed to create new opportunities in the financial world and targets to provide banking solutions to 1.7 billion unbanked.
But, because of scams and lack of security, the investor adoption rate is low in DeFi, even though it is fast. Protection of investment and investors plays a crucial role in the finance sector.
To protect the projects and average investors, new solutions like project auditing and knowing your customer initiatives are being introduced.
KYC or Know-Your-Customer ensures the DeFi providers gather and record as much information about their investors to minimize the money laundering and other financial fraudulent activities.
Project Auditing process looks into the smart contracts and checks the vulnerability of the project. The combination of these solutions is securing the investors and DeFi projects.
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This blog is first published on www.blockchainshiksha.com by author Shubhada Pande.