Did you know that from 2020 to 2021, the crypto sector boomed more than was expected for the next 5-year period? Adoption has been on the upside, with more people buying crypto and more coins entering the market. Nigeria stood to have the most crypto holders early this year and the US with BTC’s highest trading volume.
Sounds very rosy, right? Despite crypto and blockchain being a profitable investment opportunity for most, it still holds its cons. Scammers getting into the industry to defraud unknowing users is at an alarming rate. Furthermore, as the market progresses, so do their skills.
How then has crypto maintained high popularity, you may ask? Here is where crypto audit and KYC companies come in. Stick around to learn more about these processes and how they contribute to the adoption of virtual currencies.
Crypto Audit and KYC Companies
Recently, blockchain security companies offering smart contracts and crypto project auditing are on the rise. In a significant way, they are a step in the right direction as far as trust in the crypto industry is concerned. As much as smart contracts have improved crypto, any issues could be a plus for fraudsters.
FOMO has been a trending thing, especially over the last year, as more people wanted to be part of the lucrative chance in crypto. DeFi is one section that has displayed how beneficial or costly investing money in startups can be. Of course, the newer participants in the space have all the reason to be cautious.
You can bear witness to the many projects that came up and ended up inconveniencing users significantly. A good example is in KuCoin’s hack, EayFi, Harvest protocol hacks, to mention but a few. Audits clear any vulnerabilities in a project, from the team to the most basic code written.
Therefore, to ensure that your funds are safe wherever you are, make sure to look into project and smart contracts auditing. Potentially, this might be among the reasons that will prepare you for the crypto space.
A Glimpse at How Auditing Work
Auditors have perfected their skills when it comes to spotting issues with a project or its team. Good examples are SolidProof, Sentnl, and Quantstamp, well-known blockchain security firms, which forges partnerships with major crypto companies. These firms and more in the space today wish to bring trust back to crypto projects while protecting investor interests.
How? They thoroughly evaluate all the project components to point out issues that could later cost the companies. A vital part of this process is communication with the projects to offer the best services possible. Using both manual and automated assessment, the firms provide blockchain projects both smart contract and KYC proofs.
First, you can contact the firm to offer a well-extended initial look into your project’s source code. During the entire process, the firm will provide all the necessary details and answer crucial questions. The firm will then provide an audit report that mentions any vulnerabilities; usually, vulnerability risks rank high/critical, medium, and low.
Afterward, if the project is clean, they include a certificate to prove the same. Furthermore, depending on the vulnerabilities found, they will recommend the most excellent ways to fix the issue. Once they ensure all loopholes are covered, they close an audit with a complete report to match.
Mostly, this information can be available to the public if the project wishes, hence stressing the point of building trust. However, the auditing firms hold privacy on high standards and will not reveal this information if the project does not wish it.
KYC Verification
As is commonly the case, KYC verifications go along with Anti-Money Laundering laws, which prevent malicious users on a platform. The first step requires you to present legal identification as it is with most crypto exchanges today. Firms that offer KYC verification services maintain the privacy of user details on their servers, with their employees only accessing it.
In the process, they need to assess if a user can be of any danger to others in terms of money laundering and terrorism financing. Additionally, they need to check where you are getting your funds from and your legitimacy.
KYC verification processes are raising issues on some exchanges due to the long onboarding processes. It all boils down to availing the correct information required by your customers. Some businesses are stepping up to the task of providing comfortable and straightforward services for all the new customers. As a crypto user, undergoing KYC verifications ensures you uphold your due diligence and staying away from illegal activity.
Do your research well before undergoing the process to find what exactly your country requires. Some which have no clear cryptocurrency regulations may have lesser processing or more depending on the location of an exchange.
What it Entails
Innovative technology is changing things for businesses, with better software to depend on. After all, crypto demands high scalability options, an issue that most blockchains are trying to find a way around. This factor also works for KYC software to save your customers the hassle.
Also, KYC processes tended to drain businesses’ funds due to their expensive nature. Currently, there are affordable options as more firms are joining this endeavor. KYC-Chain is an excellent example of a company dealing with KYC verification processes, with different offers in place for its customers.
For instance, the company offers crypto wallet reports, blockchain analytics, monitoring transactions, and crypto coverage. Politically Exposed Person (PEP) tests are an added advantage as those in power will have no way around embezzlement, bribery, money laundering, among other vile practices.
Another is Jumio, a relatively new in KYC/AML related services. The AI-powered platform is proving to be a good solution for identity verification alleviating risks for online fraud. Its top-notch technology is also a good touch to providing fast identity solutions for its clients. Furthermore, it follows the General Data Protection Regulation, an EU- based data protection law.
Advantages of Audits and KYC Screening
All in all, the advantage that comes along with crypto audits and KYC companies is their contribution to a well-regulated crypto space. Here are some of the benefits worth pointing out:
The extensive tests taken during audits ensure no vulnerability would risk both the project and its investors. Analysis and code validation helps the project maintain genuine proceedings and acquire the help required in case of a bad actor.
As said earlier, bringing trust back to crypto is crucial to the wide adoption of the lucrative industry. Blockchain and virtual currencies are the future of the financial world, with cutting-edge solutions.
KYC screening avoids any illegal undertakings while considerably reducing the risk associated with money laundering and terrorist activity. Furthermore, PEP tests reduce the input of illicit funds into crypto, a vital element for joint partnership with traditional financial systems.
Audits ensure you are investing in suitable projects as auditing companies give the best recommendations. The firms’ partnerships with significant crypto players indicate that the space is transcending to more trustworthy investments.
Takeaway
Scams and hacks are a worrying element clouding the decentralized space. Crypto is already tied to its risky nature of volatility, which is enough on the plate of investors. Having faith in crypto systems is an excellent approach to ensuring the growth of the crypto sector.
Auditing companies are proof that there is more to blockchain technology and crypto than meets the eye. Moreover, ensuring that investors are in the right place is a way to get rid of malicious participants. KYC screenings eliminate other loopholes despite the privacy and immutability of blockchain transactions.
In the next few years, we are yet to see unprecedented growth of the crypto sector than ever before. It would be best for all service providers to join the steps towards regulation, a much-needed addition to crypto.