GainPool has indicated that it will use the best business practices to establish relationships with its ecosystem partners and users. The company states that knowing its ecosystem partners and users will minimize cases of fraud and money laundering that have become widespread in the DeFi arena. Although the philosophical foundation of Blockchain Technology is to decentralize financial solutions and retain anonymity, fraudsters have penetrated the environment. Therefore, GainPool’s step is commendable as it adds a layer of security to their solutions. GainPool will use the most advanced KYC approaches to mitigate risks that are inherent in DeFi projects.
Understanding KYC
The acronym KYC stands for Know Your Customer. It’s a procedure that banks and other financial institutions use to collect identifying information and contact data from their current and future clients. The objective of using this strategy is to mitigate risks associated with fraud, money laundering, and other illegal activities.
KYC is mainly applicable to standard banks and other financial institutions. However, DeFi projects can benefit from this procedure. Although some DeFi programs use sophisticated technology, some projects may be vulnerable to scams. Therefore, KYC procedures can help in minimizing security dangers. Here are the various reasons why GainPool intends to apply KYC.
- Safety in trading: KYC procedures help protect institutions and individuals against evil people, fraudsters, and other illegal activities. This procedure may help a trader to protect themselves while conducting business on the online spaces. Fraudsters and money-launderers find DeFi an easy target because of the lack of KYC. In the past, some exchanges have been hacked through DeFi and lost vast sums of money.
- DeFi Projects with KYC may attract many clients: Although the objective of DeFi is to avail of censorless financial solutions, many potential investors may shun the projects because of fear of losing their money. By putting in place a KYC mechanism, such potential clients may join these DeFi projects.
- The requirement in some countries: Because massive amounts of money go through DeFi projects, governments have started developing rules to control the industry. Such countries want their citizens to be safe while investing through these technologies. One aspect of such legislation is the requirement that the DeFi project owners know their clients, hence the need for KYC. It’s critical for users of DeFi projects to understand that knowing clients doesn’t remove the aspect of decentralization which is a key foundation of DeFi programs.
- KYC isn’t equivalent to centralization: After performing KYC, DeFi software can continue delivering services in a decentralized manner. The essence of DeFi is to add a layer of safety by allowing only verified users to the platform.
- KYC Data doesn’t need to be stored on the DeFi platform: With the sophisticated technology in the market, DeFi projects don’t need to store KYC information on their platform. Therefore, while carrying out KYC, the protocol’s decentralization character is retained.
KYC in GainPool
GainPool takes specific steps to guarantee safety for users while trading in their ecosystem. Initial KYC will be carried out to prevent any whitelisting problems.
Before selecting the projects to fund or launch on GPad (GainPool’s Community Launchpad), GainPool will conduct thorough research to ensure that only high-quality programs are chosen. The DeFi project aims to fund businesses that only deliver value to $GAIN token holders.
KYC has become an essential component of DeFi programs. Though these projects are decentralized, conducting KYC helps to minimize the risks present in online trading. KYC helps in ensuring that only members who are verified qualify to participate in projects.
About GainPool: GainPool uses an in-house collective mechanism to bring financial freedom to the masses in the DeFi environment. Participation is possible through either direct or indirect access. The project aims to attain its objectives by re-engineering the modus operandi of decentralize investing.
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