Cryptocurrency has evolved the concept of Blockchain and enabled it to penetrate in a diverse set of services. These services include Healthcare, Financial Institutions & Supply chain management. Knowingly, we can say that these concepts may seem a bit overlapping. But in reality there’s a whole technical process involved in linking the e-money to the actual world. Primarily, financial institutions use the traditional KYC (Know Your Customer) for customer’s verification & background checks.
In this article, we shall discuss the systematic review of Automated KYC via Blockchain.
Presently, KYC is vitally important for almost every organization to deal with financial matters better. Distinctively, every organization has its own KYC that may also include a third party that increases cost. Also, Traditional KYC is time-consuming & hinder the user experience.
What is Optimized KYC?
According to Malhotra & Poonam, decentralization of the KYC process can increase efficiency and effectiveness. KYC Optimization is the process where the protocols for the whole procedure are set to ensure a secure system. Emerging technologies like IoT, AI & Big Data have facilitated the KYC process a lot. However, data breaching, hacking & other security issues are still persistent in it. That’s why the optimization of KYC systems is necessary to build an impenetrable system. Money Launderers, Terrorist Funding & Fraud can be minimized by setting protocols that are updated. Primarily, KYC is the process through which every user goes through in order to acquire services of an organization.
What is Blockchain?
Pertinent to the KYC, blockchain provides improved security, privacy & background check on customers. According to Ashok & Ramendra, Blockchain is an incorruptible, immutable & decentralized digital public ledger. Blockchain records the financial transactions as well as other user information too. Here, Blocks are the record lists that grow with cryptographic hashing technique. With the advent of e-money & virtual cash, cyber crime & fraud hyped to a whole new level. Ceaselessly, unethical users penetrated the system so the authorities chose a framework with boundaries for clients. Here, the genuine client’s recognition became more authentic & his interests have been guarded. Irrespectively, the authorities apply the protocols of optimized KYC on every user. In this way the user’s own benefits are shielded from unethical users like hackers or scammers.
How is a Block created?
Basically blockchain defines a platform where people who do not trust each other can connect & trade. It helps the rational decision making through the nodes that are located through the message-passing system over the network. Mostly, Blockchain uses cryptographic algorithms to maintain authenticity of data. Some nodes are called minors since they are used to verify the record before final commitment of a block. Simply, a block is a collection of transactions & Blockchain is a chain of those blocks.
How Digitization Helps KYC & Blockchain?
Presently, seamless transactions that are online facilitate KYC & Blockchain. Blockchain through digitization reduces all costs of third parties and maintains the records. Precisely, a block is created within 10 minutes of time and sized from 1 to 10 MBs. These blocks are readily available for verification to all the users in the network. Since blockchain is unchangeable so the blocks cannot be edited once they are recorded. Furthermore, the digitized information on blockchain is beneficial for numerous services & technologies. Mainly, IoT, Big data & others use the recorded blocks. Distinctively, Blockchain exercises a secure pattern of digital information without the threat from breachers. The only security threat it can face is of the miners and before the block is committed to the blockchain.
In this way, the KYC & Blockchain utilizes Digitization.
Summary of the Protocols of KYC & Blockchain
Mainly, Blockchain works on four protocols which are:
- PoW
- PoB
- PBFT
- PoS
Each protocol consensus was designed to overcome the loopholes in the previous protocol. There is no restriction on the usage of protocol for users in the network. However, sticking to one protocol and improving the back-end working & maintenance is the main thing. These protocols are basically the defined lines or ways to exercise Blockchain.
Final Words
Blockchain’s main goal is to offer immutability, decentralization & security in peer to peer connectivity. Through digital signatures & cryptography, Blockchain also offers transparency to the users in the network. According to research the new techniques & methodologies of Blockchain shall further refine the existing models. Moreover, the same research explained the ‘Consortium Blockchain Model’ as one of the collaborative approaches to record blocks. It joins the organizations upon the newly designed or existing protocols.
Blockchain technology is not only a breakthrough but a gateway towards unraveling the secrets of Seamless transactional records for fast, secure & reliable systems.
