Cryptocurrency is fast becoming the investment vehicle of choice for millennials and experimental stock market traders. Today’s blockchain technology, however, is very different to how digital currency like Bitcoin was first envisioned by Bitcoin creator, Satoshi Nakamoto.
Ten years ago, Satoshi Nakamoto couldn’t have anticipated the creation of blockchain technology such as high-speed ASIC Bitcoin mining hardware. However, where cryptocurrency differs exponentially from the Nakamoto whitepaper, is when it comes to issues such as user anonymity, ID verification, and in general user privacy.
Cryptocurrency Exchanges are Imposing Stricter ID Verification Requirements Across the Board
Because of fraud and reports that digital currency is being used for other nefarious purposes, cryptocurrency exchanges are rolling out know-your-customer (KYC) due diligence checks on their users. The only problem, of course, is that retail banking know-your-customer protocols, simply aren’t suited for use on cryptocurrency exchanges.
- KYC is slow. – Coinbase users regularly report KYC verification problems as taking days and occasionally weeks to remedy
- KYC isn’t really safe or private. – Users have to trust exchanges not to sell, share, or steal their personal ID details
- KYC immediately becomes irrelevant as a security safeguard anyway, when cryptocurrency exchange users transfer funds off-platform and trade digital coins for others like Monero
Appalling Personal Privacy Safeguards
Arguably the most significant problem with know-your-customer (in a cryptocurrency context), stems from the fact that cryptocurrency exchange users don’t always know whom they are really dealing with.
A cryptocurrency exchange isn’t like a bank. Malicious parties and Bitcoin multilevel marketing operations routinely set up exchange-like websites, in attempts to trick people into depositing funds. A key problem with KYC due diligence, in this respect, is that employing know-your-customer security checks actually makes such scam sites appear more legitimate.
Blockchain Technology Solutions to the Exchange ID Problem
To put things simply, attempting to use know-your-customer due diligence in a cryptocurrency exchange context, is like trying to run an electric car with a diesel engine. – The technologies are sound. The problem is, they’re simply not compatible.
Thankfully, there are ways to make ID verification smarter, faster & more secure. What is more, blockchain technology ID verification systems are already being used by the likes of trading platform Bitshares
How Does Blockchain ID Verification Work?
With Velix.ID, users register and verify their real identity just once. After this, what is essentially an Alphanumeric address becomes a person’s unique identifier to the world. What is more, this address fully replaces any need for ID documents and can be used across several affiliated platforms.
Might Cryptocurrency Exchanges Start Using Verification Systems Like Velix.ID?
The advantages of technology like Velix.ID’s own verification system are simple.
With Velix.ID, users could (theoretically) register at malicious phishing exchanges but never actually have their real personal security compromised.
Needless to say, this coupled with the speed of blockchain technology ID verification, makes systems such as Velix.ID look very promising. This being the case, it might only be a matter of time until we see such technology going more mainstream.
Find out more about Velix.ID and our Crowdsale at our site velix.id
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