One of the key features of cryptocurrency and blockchain technology is decentralization. This means that no central authority has complete control over the system. Blockchain transactions are stored on multiple computers representing a network of peer-to-peer nodes, rather than in a single database. However, KYC requirements are causing cryptocurrency exchanges and traditional financial institutions to merge as they transfer rights to a central authority.
For proponents of anonymity in decentralized blockchains, the loss of anonymity comes at a significant cost. This is especially true in the situation where customers provide their data for verification on centralized crypto exchanges. Despite the fact that crypto exchanges guarantee the privacy of personal data, many proponents of anonymity do not want to take the risk. Their fears are well-founded, as many exchanges have yet to develop robust KYC systems to protect user information.
There is also evidence that hackers have accessed KYC users' data through vulnerabilities in exchanges' software. Toobit is one of the few exchanges with a reliable specialized system for collecting and managing KYC data.
How does KYC affect decentralization and anonymity?
