How Audit and KYC Projects Build Trust in DeFi Industry
The Decentralized Finance world is one of the most outstanding financial revolutions of the 21st century. Generally, with DeFi, everyone globally can take charge of their finances and investments while benefiting from other services like lending, gaming, etc.
However, the trust in DeFi is still lagging; thus, the adoption is also lagging. The primary reason for the lagging confidence in DeFi has always been about its bad. Generally, as a product of the crypto world, DeFi is always blamed for the issues associated with cryptocurrency. Since some KOLs still view crypto as a scam, DeFi suffers the same fate.
Fortunately, there are ways to help bolster the trust in DeFi, including audits and KYC procedures.
How Audit and KYC strengthen DeFi Projects
How do KYC and Audit projects strengthen confidence in the DeFi world? Here is a short guide.
Audit Proves That a DeFi Project is Genuine
One of the significant ways that KYC and Audits bolster trust in DeFi is by proving that a project is genuine. Scams connected to the crypto world have been soaring, with investors losing fortunes to fake schemes. However, how do these scams happen?
Some developers may introduce a project with the primary intention of stealing from unknowing investors. Generally, these kinds of projects promise to offer high yields and could easily attract investors. Due to such scams, some investors could easily lose trust in DeFi.
However, by using the KYC and Audit procedures, investors will now start trusting DeFi-related projects. The auditor can know if a particular project is genuine or not. In some cases, the auditor may do deep research, including looking at the following;
- Project webpage
- Coin Minting mechanism
- Team behind project
- Economic model
By doing thorough analytics of the above mentioned, the auditor can assure investors that the new DeFi project is genuine.
Another reason why audit and KYC platforms contribute to bolstering trust in DeFi is the real tests done. Smart contracts involve codes that are very complex for a person with no coding knowledge to understand. Therefore, it may be impossible for any investor to do an audit of a project before investing.
However, smart contract audits have for some time now been an industry standard. The smart contract system auditors include a group of people with coding experience. The auditors apply autonomous tests on the system to see how it reacts to different scenarios of transactions.
Furthermore, the auditors include manual tests to see if the results are consistent with the autonomous ones. The applications of real tests make their reports more valid and dependable to the DeFi investors, thus increasing trust in the DeFi industry.
Audit Projects Give Recommendations
Another thing that audit and KYC projects do to help in building trust for the DeFi world is offering recommendations. Developers of the projects are the primary beneficiaries of the recommendations given by the auditors. The auditors can tell the developers how to change some code for more efficiency. Since the audits are often done before the project launches to the public, the developers can take their time and make the necessary changes to achieve efficiency.
Investors, on the other hand, can benefit vastly from the project. The recommendations given by the audit companies may include what an average investor should do. On some occasions, they may state the risk level involved in investing in the projects. As such, the average investor will benefit.
KYC Details Boost Consumer Trust
The fact that KYC collects details is another aspect that makes investors have deep confidence in the DeFi space. An average investor often wants to know that their investment will remain safe from hackers.
As mentioned earlier, KYC helps eliminate fraudulent people who are planning to commit manipulations or financial fraud. As such, it’s safe to say that KYC procedures can help boost investors’ confidence.
SolidProof Helps Bolster Investor Trust
Solidproof’s primary intention was to help in auditing and providing KYC services for DeFi projects. It aimed to participate in bolstering the trust of investors in DeFi, thus speeding up DeFi adoption.
Solidproof KYC standards target to protect the DeFi platforms from corruption, fraud, money laundering, and financing of terrorism. It does KYC by;
- Identifying project customers.
- Understanding their nature of activities.
- Assessing money laundering risks and offering their recommendations to the platform developers.
Auditing by the Solidproof network also takes a few straightforward steps to ensure that services are provided efficiently. The steps include:
- Communication– The first step to getting an audit is communicating with the Solidproof network and submitting the code.
- Auditing– The second step is Solidproof working on your project’s audit, searching for any vulnerabilities manually and algorithmically.
- Fixes- Here, Soldiproof suggests recommendations to the developing team, which they will work on. Afterward, the Solidproof network takes a second audit.
- Reports- Finally, SolidProof releases its audit report.
It’s true that with the increasing cases of scams, DeFi institutions are vulnerable to related financial frauds. Frauds contribute vastly to slacking investor trust in the Decentralized finance space.
Audits help assure investors that the underlying project is genuine and the people behind it are not malicious. Moreover, auditors do real tests and give recommendations to the developers and, in some instances, the investors. KYC details collected and analysis done helps in protecting the projects.
Any platform offering DeFi services can try to use Solidproof’s auditing and KYC services to bolster efficiency.
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