The topic of KYC has two sides in crypto. On one hand, the main idea is to decentralize the world and KYC is seen as a burden. With the no-KYC process, anybody can trade on DEXes without identifying themselves. On the other hand, at the current stage crypto needs strong supporters to promote mass adoption. KYC is essential to allow institutions to participate in trading, as most of them are regulated entities. Without bringing them on, it is not really possible to take the idea of peer-to-peer trading on DEXes to mainstream users.
Polkadex found the solution in Decentralized KYC. It is a way of using cryptographic proof instead of actual user’s data to verify that the participant is not sanctioned by Anti Money Laundering or involved in other financial crimes.
Since blockchain is using a 'proof of identity', the user’s personal data always remains only with the user in his own wallet. This means that the data is not given out to any third parties and users are in full control of their data – there is no risk of data leaks or hacks.
KYC will be needed for users whose trades will exceed a certain limit. The exact limits will be enforced by the crypto regulations in the Republic of Estonia where Polkadex is registered.
Users will store their KYC data in a wallet provided by the KILT blockchain and expose it to their preferred KYC attester like Fractal. The chosen attester will issue a cryptographic proof to the KILT blockchain. Polkadex will receive only the zero-knowledge proof of identity. Hence user data is exposed only for the verification process and remains in the user's wallet the rest of the time.