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Although the crypto industry is home to a wide range of projects and advancements, critics and fans alike will agree that the DeFi scene has taken the industry by storm. DeFi has grown by leaps over the last few years, with the total value of crypto locked in the industry reaching $65.18 billion as of May 2021.
DeFi's rapid growth has not only attracted potential investors but hackers and scammers as well. Yearn.Finance and DODO are some of the biggest losers of 2021 thus far, having lost $11 million and $3.8 million in February and March, respectively.
As DeFi, and crypto in general, keep getting global recognition, developers have had to comply with KYC and AML regulations in certain jurisdictions so that they can keep operations. Therefore, a crop of KYC solutions for DeFi has emerged to fill the gap. Further, audit reports have become a necessity for developers to ensure there are no overlooked vulnerabilities in the project’s source code.
So, which are the best to look out for? Keep reading for an overview of four of the best solutions that are worth your time.
But first, here's some little insight into KYC checks and why they are so important.
SOLIDProof is a German audit company that uses manual and automated tests to assess smart contracts and blockchain projects and check for any vulnerabilities. Once the process is complete, the company offers an audit report that classifies the vulnerabilities found and offers recommendations to remedy them.
For the DeFi project's KYC checks, SOLIDProof will be looking to establish customers' identities and assess the nature of their activities. They will also check that the clients have legitimate sources of funds and assess any risks associated with them.
Further, SOLIDProof carries out audit checks for entire DeFI projects. As a developer, you want the assurance that your project is doing well and that there are limited chances of a DeFi hack. Thus, SOLIDProof analyzes the project to find any vulnerabilities and examines your code before preparing an audit report.
One of the best things about SOLIDProof is that they work together with your development team to mitigate any risks highlighted in the audit report. Therefore, DeFi project developers can eliminate most of the risks surrounding their projects and establish trust among their clients, thanks to its personalized services.
QuillAudits is a security firm that offers audit services for smart contracts and DeFi projects, besides other cybersecurity solutions for blockchain projects. The firm takes DeFI projects through an entire process to validate its functionalities and find any loopholes, so they can correct them.
The process begins with a specification gathering so the audit team can understand how developers intend for their DeFi project to function. It then carries out a manual review to check for any unexpected behaviour and any common vulnerabilities.
Afterwards, the team uses automated tests to check the project, before generating the initial audit report. QuillAudits then gives the team a chance to update the code before taking the project through another audit process.
If you're looking for an open-source KYC solution that's powered by digital tokens, Identity.com is ideal for you. The ecosystem, that's governed by a staking mechanism, offers on-demand identity verification that's safe.
Currently, CVC tokens are solo players in the system. However, the platform plans on bringing more digital tokens on board as the network grows over time. The system's key entities are users, validators, and requesters. The latter is the DeFi project in need of a user's KYC verification. They query the credential wallet once a user requests access to their services. A validator within the system then approves the user and sends the information to the requester.
Besides the KYC solution, Identity.com offers three toolkits for users, requesters, and validators. Thus, all three players can seamlessly connect to the ecosystem.
DeFiFusion provides a range of on-demand services within the DeFi scene, including audit reports and security checks for smart contracts. The company’s goal is to make DeFi more accessible and secure through auditing, consultancy, Dapp development, and disaster recovery.
Like other audit firms included in the list, DeFiFusion carries out an entire auditprofcss for any DeFi project or smart contract. Through this process, the team identifies any risks and indicates the severity.
They also validate the projects and provide an audit report, including their recommendations for any improvements within the project.
DeFi project developers need to find solutions to ensure they can verify their users' identities and minimize the chances of frauds, scammers, and hackers. Audit processes help to safeguard these projects even further, by ensuring that there are no security vulnerabilities in the source code and entire project that would aid hackers.
That said, it's essential that they maintain the anonymity nature of blockchain technology. For this reason, finding a solution that offers data privacy is more important to build a trustworthy relationship with the users. Luckily, all four of our suggestions tick all the boxes. You only need to find the one that works best for your DeFi project!
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