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Credits, a Singapore based public blockchain platform with an open source code and its own internal cryptocurrency CS, is being explored as a means of simplifying compliance with KYC requirements for financial institutions including banks.
In order to comply with KYC, banks and other financial institutions must dedicate a huge amount of resources. Each financial institution has to satisfy KYC requirements for every new customer, even though the customer has probably completed a KYC procedure somewhere else before. Banks have to collect, track and store huge amounts of data, so that it may be reported to regulatory institutions in a timely manner.
In this case, creation of a client identification system based on the distributed ledger technology appears to be highly relevant. When a new client enters into the ecosystem, a bank verifies the documents and uploads the data onto the blockchain. Whenever a new data is needed to be appended, the ledger could enable encrypted updates to the ledger. These updates can be accessed by other entities in real time as and when required. Direct access to the KYC data saves huge amount of time for institutions. Besides, required compliance reports can be automatically generated from the data of the blockchain. This helps to reduce non-compliance penalties.
When it comes to security, every participant (bank and regulatory institution) interacts with the blockchain using a public-private cryptographic key combination. Since the platform is a transparent system, no entity has the ability to modify or erase a block without it being recorded on the blockchain. Records/blocks are validated by peers, like other financial institutions, on the blockchain network. As a peer to peer network, each financial institution would be able to trust the others. There is no centralised authority that can be compromised and there’s no way to hack the cryptographically secure data within the general ledger. In this case, manual errors while performing the KYC initiation can be avoided.
The platform completes certain checks to preserve the integrity of the chain and the correspondence of information on different nodes of the network. It checks all transactions on the balance sheet, in which the amount of incoming and outgoing transactions is checked for compliance. The previous block hash is checked for a sum and EDS block is checked: before sending a new block to the network, the writing node signs it with its digital signature for identification.
Each network node has a key pair (private and public key) to sign the block. One cannot participate in consensus until one sends the transaction to the network. The purpose of this is to increase the confidence in the nodes.
The platform enables users to be identified on a single occasion and this information is stored securely with access granted to other financial institutions in the ecosystem. All data is stored in the open file, yet some information can be encrypted with homomorphic encryption based on elliptical curves in order to limit the general access. Only the ecosystem participants are allowed to encrypt and decrypt the data.
Due to the lack of mining and the unique type of consensus dPoS + BFT, the platform can operate at high speed (0.1 second per transaction) and conduct a large amount of transactions per second (more than 1 million per second). The cost of transactions depends on the network load and the number of nodes and is approximately 0.0001 USD transaction.