How KYC-Verified Teams Are Setting A New Standard For Trust In Web3

With the amount of innovation and participation increasing so rapidly it is transforming Web3 from a niche technology to an expanding digital ecosystem where developers, investors, and end users can interact in a multitude of new ways. As a result, this rapid growth has led to a greater need for trust, transparency, and accountability in Web3 and the best method to establish trust and confidence in project teams is through KYC verification.

There are many Web3 projects claiming to be creating paradigm shifts within decentralized finance, digital ownership, identity management, etc. However, not all projects are created equally; some may have very loosely defined teams, and/or anonymous developers, and/or not clearly defined organisational structures. These ambiguities place participants at risk and increase doubt across the wider community surrounding the project.

We will take a closer look at how KYC verified project teams are increasing the level of trust across Web3 projects, the importance of this increased trust for the sustainability of Web3 growth and how KYC verified teams are beneficial for all stakeholders in the Web3 ecosystem.

KYC Verification in Web3  

Web3 KYC, or Know Your Customer, is the process of confirming that someone is who they say they are using different types of documentation and third-party validation services. Financial institutions have been using KYC since long before crypto existed. The purpose of KYC has been to allow financial institutions to prevent fraud and illegal activity like money laundering.  

In the rapidly growing world of Web3, KYC will help tie all of these new projects to an actual team of people who take responsibility for them.  

Unlike in traditional finance, where KYC only serves to reinforce a lack of decentralization, KYC helps give people trust in the people behind the projects built on Web3 technologies—the teams building the protocols, applications, and ecosystems. When a team successfully completes a KYC verification process through an established third-party provider like a KPMG or Deloitte, they will release their verified credential that proves they are not only real individuals with a documented history but they are also accountable to the KYC provider.  

The Role of Trust in Web3  

Trust will be a critical part of any successful digital ecosystem. In traditional finance, trust is delivered by banks and other financial institutions through regulatory oversight and established legal systems. In decentralized technologies, trust will be built into the very code that runs them, through community-led decision-making models, and the incentives built into protocols.  

When we have projects built on these technologies that hold funds or handle user data or facilitate user interaction and community engagement, trust in the team behind it becomes essential. Without transparency, users and participants will be confused about who is building and governing the systems around them.

• The ultimate decision-making authority for a project’s development
• The individual or entity accountable for resolving any problems that may arise with a given project
• The validity of a project’s long-term commitments
• The existence of the necessary expertise for a project to effectively implement its roadmap.

The importance of Know Your Customer (KYC) verification is to provide a pathway between anonymity and personal responsibility. KYC provides a method to transform speculative excitement surrounding certain types of projects into a verified credible statement in order to ensure that the project will be more widely adopted in the future.

By verifying who you are through KYC, you can build confidence in your project.

Increase Transparency

The fingerprints left on a person’s KYC verification also allow other users and developers to see that individual as a real person working on the project. They can check to see what work the developer has done in their career, to see if they are qualified to deliver what they promised to the community, and this helps to create a culture of trust in the community. This transparency helps build a strong Community.

Less Perception of Risk

There is a very high perceived risk associated with Zero Trust because, by design, everything about your online identity is kept completely anonymous. However, the anonymity of team members causes potential users to feel a higher risk of losing their money or assets if they participate in the governance, product, or service of a project because they do not know the members who are making the decisions. If the governance of a project is being performed by a team whose identities can be verified, the community will feel more secure participating in the project.

Professional Accountability

The KYC process connects a team’s real-life identity to the team. Because of this link, team members are held to a higher standard of professional accountability because their reputation as a professional in their field is tied to their verification. This direct link of accountability also reduces the chances of a “rug pull” – when a team suddenly barricades their project to walk away with a community’s money.

Adherence To Regulatory Conformity: 

While a number of Web3 projects do work in regulated areas, the probability of their adoption on a large scale will be dependent on how much these projects conform to compliance expectations from the worldwide business community. A project team with KYC verification sends a strong message to cultural, company and institutional stakeholders to demonstrate both their responsibility regarding developing their product and managing risk.

KYC Methodology in Action

When the KYC process has been fulfilled, a group or individual having completed the KYC process can be associated with a number of steps as a Web3 project team:

1. Providing Identification: A group or individual that is registered and/or has completed KYC has provided a verified government’s ID.
2. Investigating the Professional: Due to the process of verification of a professional account, a group or individual that has successfully completed KYC may have had their work history verified in some other way (for example, through work related to them).
3. Issuing Verification Reports: After verifying the client’s identity for KYC, the verification provider must prepare and release a report indicating that the client has verified his/her identity.
4. Publishing Transparency Statements: A project that has undergone KYC can publicize its verification report or authorization badge to verify that it has completed KYC checks.

This view of KYC as it relates to Web3 does not mean creating a central body—rather, it provides and builds trust in the project by providing transparency, and at the same time will permit the use of decentralized protocols to have control and authority.

Understanding the Broader Impact of Projects Impacting the Growth of the Web3 Ecosystem

Verified project teams are more likely to receive better levels of response from the developer and end-user community, which means more opportunity for developers to collaborate, greater likelihood of support from institutional partner organisations, and more confidence for the end-user to engage with a product developed by a known and accountable team.

Verification of project teams sites will further enhance the reputation of the overall Web3 Ecosystem by creating a perception of a mature, transparent, and professional Web3 Ecosystem, attracting interest not only from hobby or enthusiast developers but from mainstream developer organisations, regulated institutions and institutional long-term investors.

As an example, participants may use third-party applications or stock heatmap to help analyze and evaluate the current market sentiment and determine which sectors or industries may be seeing increased levels of market interest. Further, the value of these sentiment-based tools are greatly increased when they can be paired with the verification of project teams and associated controls and thoroughly vetted development teams for the projects users have chosen to engage on-chain with based on the verification of the project teams they have chosen to engage with.

False Claims & Hype: The Problems With Speculation and Hype in Web3

One problem that continues to plague the Web3 industry is the propensity for certain narratives to border on speculation and hyperbole. Projects that choose to highlight their verified credentials rather than marketing hype are able to distinguish themselves by illustrating their ability to provide users with real and tangible value without resorting to hyped-up claims.

The community will trust the project if their content is based on factual information instead of speculation, opinion or unverified experiences. In order to earn that trust, editorial platforms do not allow publishers to misrepresent their work with incorrect information, but instead promote the publication of quality content about cryptocurrency and digital assets through well researched articles.

Conclusion: KYC Verification Is a Confidence Builder & Not a Cure-All

Although KYC verification does not solve every issue that exists within the Web3 ecosystem, it serves as a confidence-building tool that establishes a higher level of credibility for projects and assists in establishing trust within the ecosystem. As such, it facilitates a higher level of transparency, lessens the amount of risk within the ecosystem, provides a level of accountability for teams, and provides a measure of professionalism for all parties involved.

As Web3 continues to mature, projects that emphasize verified identities, backed up with solid technological foundations, community engagement and clear roadmaps, will create more opportunities for sustainable growth and long-term adoption.

By providing a verification process for participants, KYC verification provides the participant with the ability to make informed decisions based on credible information rather than speculation, guesswork or exaggerated claims. By doing this, KYC establishes a new benchmark for trust within the decentralized world.