Clear DefinitionsOff‑chain KYC / eKYC
1 min read
Pronunciation
[off-cheyn kay-why-see ee-kay-why-see]
Analogy
Like showing your ID at a bank branch, then receiving a token you can use elsewhere without revealing your full identity each time.
Definition
Identity verification processes conducted outside the blockchain—using centralized or decentralized identity providers—to comply with AML/CTF regulations, issuing attestations that can be referenced on‑chain.
Key Points Intro
Off‑chain KYC balances regulatory compliance with user privacy by issuing verifiable attestations.
Key Points
Data collection: Collect government ID and biometric proof.
Verification: Automated checks against databases.
Credential issuance: Issuer mints a verifiable credential.
On‑chain reference: Users present proof without sharing raw PII.
Example
An exchange uses a KYC provider that issues a signed VC indicating accreditation status; smart contracts check VC validity before permitting trades.
Technical Deep Dive
eKYC provider runs identity proofing, issues a W3C VC signed with issuer DID. Relying dApp verifies signature and revocation status via on‑chain registry contract.
Security Warning
Centralized KYC creates privacy risks; store PII encrypted and minimize data retention.
Caveat
User trust in KYC provider is required; consider decentralized alternatives.
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