KYC: The New Normal for Crypto Airdrops?

_{To decentralise or not to decentralise}

As discussed in our article Outsmarting the System: Sybil Attacks in Airdrop Farming projects are starting to take additional measures to ensure their airdrops are fair and prevent bad actors gaming the system. One of these methods starting to appear in the requirements for receiving an airdrop is KYC. Projects such as SupraOracles and Linea make it a prerequisite for taking part meaning that farming on multiple wallets is hard (unless you’re an international secret agent with multiple identities). In this article we’ll look at what KYC is, it’s importance and impact and an option for a digital residency for KYC purposes.

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What is KYC?

Know Your Customer (KYC) is a set of regulations that financial institutions are required to follow in order to verify the identity of their customers. This is done to prevent fraud, money laundering, and other financial crimes. KYC requirements typically include collecting personal information such as name, address, date of birth, and government-issued ID to prove who you are. Most major centralised crypto exchanges enforce this to be able to use their platform or remove trading limits.

Why does it matter?

KYC is important for a number of reasons.

• First, it helps to prevent fraud and financial crimes. By verifying the identity of their customers, financial institutions can make it more difficult for criminals to open accounts and commit fraud.

• Second, KYC helps to protect customers. By knowing who their customers are, financial institutions can better understand their risk profile and take steps to protect them from fraud and other financial losses.

• Third, KYC helps to comply with government regulations. Many governments have laws that require financial institutions to implement KYC procedures.

• Fourth, KYC helps to build trust. Customers are more likely to do business with financial institutions that they know are taking steps to protect them from fraud and other financial crimes.

How is it used in crypto airdrops?

Token airdrops are a way for new crypto projetcs to distribute their tokens to a large number of people who have engaged with their project in a number of ways. To participate in an airdrop, users typically need to complete numerous tasks over an extended period of tume. In most cases, crypto projects offering airdrops have not required users to KYC. However, some larger projects are starting to bring KYC into their requirements for participation. This helps to ensure that the tokens are distributed to real people and not to bots or other automated systems. For example, SupraOracles, a large project with a big airdrop in the future requires KYC at the very beginning to be able to receive their tokens.

Why is it a contentious subject in the world of crypto?

Some people in the crypto community argue that KYC is an unnecessary and unnaceptable intrusion on their privacy. They argue that crypto should be a decentralised and anonymous system, and that KYC requirements undermine this goal. Others argue that KYC is necessary to protect the crypto industry from criminals. They point to the fact that crypto has been used to launder money and finance terrorism. They argue that KYC requirements are a necessary evil that helps to keep the crypto industry safe. In countries like the US where crypto is oppressively regulated, most residents cannot qualify for airdrops without bending the rules (which is not advised) which means a vast number individuals who genuinely want to support a project are deterred from taking part.

Palau Digital Residency Program

The Palau Digital Residency Program is an example of how KYC regulations can be circumvented. This The Palau Digital Residency Program is a program that allows people from all over the world to become digital residents of Palau without having to live in the country. This program is designed to attract businesses and individuals who are interested in using crypto. For a fee individuals can pay to get a Palau Digital Residency with 1-year, 5-year and 10-year residency options. The program offers a number of benefits, including KYC on major crypto exchanges, access to government services, and the ability to open bank accounts and get a credit card.

You can find out more information here.

Conclusion

KYC is an important issue in the world of crypto. There are valid arguments on both sides of the debate. It’s a necessary tool for preventing fraud and money laundering, but it also raises concerns about privacy. It’s likely to become increasingly important as the crypto industry grows and mature with mainstream adoption. Ultimately, it is up to each individual to decide whether or not they are comfortable with the level of KYC required by crypto businesses. The Palau Digital Residency Program is an interesting example of how governments are trying to balance these competing interests. However, it is important to note that the program is still in its early stages and it is not clear how long it will be available, how successful it will be and how sustainable it is.

_{Please note that investing in crypto carries a high level of risk and is speculative in nature. The content of this article should not be considered as a recommendation from Droppables or the author to invest in crypto. Droppables does not provide any guarantees regarding the accuracy or timeliness of the information presented in this article. It is important to consult with a qualified professional who can assess your specific circumstances before making any financial decisions.}