HomeBlockchainOp-ed: Not all blockchains have to be pseudonymous

Op-ed: Not all blockchains have to be pseudonymous


Blockchain technology has the ability to improve different industries, especially in banking and finance. Layer one protocols are like the foundation of a blockchain network. They are important parts of how the blockchain system works. Some examples of the first level of blockchains are Bitcoin, Ethereum, and Binance Smart Chain. These blockchains are used as the foundation for different decentralized apps and smart contracts.

Layer one protocols are in charge of making the basic rules and agreements for how a blockchain network operates. They decide how transactions are checked and included in the record. Also, layer one protocols will allow different dApps to work together in the future.

Companies can create their own “enterprise blockchain” to reach their business goals or provide services. These blockchains are very different from the layer ones mentioned earlier. The focus of layer ones is on providing services that align with the basic principles of cryptocurrencies, such as anonymity and decentralization.

A business blockchain can change its rules to provide services in a way that follows the rules. They can provide services that are not allowed in a pseudonymous environment because of rules and might attract a different type of person to layer one technology.

KYC and AML For Regulatory Compliance

In today’s digital world, fast financial transactions are happening a lot. It’s really important to follow the rules. In finance, everyone knows about checking who our customers are and following rules to stop people from hiding illegal money. Companies check who their customers are to make sure they are not doing anything illegal.

KYC and AML are rules made by the government to stop bad things like money laundering and helping terrorists. These actions are very important in the finance industry, especially for businesses that handle cryptocurrency and virtual money. These rules make sure that companies watch transactions closely, look for strange patterns or behaviors, and tell the right people about any possible problems.

The way blockchains work can make it hard to use them directly in protocols. Some DeFi platforms on blockchains have started using their own methods to verify and follow rules for users.

Some projects are looking into using tokens or smart contracts made specially to help follow rules and regulations. These tokens can show who someone is on the blockchain without sharing private information with everyone.

Enterprise blockchains are spread out, which makes it easier to put in rules for preventing money laundering and knowing who you are doing business with. This allows regular people and organizations to feel good about using a certain company’s blockchain system.

Financial Transparency Through KYC and AML

It is very important for people to know where the money is going and how it is being used. This helps to build trust and make sure that financial systems, including those using blockchain, are honest and reliable. Adding KYC and AML rules to a blockchain technology can give people more transparency and privacy. This can be done using methods like zero-knowledge proofs, which helps prove something is true without giving away any extra information. AML procedures on a layer one blockchain make it possible to track transactions as they happen.

Following the rules is really important for lots of people to use and connect with regular banking systems. But it’s hard to find a good balance between keeping things private, spreading out control, and following the rules. Laws about cryptocurrencies are always changing, and different places may have different rules.

As the industry changes, there will probably be new ways to make sure people are who they say they are and to prevent illegal activities on blockchains.

The Chance on Level One

Basically, layer one protocols can easily connect with outside data sources. This helps quickly check customer identities and track transactions as they happen. Traditional blockchains like Bitcoin, Ethereum, and others don’t allow for AML and KYC procedures. New business blockchains don’t have to follow these rules and can be designed for a different group of people.

Layer one protocols can have things like ways to check who you are, tools to keep an eye on transactions, and smart contracts to make sure transactions are safe and easy to see.

Companies could use layer one blockchains to make sure all users are following rules about knowing customers and preventing money laundering. This can help build trust between people involved and keep their information safe.

New blockchains are making it safer for people to use them by adding AML and KYC features. This could attract more people to use the technology and benefit from it.


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