In banking system, when you want to open an account, the bank needs your identity card,
and signature or fingerprint. This process is known as KYC "Known Your Customer".
Whenever the amount of money go in or get out, the bank will know exactly, whose
the money is belong to. To avoid money laundry.
Initially in the crypto space such as bitcoin blockchain, there is no KYC process needed,
users are all anonymous, they just create their account with the wallet containing
cryptocurrency address, private key that's all. We only know which crypto account
has how much money, but we don't know it belongs to who.
Later to identify users, some blockchain system adopt the KYC method, and start
identify their users. So all the users need to go through a KYC process before
grant permission to their own account.
How does KYC process work?
Step 0: Human verification
To avoid non human registration like application bot, human
need to go through a test to verify if they are human or machine.
Step 1: Phone verification
To know where the user is coming from, the user need to enter their phone number,
the system will generate sms code for user to verify their phone.
Step 2: Email verification
To verify if an email address belong to a user, the user need to verify the email
with the link send by the system.
Step 3: Identity verfication
To verify if a person is really who they claims they are,
they need to scan their identity card or passport.
Why using scanning is better than upload the photo of identity card,
because scanning allow us to verify if the identity is really in the person hand,
but the photo of an idenity could be found online or using application to edit it.
Step 4: Photo verfication
To verify the photo of a person, the application need to open the camera
and took the photo of the person, not uploading their existing photo,
in doing so, we will know if a person is really the one who is doing the KYC
process.
Step 5: Whole packed verfication
The system need to ask the person to take another picture,
which contains himself/herself holding their identity card and a piece of
paper mentioning the date of registration (Ex. Aug 22, 2021)
the website they register (Ex. serey.io) their username (Ex. Cryptopreneur).
In this case we will know that, the person is really exists, he has his identity in his hands,
and he is really doing the registration today with the username he prefers.
There are many process of doing KYC, but the process above is the more
relevant, otherwise, users could cheat, by uploading fake photo and fake
identity to create multiple accounts in the system.
@Cryptopreneur - Cambodia Serey Community
you're welcome