Why Giant Does Not Need KYC

This material explains how the ‘Know Your Client’ principle is not  applicable to the Giant blockchain and Giant.Exchange - the first  decentralized application based on this environment. As you are about to  witness, the blockchain of Giant and solutions used in the Giant-backed  decentralized applications (DApps) allow to prevent financial crimes  with the KYC level of efficiency.

What Does KYC Mean?

The  ‘Know Your Customer’ principle is aimed at countering money laundering  and terrorism financing. Traditional financial organizations (mainly  banks) are using it widely, and there have been talks on the  cryptocurrency sphere needing to implement this principle too. In  practice, this simply means the verification of the user identity by  using the copies of his/her identification papers. Another crucial  element of KYC is the monitoring of financial transactions. Some  cryptocurrency exchanges have installed it to quickly identify  fraudsters. There has recently been a rise of such events due to the  increased pressure of regulators. Despite this, the current  international laws do not demand KYC installed on all decentralized  exchanges.

KYC and the Giant Blockchain

The blockchain of  Giant is a hybrid ecosystem that uses and combines the latest  achievements of other cryptocurrency development teams - you can read more  about these inventions in a dedicated material. Giant Coin itself would  not be an efficient money laundering tool - all transactions are  recorded in the distributed ledger and are visible in the Block Explorer. This is similar to Bitcoin, a cryptocurrency which, contrary to a popular misconception, can actually help to detect  criminal activities online — and this is one of the crucial elements of  the KYC policy. This shows how the Giant blockchain achieves the same  goals the KYC-using organizations are pursuing. Like in Dash, all  privacy tools are optional.

The Giant developers do not own any  cryptocurrency exchanges which convert Giant Coin into other currencies  and vice versa. In case you are using a separate digital currency  exchange as a Giant Coin wallet provider (term comes from the FATF papers  on cryptocurrency), this exchange developers are responsible for any  potential hosted wallet security issues and transactions monitoring.  Whether to apply the ‘Know Your Client’ principle or not - this is the  issue all exchanges decide individually. As with the overwhelming  majority of cryptocurrencies, Giant founders do not control the Giant  blockchain, the related financial community or its participants.

KYC and Giant.Exchange

Giant.Exchange  does not allow to trade currencies for currencies - instead, traders  are betting on the price motion by using the pre-created binary options  contracts. The user funds originate from their money converted on crypto  exchanges not in any way related to the original Giant founders. Brokers who create their own smart contracts cannot tamper with their  basic mechanism - they can only change the individual parameters, for  example, reward number, data source and time duration. It is impossible  to receive the Trader funds for Brokers, as all the money is placed on  the dedicated smart contract which does not belong to anyone and cannot  be hacked.

There is a lot of problems that centralized financial  organizations have but decentralized do not. In a notable example, all  Giant.Exchange smart contracts check for the actual presence of the  funds of all parties involved - nobody can claim to have a certain sum  of Giant Coins without actually possessing them. Contrary to this, paper  contracts cannot automatically check for parties’ funds immediately at  the stage of creation. With the Giant protocol, you cannot bet the money  you don’t have and create binary options uncontrollably. The Giant.Exchange budget is stored on a separate smart contract which has  an explicit prohibition for anyone to get immediate access to the  savings. The masternode holders’ vote can determine how this budget will  be used in the near future.

To create smart contracts on Giant.Exchange, you must be a masternode owner. One masternode costs 1000 GIC or $496 at the time of writing. Only one account can use a certain masternode to create smart contracts, meaning it would be hard to multiply accounts. Any engagement with long-lasting effects on the  Giant.Exchange blockchain requires a transaction signature with the  masternode key.  

Same obstacles are made for those who would want  to act as an Oracle and play dirty: Oracles can only find the  cryptocurrency exchange API and provide data for Brokers, there is  simply no room for manipulation. Same principles apply to all other Giant smart contracts creators. Theoretically, a fraudster could create a  new crypto exchange with false information and try to connect it to Giant.Exchange via a new ‘Oracle’ smart contract, but all new contracts  are listed only after the major support of other masternode owners after a dedicated vote takes place. There’s even more: any anomalous smart  contract may be deleted after a community vote.

Speculations and  other illicit activities appear in communities where the rules are  unclear. The Giant.Exchange rules are quite strict towards all the  binary option contract parties which eliminates the opportunity to  deceive investors.

In a way, Giant.Exchange has its own public KYC  system where all active smart contract creators are connected to a  known masternode. The user reputation system can also show any  suspicious actors. When a new Oracle connects an unknown exchange as a  new price data source or when a new Broker creates a binary option  related to a previously-unknown digital asset, not only his/her smart  contracts are likely not to pass the community pre-approval, the  reputation may easily become downvoted by other members. The wide range  of offered smart contracts will ensure that the majority of users will  choose the best-working ones.

Conclusion

Let’s summarize what prevents financial crimes on Giant.Exchange:

• currency conversion is not available
• high masternode price barrier for rogue Brokers and Oracles
• the prohibition to use one masternode for multiple accounts
• funds availability confirmation
• Brokers can only change the basic parameters of a binary option contract
• Oracles can only change the data source API
• smart contract votes with all other masternode owners participating
• user reputation system

This  leaves only one opportunity for criminals - to hack our platform and/or  Giant blockchain. As you might deduce, KYC has never stopped hackers  from stealing bank funds. Decentralization is what can completely  eliminate a single point of hacking and solve other different security  issues. Giant.Exchange is just one of the possible means of interaction  with the Giant blockchain, and this is why its potential vulnerabilities  are not a threat to users. It is important to note here that any people  posing as ‘Giant administrators’ who ask for your Giant Coin wallet  data and/or Giant.Exchange account credentials are only trying to steal  you money. If you don’t tell your passwords to anyone, you are unlikely  to suffer from any criminals on Giant.Exchange.

Note that  Giant.Exchange is just the beginning of Giant smart contracts-based  decentralized applications. By using our structure, everybody will be  able to create a separate platform with stricter or more liberal rules  of participation.

References

1. Giant, Giant Blockchain: The Best Features of Dash and Ethereum https://giantpay.network/pages/giant-blockchain-the-best-features-of-dash-and-ethereum
2. Berkeley News, In a Step Toward Fighting Human Trafficking, Sex Ads Are Linked to Bitcoin Data http://news.berkeley.edu/2017/08/16/in-a-step-toward-fighting-human-trafficking-sex-ads-are-linked-to-bitcoin-data/
3. The Financial Action Task Force (FATF), Guidance for a Risk-Based Approach to Virtual Currencies http://www.fatf-gafi.org/publications/fatfgeneral/documents/guidance-rba-virtual-currencies.html