The permissionless and open-source nature of decentralized finance and its applications is what attracts much of such applications existing usership. However, a recent revelation in Uniswap’s v4 code has sparked fear and speculation within the DeFi community…

KYC Incoming?

A ‘hook’ discovered in Uniswap v4’s open-source code would allow users of the platform to be checked for KYC completion prior to trading in the DEX’s currently permissionless pools.

KYC refers to ‘Know Your Customer’ - a process that is widespread in traditional industries and involves users confirming their identity which is then verified by a centralized entity. In traditional sectors, it is predominantly used as a way of circumventing money-laundering practices. 

Uniswap’s potential KYC is slightly different insofar as it is an ‘opt-in’ feature and the KYC process itself involves the use of an NFT (presumably minted and checked elsewhere). However, with government crackdowns on cryptocurrency in full swing, and the industry’s growing reputation for illicit financing, cryptocurrency users are now concerned that KYC could become mandatory for those wishing to use DeFi.

The news has been hit with criticism from inside the industry with some commenters fearing the eventual removal of the feature’s optionality…

Part of what makes the decentralized finance world so compelling is its permissionless nature and the way in which platforms remain open and accessible to all. Whether or not this is to remain the case in perpetuity is yet to be seen…