ethereum Use-Cases
December 6, 2016 by Josh

By Joshua Ndolo, CEO & Founder, Amani.



This past weekend Amani blockchain services of which I am the CEO and Co-Founder accepted the invitation to take part in the first regulation hackathon hosted by a securities regulator in North America. I led a team of strategists, blockchain subject matter experts, developers and UX designers together for three days to find solutions that help streamline the regulatory environment using blockchain technology that is beneficial not only for regulators but also for the regulated organizations and even for the economy as a whole and this event was organized by the Ontario Securities Commission.

The problem we attempted to solve was streamlining Know your Client (KYC) processes. Know your client is the process of a business, identifying and verifying the identity of its clients and it is essential in establishing a client’s identity in the financial industry, establishing whether a client is an insider, ensure the registrant has sufficient information to meet suitability obligations and to establish the creditworthiness of a margin account.

The solution we came up with was an application called Ancillary that will streamline KYC processes by enabling an ecosystem that allows for seamless exchange of information on a trusted, secure and private network. As with any attempt in validating a proof-of-concept defining the problem statement is key to identifying whether a distributed ledger is a viable solution for the problems beforehand.

Therefore, the problems we highlighted were the expensive costs associated with the current infrastructure that comes up to $300 million by top end banks annually. Another problem is how time-consuming the processes are whereas it takes financial institutions up to 12 days to verify a client’s information and it was also widely known that onboarding at different banks and different departments within banks was a painful experience for customers.

Whatever solution we created using blockchain technology it was essential that it is one in which people were in total control over their own data.  People should also then be able to grant temporary access to institutions wanting to view their data. People should also have a choice over what data is revealed and people should also be able to remove documents from this registry when they are out of data or need updating.

The distributed ledger solutions were categorized into two models:

Centralized blockchain: In this model, a central registry is established where customer data is stored in this distributed ledger and the originating bank generates the KYC number to be stored in this central registry. The central registry charges a fee for the service, a fee that is much less than the cost of duplication of documentation that is prevalent with current KYC processes. A centralized blockchain based model is definitely a better option than current registries due to its considerably lower operational infrastructure costs and ease of integration.


Decentralized blockchain: In this model consensus among participating banks whether it be proof-of-work or through proof-of-stake on the validation process is critical in order to maintain the trust and integrity of the system. When the client approaches another bank to open an account or request any banking services, the approached bank acts as a requesting bank and refers to the ledger to check the KYC status of the customer.

The requesting bank can request the original bank to share the documents and the blockchain platform ensures secure transfer of documents between the two banks (the documents are stored securely and shared through public key cryptography). With this method, financial institutions, regulators and external validators act as nodes on the network that validate any information that is to be shared on the ledger. This then requires all participating nodes to agree on the protocol of the framework and solution.


Although a decentralized model seems more feasible will regulators allow for a lack of central registry? Who will establish guidelines for effective governance in the decentralized model? Should financial institutions first consider experimenting proof-of-concepts within their own departments before agreeing to an inter-bank solution? More questions do remain unanswered but one thing that is undeniable is that blockchain technology will streamline current KYC processes.

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  • Rajesh

    Hi Josh – I definitely think that addressing challenges in KYC space makes a strong case for Blockchain. You have aptly mentioned that verification could take up to 12 days. In fact I know cases which have taken more than a month. Further, most steps are repeated during periodic review of client’s KYC status. All these add up to cost but most importantly client frustration, resulting in missed comments

    Personally, I do not favor a centralized Blockchain as it doesn’t solve the issue of single point of failure. Plus computing power is concentrated with one node and the benefits of disintermediation is lost. What would drive the cost down for a centralized Blockchain based central registry?

    I liked your approach towards decentralized Blockchain. You have attempted to list most of the participants to the Ledger. Again my view is that regulated entities use private – permissioned Blockchain. Hence, I am of the view that neither PoW nor PoS would be applicable.

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