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Discover How Mandatory KYC Systems Strengthen Digital Accountability And Transparency Against Fraud, Learning Lessons From MtGOX And FTX



Many people assume blockchain technology is a perfect defense built to stop all forms of financial fraud. It is known for being secure, transparent, and tamper-proof. So, when major centralized crypto platforms like MtGOX and FTX collapsed, the question naturally follows: “If blockchain is so safe, how did this happen?”

The answer is straightforward:
 Blockchain technology does not prevent human dishonesty, it helps reveal it.

Blockchain works by recording transactions in a way that is permanent and cannot be changed later. Once a record is written onto the blockchain, it stays there forever. This is excellent for keeping records clean and providing an auditable trail. However, it does not stop individuals from lying, stealing, or misusing customer funds before those transactions are officially created.
In the cases of MtGOX and FTX, the issue was not the blockchain itself. It was the people and the centralized entities running the platforms. They had discretionary control over customer funds and made decisions that were dishonest or irresponsible. Blockchain did not fail, it simply was not designed to prevent those human actions.

However, blockchain still plays a vital role. Because every transaction is permanently recorded, it becomes much easier for investigators to trace what happened. They can follow the money trail, see where the funds were moved, and identify who was responsible. That offers a major improvement over traditional systems, where records can often be hidden or altered.
 
Now, here is where industry-standard security protocols can strengthen the system. The mandatory use of KYC (Know Your Customer) verification adds a layer of real-world accountability that the old platforms like MtGOX and FTX lacked. By verifying the identity of each user, KYC helps ensure that participants are real people, not bots, fake entities, or anonymous actors. This makes it significantly harder for bad actors to operate or hide behind multiple accounts.

KYC does not replace the blockchain, it complements the technology. While the blockchain keeps the records clean, mandatory KYC helps ensure the people entering the data are accountable. Together, they form a stronger foundation for building trust, transparency, and long-term resilience across all financial systems.

Is blockchain technology beneficial or harmful for the world? Overall, it is highly beneficial. It does not solve every problem, but it gives us much better tools to uncover the truth and hold people accountable. And when paired with required security procedures like KYC, its ability to secure transactions is even more powerful.

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