Can KYC Add Security Without Compromising Decentralization? 🤔

Hey everyone,

I’ve been thinking about the whole “not your keys, not your funds” philosophy, and while I agree with it, I also feel like there’s room for added security, especially when it comes to fund recovery and preventing fraud.

What if we implemented KYC for wallets, but without compromising decentralization?

Here’s what I’m thinking:

1. KYC data stored in decentralized storage (e.g., IPFS, Filecoin) instead of traditional databases. That way, no central authority holds your personal data.

2. Use Zero-Knowledge Proofs (ZK proofs) to verify users without actually exposing their identity. This means users could prove ownership or compliance without revealing any personal information—maintaining privacy and transparency.

3. The focus is not on managing private keys, but on fund recovery in case of hacks or scams, and ensuring more transparency in the system without adding centralized control.

In my opinion, this would add an extra layer of security and verifiability without compromising on decentralization or privacy. It could also help with anti-money laundering (AML) efforts and offer a way to recover funds without needing full central control.

What do you all think? Could this work as a decentralized, privacy-preserving solution to improve wallet security and fund recovery? Or do you think it’s still too centralized, even with decentralized storage and ZK proofs?

I'm stills new to the space.

Would love to hear your thoughts! 💬