Alephium: balancing innovation and compliance

Context

Alephium is a next-generation blockchain that combines energy-efficient Proof of Work with native smart contract capabilities, avoiding typical Layer 1 compromises to offer scalability, expressivity, security, and decentralization. Alephium explores underutilized possibilities, such as offering miners native DeFi on a Proof of Work ecosystem, enabling unique uses cases without relying on Proof of Stake networks like Ethereum or Polygon.

Challenge

For a Layer 1 blockchain like Alephium, based in Switzerland, compliance became a pressing issue early on. The challenge was to adhere to local regulations while ensuring a seamless user experience. Alephium’s goal was to strike a delicate balance: incorporating KYC/KYB verification processes to comply with regulations and strengthen the security of its ecosystem, but only when necessary. Respecting user privacy was obviously paramount.

Alephium needed to balance Anti-Money Laundering (AML) compliance while maintaining a secure, reliable, and user-friendly ecosystem.

Currently, compliance affects multiple aspects of the project:

• Reward Program

• Grant Program

• Third-party partners integrated with Alephium.

Solution

Alephium selected Synaps to automate and streamline its KYC (Know Your Customer) and KYB (Know Your Business) processes. With Synaps, Alephium was able to implement verification systems only when necessary, ensuring an optimal user experience while meeting regulatory requirements.

• Reward Program: Alephium uses a simplified AML check to verify users when they receive rewards.

• Grant Program: Synaps’ solution enables Alephium to verify that grant recipients are legitimate and reliable actors, safeguarding the ecosystem.

• Third-Party Partners: Alephium leverages Synaps’ federated KYB solution to streamline and verify 3rd party partners, enabling smooth collaboration with trusted entities.

One of the key strengths of Synaps’ solution is its reusable KYC and KYB, which allows users and partenrs to verify their identity once and reuse that information across other ecosystems. This greatly enhances the user experience and speeds up the verification process.

Results

The integration of Synaps has allowed Alephium to:

• Comply with AML regulations from the outset, ensuring strong legal protection.

• Simplify the identity verification and compliance process for users and partners through federated KYC and KYB solutions, reducing friction while enhancing ecosystem security.

• Protect the ecosystem from fraud and potential vulnerabilities by systematically verifying grant recipients.

Conclusion

By integrating Synaps, Alephium has successfully combined compliance, security, and simplicity, while ensuring a smooth user experience. This approach has allowed Alephium to focus on its primary goal: innovating within the Proof of Work blockchain space and ensuring the long-term sustainability of its ecosystem. Recently, Alephium announced its integration with Ledger, a major milestone for the development of the layer 1.