Blockchain Identity Block for KYC Compliance
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Solution Overview
Problem
Current blockchain applications face challenges in implementing know-your-customer (KYC) and anti-money-laundering (AML) compliance due to the inability to associate identity with transactions, and existing authentication and authorization systems struggle with submitting transactions on behalf of end users.
Innovation Solution
The solution involves creating an initial identifier for an asset and its owner on a blockchain, linking an identity block to the asset, and facilitating asset transfers by updating the identity block upon ownership changes, allowing each network participant to maintain their own authentication and authorization systems while ensuring compliance through immutable KYC data.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Reliability
If identity information is not associated with blockchain transactions, then transaction privacy and decentralization are maintained, but KYC/AML compliance and identity verification cannot be implemented
Solution Approach 1:
The patent segments identity management into separate identity blocks that are linked to transaction blocks through hash references. This allows the blockchain to maintain decentralization and privacy while enabling KYC/AML compliance by separating the actual identity data storage from the transaction ledger, implementing compliance requirements without compromising the blockchain's core principles.
Solution Approach 2:
The patent introduces identity blocks as intermediary structures that mediate between transaction blocks and identity verification requirements. These identity blocks contain KYC/AML information and are referenced by transaction blocks, serving as a bridge that enables regulatory compliance while maintaining the blockchain's decentralized and private nature.
2Ease of operation
If traditional authentication systems are used for submitting transactions on behalf of end users, then user convenience is improved, but security and authorization management become challenging
Solution Approach 1:
The patent implements preliminary authentication by requiring users to complete KYC verification and establish their identity blocks before they can submit transactions. This preliminary action ensures that all transaction participants are pre-verified and authorized, enhancing security while maintaining ease of operation for legitimate users.
Solution Approach 2:
The patent incorporates feedback mechanisms where the blockchain system verifies identity block references and authorization credentials before processing transactions. This feedback loop ensures that only properly authenticated and authorized transactions are executed, maintaining both security and operational efficiency.
Data Source
AI summary
A blockchain of transactions may be referenced for various purposes and may be later accessed by interested parties for ledger verification. One example operation may comprise one or more of creating an initial identifier representing an asset and an owner entity of the asset in a blockchain, identifying an identity block associated with the initial identifier, and identifying an asset transfer of the asset from the owner entity to a blockchain entity.