Blockchain Risk Scoring via Transaction Pattern Analysis

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Solution Overview

Problem

Blockchain transactions lack mechanisms to assess fraud risk when parties are anonymous, as there is no identity verification or recourse available, making it difficult to distinguish trustworthy from untrustworthy transactions.

Innovation Solution

A system and method for risk scoring blockchain transactions by analyzing historical data of transactional entities and nodes, including fraud indicators, transaction frequency, and geographic factors, to provide a risk score that maintains anonymity while informing users about potential fraud.

Engineering Contradictions & Design Principles

VSEngineering Contradiction Analysis

1Loss of information

If blockchain transactions use anonymous wallets to protect user identity, then user privacy is improved, but fraud risk assessment capability deteriorates

Engineering Contradiction:

Improveuser identity informationVSAvoidfraud risk assessment

Core Design Contradiction:

Loss of informationVSReliability

Solution Approach 1:

The patent introduces a risk scoring system as an intermediary that analyzes blockchain transaction data without requiring identification of the actual users. The system uses cryptographic addresses and transaction patterns as mediators to assess fraud risk while preserving user anonymity. This resolves the contradiction by enabling reliability assessment through indirect analysis of transactional behavior rather than direct user identification.

Inventive Principle:

Principle #24Intermediary (Mediator)

Solution Approach 2:

The patent replaces traditional identity verification mechanisms (mechanical/systematic identification of users) with algorithmic analysis of transaction patterns. Instead of verifying who the users are, the system uses computational methods to analyze transaction histories, frequency, amounts, and network relationships to generate risk scores. This substitution enables fraud assessment in the anonymous blockchain environment.

Inventive Principle:

Principle #28Mechanics substitution (Replace mechanical system)

2Reliability

If traditional e-commerce uses identity verification and payment networks to protect consumers, then consumer protection is improved, but transaction anonymity deteriorates

Engineering Contradiction:

Improveconsumer protectionVSAvoiduser anonymity

Core Design Contradiction:

ReliabilityVSLoss of information

Solution Approach 1:

The risk scoring system acts as an intermediary protection layer that operates within the anonymous blockchain framework. Rather than requiring traditional payment networks and identity verification, the system provides consumer protection through algorithmic risk assessment based on transactional data, enabling protected transactions while maintaining anonymity.

Inventive Principle:

Principle #24Intermediary (Mediator)

Solution Approach 2:

The system enables parties to perform their own risk assessment by providing risk scores for potential transaction counterparts. Users can independently evaluate transaction risk without relying on external payment networks or identity verification services, making the protection mechanism self-contained within the blockchain ecosystem.

Inventive Principle:

Principle #25Self-service

3Productivity

If blockchain transactions provide no recourse mechanism, then transaction speed and simplicity are improved, but fraud recovery capability deteriorates

Engineering Contradiction:

Improvetransaction processing speedVSAvoidfraud recovery

Core Design Contradiction:

ProductivityVSReliability

Solution Approach 1:

The risk scoring system performs preliminary risk assessment before transactions are executed. By evaluating transaction risk in advance and providing scores to users, the system enables informed decision-making that can prevent fraudulent transactions before they occur, rather than attempting recovery after the fact. This preliminary protection maintains transaction finality while reducing fraud exposure.

Inventive Principle:

Principle #10Preliminary action

Solution Approach 2:

The system provides feedback in the form of risk scores to users about potential transaction counterparts. This feedback mechanism enables users to make informed decisions about whether to proceed with transactions, creating a preventive feedback loop that addresses fraud risk without requiring post-transaction recourse mechanisms.

Inventive Principle:

Principle #23Feedback

Data Source

PatentUS11797995B2Method and system for risk scoring anonymized transactions

Publication Date: 2023.10.24 MASTERCARD INT INC

AI summary

A method for risk scoring a blockchain transaction includes: storing blockchain data associated with a blockchain, the data including a plurality of blocks, each block including a block header and transaction values, each transaction value including a sending address, recipient address, and transaction amount; receiving a new transaction value related to a proposed blockchain transaction and a node identifier associated with a node included in a blockchain network associated with the blockchain, the new transaction value including a user address, transacting address, and blockchain amount; identifying transaction values in the blockchain where the sending address or recipient address is associated with a transacting cryptographic key pair also associated with the transacting address; determining a risk score for the proposed blockchain transaction based on at least the data included in each of the identified transaction values and the new transaction value; and transmitting the determined risk score.