CH-PRE Blockchain Auditing for Private Inter-Bank Settlements
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Solution Overview
Problem
Current inter-bank payment systems on blockchain lack privacy in customer financial information and require complex cryptographic solutions that consume resources, leading to scalability issues and vulnerabilities in data storage and access.
Innovation Solution
Implementing Conditional Homomorphic Proxy Re-encryption (CH-PRE) to encrypt customer balances and transaction amounts directly on the blockchain, using smart contracts and CH-PRE key pairs to facilitate transactions and audits without revealing customer information, eliminating the need for separate storage spaces like Private Database Collections (PDCs.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Reliability
If Zero Knowledge Proofs (ZKP) are used to ensure cryptographic guarantees for account balances, then transaction privacy is improved, but device complexity and computational resources increase significantly
Solution Approach 1:
The patent introduces a trusted third party (TTP) that generates key pairs and manages the cryptographic infrastructure. This intermediary simplifies the system by centralizing key management and providing a trusted source for encryption keys, reducing the complexity that would otherwise be distributed across all nodes. The TTP enables privacy-preserving transactions through homomorphic encryption without requiring each node to implement complex ZKP verification mechanisms.
Solution Approach 2:
The patent uses homomorphic encryption to create cryptographic copies of balance data that can be verified without revealing the actual values. Instead of implementing complex ZKP protocols, the system creates encrypted representations of account balances that maintain mathematical properties allowing verification of transaction validity while preserving privacy. This copying approach reduces computational overhead compared to full ZKP implementation.
2Reliability
If Private Database Collections (PDCs) are maintained by banks to store confidential information, then data privacy is improved, but device complexity and maintenance overhead increase
Solution Approach 1:
The patent extracts confidential data from traditional PDC storage and replaces it with homomorphically encrypted data stored directly on the blockchain. This removes the need for separate private database collections maintained by each bank, eliminating the complexity of syncing and managing multiple storage systems. The extraction of sensitive data from PDCs and its replacement with cryptographic primitives simplifies the overall architecture while maintaining privacy.
Solution Approach 2:
The patent replaces the mechanical system of PDC maintenance and data synchronization with cryptographic mechanisms. Instead of banks manually managing private databases and coordinating updates, the system uses homomorphic encryption and smart contracts to automatically handle privacy-preserving operations. This substitution eliminates the coordination overhead and maintenance complexity associated with PDCs.
3Ease of operation
If customer information is stored in plaintext in PDCs, then ease of access for auditing is improved, but security against unauthorized access deteriorates
Solution Approach 1:
The patent changes the parameter of data representation from plaintext to homomorphically encrypted format. This transformation allows auditing operations to be performed on encrypted data through cryptographic verification mechanisms. Auditors can verify transaction validity and check compliance without decrypting or accessing the actual customer information, thus maintaining security while preserving auditability. The parameter change from readable format to cryptographic format resolves the contradiction between accessibility and security.
4Device complexity
If blockchain stores only transaction validation between banks, then network simplicity is improved, but measurement precision of actual transactions deteriorates
Solution Approach 1:
The patent replaces the mechanical verification process with cryptographic substitution. Instead of banks manually verifying and recording transaction details, the system uses homomorphic encryption and zero-knowledge proofs to automatically verify transaction validity. The blockchain stores cryptographic proofs and encrypted data rather than detailed transaction information, maintaining network simplicity while achieving precise verification through mathematical guarantees.
Data Source
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AI summary
Privacy enabled inter-bank settlements and auditing of fund transfer has been addressed using private and shared databases in the blockchain. These are resource inefficient and incur additional overhead on banks to maintain the extra databases. These also pose some security concerns. A method and system disclosed leverages blockchain and Conditional Homomorphic Proxy Re-encryption (CH-PRE) to preserve the privacy of the customer information (balances and transfer amounts) and enables faster auditable settlement between the banks in the presence of governing body. Perform computations on encrypted data (customer balances and transfer amounts) to audit and validate the transaction data without revealing customer information such as balances. As customer balances and transfer amounts are stored in encrypted format, an attacker who is able to gain access to this encrypted data, will not be able to read the customer balances and transfer amounts, as the attacker does not possess bank's private key.