DAG Blockchain Authentication With KYC Node Aggregation
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Solution Overview
Problem
Verifying the originator of transactions in blockchain-based financial transactions is challenging due to the decentralized nature of the ledger, which can be exploited by bad actors to conceal illicit funds, and integrating secure shell protocols introduces additional vulnerabilities.
Innovation Solution
Implementing directed acyclic graph (DAG) technology to associate transactions with KYC blocks, dynamically aggregating nodes to compress the audit trail and integrate KYC data with settlement processes using self-executing smart contracts.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Productivity
If traditional blockchain traversal is used to verify transaction originators, then security and audit trail integrity are maintained, but processing efficiency deteriorates due to the need to traverse numerous nodes across the decentralized ledger
Solution Approach 1:
The patent segments the blockchain verification process by introducing a DAG structure that divides the transaction verification into hierarchical levels. Instead of traversing all blockchain nodes, the system segments verification into: (1) DAG-based rapid verification of transaction relationships, and (2) selective blockchain verification only when needed. This segmentation reduces the computational burden while maintaining security.
Solution Approach 2:
The patent introduces a DAG structure as an intermediary layer between transactions and the blockchain ledger. This mediator enables efficient transaction origin verification by establishing directed relationships without requiring full blockchain traversal. The DAG acts as a preprocessing layer that filters and organizes transaction data before blockchain verification, reducing the number of nodes that need to be examined.
2Reliability
If KYC protocols are implemented in decentralized blockchain processing, then identity verification security is improved, but processing complexity increases due to the need to integrate centralized verification with decentralized processing
Solution Approach 1:
The patent extracts the KYC verification process from the main transaction processing flow by implementing it as a separate preprocessing step. Identity verification is performed and stored in the DAG structure independently before transactions are processed on the blockchain. This extraction allows KYC protocols to be implemented without adding complexity to the core decentralized processing mechanism.
Solution Approach 2:
The patent implements KYC verification as a preliminary action before transactions enter the blockchain network. Identity verification results are pre-validated and embedded in the DAG structure, so that when transactions are processed, the identity verification is already complete. This preliminary action eliminates the need to re-verify identities during blockchain processing, reducing complexity while maintaining security.
3Reliability
If SSH protocols are used for settlement, then secure communication is achieved, but vulnerability increases due to the risk of SSH key theft by bad actors
Solution Approach 1:
The patent introduces a DAG-based verification mechanism as an intermediary layer between settlement parties. Instead of relying solely on SSH key-based authentication, the system uses the DAG structure to verify transaction relationships and settlement authority. This intermediary verification layer reduces dependency on SSH keys, mitigating the risk of key theft while maintaining secure communication through multi-layered authentication.
Data Source
AI summary
Systems, methods, and apparatus are provided for dynamic DAG-based blockchain authentication protocols. An authentication engine may deploy two associated parent nodes in a private blockchain network. The first parent node may include first party data and the second parent node may include smart contract logic including an aggregation threshold. The authentication engine may receive transaction data for a plurality of transactions between the first party and a second party and validate the transactions against the aggregation threshold. If a transaction exceeds the aggregation threshold, the authentication engine may aggregate a threshold number of transaction nodes into an aggregated node cryptographically linked to the second parent node and generate a new transaction node including a self-executing smart contract cryptographically linked to the aggregated node. At settlement, the authentication engine may validate links between the aggregated nodes and the second parent node and retrieve associated first party data.