Blockchain-Based E-Commerce Fraud Detection and Risk Scoring
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Solution Overview
Problem
Users often unknowingly purchase counterfeit or fake products online due to the lack of effective methods to identify genuine products and fraudulent online venues, leading to financial losses and infringement of intellectual property rights.
Innovation Solution
A system utilizing 'wisdom of the crowd' and Artificial Intelligence (AI) to generate a Risk Score for online products and websites, providing users with warnings and certification stamps, and incentivizing reporting of fraudulent activities through a bounty system, with data stored on a blockchain to prevent tampering.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Speed
If users purchase online without verification, then transaction speed is improved, but reliability of product authenticity deteriorates
Solution Approach 1:
The system performs preliminary actions by pre-generating certification stamps and risk scores for online venues and products before transactions occur. These authenticity indicators are prepared in advance and made available for immediate verification during purchasing, allowing users to quickly assess authenticity without delaying transactions.
Solution Approach 2:
The system introduces an intermediary mechanism - the certification stamp and risk score - that mediates between the buyer and seller. This intermediary provides independent verification of product authenticity and venue legitimacy, enabling fast transactions while maintaining reliability through third-party validation.
2Reliability
If comprehensive verification methods are implemented, then product authenticity is improved, but device complexity deteriorates
Solution Approach 1:
The system extracts the complex verification process from the user's device and relocates it to a centralized server infrastructure. The server performs AI-based analysis, crowd-sourced validation, and data aggregation, while the user's device only needs to display simple certification stamps and risk scores, dramatically reducing client-side complexity.
Solution Approach 2:
The certification stamp system serves multiple functions simultaneously: it displays product authenticity, indicates venue legitimacy, provides risk assessment, and offers blockchain-based verification. This multi-functional approach consolidates various verification mechanisms into a single universal indicator, reducing overall system complexity.
3Stability of the object's composition
If blockchain technology is used for data storage, then data integrity is improved, but use of energy deteriorates
Solution Approach 1:
The system applies blockchain technology selectively only to critical authentication data that requires maximum integrity protection, such as certification stamp issuance and risk score generation. Non-critical operational data is stored using conventional, energy-efficient databases, optimizing the balance between data integrity and energy consumption.
Data Source
AI summary
System, device, and method of protected electronic commerce and electronic financial transactions. A method includes: analyzing (i) content of an online destination that sells an asset to an end-user, and (ii) data about ownership in the online destination, and (iii) meta-data about that content; and determining that an offering to sell that asset to the end-user is fraudulent. The system further provides digital tokens or crypto-currency, that end-users should pay in order to submit a user-report about a possible scam. The collected crypto-currency tokens are used by the system, to reward a user that submitted a scam report that turned out to be correct, to fund operations of a fraud-prevention entity, to fund guarantee payments to defrauded end-users, and for other purposes. The system generates authenticity stamps for online venues and for crypto-currency wallets that are determined to be legitimate.