External Compliance System for Cryptocurrency Identity Tracking
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Solution Overview
Problem
Cryptocurrency exchange networks face challenges in complying with information retention regulations due to their anonymous nature, as storing identity information alongside transactions is not secure and violates public accessibility of the block chain.
Innovation Solution
An information compliance system that operates outside the cryptocurrency exchange network, using machine learning algorithms to predict and verify wallet services associated with unique cryptographic addresses, facilitating the sharing of identity information while maintaining anonymity and ensuring regulatory compliance.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Adaptability or versatility
If identity information is stored alongside transactions in the cryptocurrency exchange network, then regulatory compliance is improved, but security and public accessibility of the block chain are compromised
Solution Approach 1:
The patent introduces an external information compliance system as an intermediary between the cryptocurrency exchange network and regulatory requirements. This external system stores identity information separately from the public blockchain, acting as a mediator that enables regulatory compliance without compromising the security and anonymity of the blockchain network. The compliance system receives transaction data from the network and maintains identity information in a secure, regulated environment outside the public ledger.
2Adaptability or versatility
If third parties are involved in every electronic transaction to meet legal regulations, then regulatory compliance is improved, but transaction efficiency and speed are worsened
Solution Approach 1:
The patent implements preliminary action by having wallet service systems pre-verify customer identity information before cryptocurrency transactions occur. The external information compliance system performs identity verification and stores information in advance, so that when transactions happen, the compliance checks are already complete. This eliminates the need for real-time third-party intervention during each transaction, maintaining both regulatory compliance and transaction efficiency.
3Adaptability or versatility
If identity information is retained and shared across multiple entities, then regulatory compliance is improved, but user privacy is worsened
Solution Approach 1:
The patent extracts identity information from the public blockchain and stores it in a separate, secure external information compliance system. This separation takes the sensitive personal data out of the public domain while keeping the transaction records on the blockchain. The external system controls access to identity information, ensuring it is only shared with authorized entities for regulatory purposes, thereby protecting user privacy while maintaining compliance.
Data Source
AI summary
Various embodiments include a method of facilitating identity information exchange in a cryptocurrency transaction. An information compliance computer system can receive a pending cryptocurrency transaction from a transmitter wallet service system for managing one or more user wallet accounts, each associated with one or more cryptographically verifiable addresses in a cryptocurrency exchange network. The information compliance computer system can identify a recipient wallet service system associated with a destination address indicated by the pending cryptocurrency transaction. Information compliance computer system can exchange identity information between the transmitter wallet service system and the recipient wallet service system. The information compliance computer system can publish the pending cryptocurrency transaction to the cryptocurrency exchange network for inclusion into a block chain of the cryptocurrency network.