Identity Verification Token for Cryptographic Transactions

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Solution Overview

Problem

Conventional virtual currency transaction systems lack effective identity verification mechanisms, leading to challenges such as increased risk of money laundering and fraud, due to their decentralized and anonymous nature, which hinders widespread adoption and compliance with regulatory requirements.

Innovation Solution

Implementing a system that uses Know Your Customer (KYC) verification standards to generate and validate identity verification tokens for entities involved in virtual currency transactions, ensuring that transactions are linked to verified identities and recorded on a distributed ledger, thereby enhancing security and compliance.

Engineering Contradictions & Design Principles

VSEngineering Contradiction Analysis

1Reliability

If identity verification mechanisms are implemented in virtual currency transactions, then security and compliance are improved, but transaction processing time and system complexity increase

Engineering Contradiction:

ImprovesecurityVSAvoidtransaction processing time

Core Design Contradiction:

ReliabilityVSLoss of time

Solution Approach 1:

The system performs identity verification in advance by generating identity verification tokens before transactions occur. These tokens are created through KYC verification processes and stored in the distributed ledger, allowing transactions to be processed quickly by simply validating the pre-existing tokens rather than performing full identity verification at the time of each transaction.

Inventive Principle:

Principle #10Preliminary action

Solution Approach 2:

The system creates simplified copies of identity verification results in the form of identity verification tokens that can be easily validated. Instead of repeatedly performing complex identity verification procedures, the system uses these token copies that contain essential verification information, enabling fast transaction processing while maintaining security.

Inventive Principle:

Principle #26Copying

2Reliability

If identity verification mechanisms are implemented in virtual currency transactions, then security and compliance are improved, but system complexity increases

Engineering Contradiction:

ImprovesecurityVSAvoidsystem complexity

Core Design Contradiction:

ReliabilityVSDevice complexity

Solution Approach 1:

The system introduces identity verification tokens as intermediary elements that simplify the integration of KYC verification into the cryptocurrency transaction system. These tokens act as mediators between the complex identity verification process and the simple transaction validation process, reducing overall system complexity by providing a standardized interface.

Inventive Principle:

Principle #24Intermediary (Mediator)

Solution Approach 2:

The identity verification tokens serve multiple functions: they verify identity, enable transaction authorization, and provide compliance documentation. This multi-functionality reduces system complexity by consolidating multiple verification and compliance mechanisms into a single universal token system that works across different transactions and platforms.

Inventive Principle:

Principle #6Universality (Multi-functionality)

3Object-affected harmful factors

If anonymous identities are maintained in virtual currency transactions, then user privacy is preserved, but susceptibility to money laundering and fraud increases

Engineering Contradiction:

Improvemoney laundering riskVSAvoididentity information

Core Design Contradiction:

Object-affected harmful factorsVSLoss of information

Solution Approach 1:

The system extracts only the essential verification information needed for compliance into identity verification tokens, while keeping detailed personal identity information separate and secure. The tokens contain sufficient data to verify identity and prevent money laundering, but do not expose unnecessary personal information, thus reducing information loss while addressing harmful factors.

Inventive Principle:

Principle #2Taking out (Extraction)

Data Source

PatentUS20240211947A1Methods and systems for identity verification in cryptographic transactions

Publication Date: 2024.06.27 BOOST SUBSCRIBERCO LLC

AI summary

A computer system receives a verification request from a computer device associated with a digital wallet. The verification request includes identification information identifying an entity associated with the wallet. In response to receiving the verification request, the computer system generates an identity verification token using the KYC standard and based on the identification information. The an identity verification token verifies the entity associated with the wallet. The computer system transmits the identity verification token to the computer device for performing a cryptographic transaction linked to the wallet. The computer system receives a validation request associated with the cryptographic transaction from a transaction server. The validation request includes the identity verification token. In response to receiving the validation request, the computer system validates the identity verification token to generate validation information. The computer system transmits the validation information to the transaction server for performing the cryptographic transaction.