Privacy-Preserving Blockchain Settlement With Stealth Addresses
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Solution Overview
Problem
Existing blockchain systems for digital asset transfers lack scalability, flexibility, and compliance with regulatory requirements, compromising transaction privacy and decentralization among competing entities.
Innovation Solution
Implementing decentralized systems that utilize stealth addresses, fully homomorphic encryption, and zero knowledge proofs to anonymize transactions and ensure regulatory compliance, enabling atomic delivery versus payment transactions on a privacy-preserving blockchain.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Loss of information
If blockchain transparency is used for digital asset transfers, then transaction visibility and auditability are improved, but transaction privacy and entity anonymity deteriorate
Solution Approach 1:
The patent introduces stealth addresses as an intermediary mechanism between the sender and receiver. These addresses act as anonymizing intermediaries that mask the true identities and locations of parties involved in transactions while still enabling the transactions to occur on the blockchain. The stealth address service functions as a mediator that translates real identities into privacy-preserving representations, allowing regulatory compliance without exposing sensitive information.
2Loss of information
If traditional privacy solutions are implemented, then transaction privacy is improved, but scalability and regulatory compliance capability deteriorate
Solution Approach 1:
The patent merges multiple functions into the stealth address system: privacy preservation, scalability support, and regulatory compliance verification are combined in a single integrated mechanism. The stealth address service simultaneously handles transaction anonymization while maintaining the ability to scale with the network and providing compliance capabilities through verifiable credentials, eliminating the need for separate privacy and compliance systems.
3Loss of information
If additional trust assumptions are introduced for privacy solutions, then transaction privacy is improved, but blockchain decentralization and trust minimization deteriorate
Solution Approach 1:
The stealth address system implements self-service by enabling users to generate and manage their own privacy-preserving addresses without requiring additional trusted intermediaries. The system uses cryptographic techniques where users control their own privacy through key pairs, and the blockchain itself verifies compliance through verifiable credentials, eliminating the need for centralized trust authorities while maintaining privacy and compliance.
Data Source
AI summary
A method may include: receiving a request to deposit an encrypted amount of deposit tokens from an institutional investor; generating a stealth address for the institutional investor; encrypting claims for the institutional investor; posting the encrypted claims to an encrypted claims result smart contract, wherein the encrypted claims are mapped to the stealth address on a privacy-preserving blockchain; establishing the encrypted amount of deposit tokens on-chain at the stealth address; receiving an encrypted amount of a first fund and an encrypted amount of a second fund from the stealth address; and atomically transferring the encrypted amount of the first fund and the encrypted amount of the second fund to the stealth address, and deposit tokens for the encrypted amount of the first fund and the encrypted amount of the second fund to a fund manager for the first fund and a fund manager for the second fund, respectively.