Proxy Smart Contract Identity Verification for Compliant DeFi Access
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Solution Overview
Problem
Institutions, such as financial institutions or banks, are unable to interact with decentralized finance (DeFi) applications or smart contracts in a compliant and permissioned manner due to the lack of trust in other participants.
Innovation Solution
Implementing digital identity frameworks and infrastructure, including proxy smart contracts, verifier smart contracts, and digital identifier registries, to verify and execute trades by converting off-chain verifiable credentials to on-chain formats, ensuring a chain of trust and compliance with predefined rules.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Adaptability or versatility
If institutions participate in DeFi applications without digital identity verification, then interaction with decentralized applications becomes possible, but trust and compliance cannot be ensured
Solution Approach 1:
The patent introduces a proxy smart contract as an intermediary between institutions and DeFi applications. This proxy contract handles the verification of digital credentials and manages the interaction, allowing institutions to participate in DeFi while maintaining trust and compliance through verified digital identities.
Solution Approach 2:
The system performs preliminary verification of digital credentials before allowing institutional participation in DeFi transactions. The proxy smart contract verifies credentials in advance, ensuring that only authenticated and compliant participants can interact with decentralized applications.
2Reliability
If digital identity verification is implemented for institutional participation, then trust and compliance are ensured, but system complexity increases
Solution Approach 1:
The proxy smart contract serves as a mediator that encapsulates the complexity of digital identity verification. By centralizing the verification logic in the proxy contract, the system maintains reliability through comprehensive verification while hiding the complexity from end users and simplifying the interface for institutional participation.
Solution Approach 2:
The proxy smart contract performs multiple functions including credential verification, compliance checking, and transaction facilitation within a single unified system. This multi-functionality reduces overall system complexity by consolidating what would otherwise be separate complex subsystems into one versatile component.
3Quantity of substance
If verifiable credentials are stored in nested format, then data structure efficiency is improved, but verification complexity increases
Solution Approach 1:
The patent segments the verification process into distinct modular components: credential verification, issuer verification, and compliance checking. This segmentation allows the system to handle nested credential structures efficiently while managing verification complexity through systematic, step-by-step validation of each segment.
Solution Approach 2:
The proxy smart contract acts as an intermediary that manages the complexity of parsing and verifying nested credential structures. It abstracts the verification logic, handling the complexity of nested data formats while presenting a simple verification interface to both issuers and verifiers.
Data Source
AI summary
Systems and methods for using digital identity frameworks to access and interact with decentralized applications are disclosed. A method may include a proxy smart contract: receiving a trade from an authorized trader and an on-chain format of a verifiable credential, wherein the on-chain format of the verifiable credential comprises a flattened array of an authorized trader verifiable credential, a trusted entity verifiable credential, and root issuer verifiable credential; verifying, using a verifier smart contract, the on-chain format of the verifiable credential, wherein the verifier smart contract queries a digital identifier registry to verify that an authorized trader digital identifier, a trusted entity digital identifier, and a root issuer digital identifier associated with the root issuer verifiable credential are active; and in response to the authorized trader digital identifier, the trusted entity digital identifier, and root issuer digital identifier being active, executing, with a decentralized finance smart contract, the trade.