Token-Based Off-Chain Authorization for Cryptocurrency Payments
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Solution Overview
Problem
Blockchain technologies, such as cryptocurrencies, face challenges in user friendliness and transaction capacity, limiting their widespread adoption due to the need for specialized knowledge, limited acceptance by commercial organizations, and low transaction rates compared to traditional payment systems like Visa.
Innovation Solution
Implementing tokenization and off-chain channels that allow cryptocurrency-based interactions to be authorized using existing payment processing networks, enabling merchants to accept cryptocurrencies like traditional credit card transactions and overcoming transaction rate limits by conducting transactions outside the underlying blockchain.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Ease of operation
If direct cryptocurrency transfer between wallets is used, then cryptocurrency transactions can be performed, but user friendliness deteriorates and commercial acceptance is limited
Solution Approach 1:
The patent introduces payment processing networks (such as VisaNet) as intermediaries between cryptocurrency wallets and merchants. The network acts as a mediator that translates cryptocurrency transactions into familiar payment processing protocols, enabling merchants to accept cryptocurrency through existing infrastructure without requiring specialized cryptocurrency knowledge or equipment.
Solution Approach 2:
The patent enables payment processing networks to handle both traditional fiat currency transactions and cryptocurrency transactions through a unified system. The network can process various types of transactions (credit cards, debit cards, and cryptocurrencies) using the same infrastructure, increasing commercial acceptance and versatility.
2Productivity
If blockchain-based cryptocurrency transactions are used, then cryptocurrency transfers can be performed, but transaction capacity deteriorates due to low transaction rates
Solution Approach 1:
The patent segments the transaction processing into two parts: (1) off-chain rapid authorization through payment processing networks for immediate transaction confirmation, and (2) on-chain settlement through the blockchain for final record-keeping. This segmentation allows high-speed transactions while maintaining blockchain security and finality.
Solution Approach 2:
The payment processing network serves as an intermediary layer that handles the bulk of transaction processing outside the blockchain, enabling high-volume transactions at Visa-like speeds. The blockchain only needs to process a subset of transactions for final settlement, dramatically increasing overall transaction capacity.
Data Source
AI summary
Methods and systems for token-based off-chain interaction authorization are disclosed. A hub computer can maintain a network of off-chain (or “layer two”) channels between itself, cryptocurrency issuer computers, and cryptocurrency custodian computers. These off-chain channels correspond to one or more underlying blockchains. The hub computer can receive an access token, a resource provider identifier, and an interaction value. The hub computer can use the access token to identify a cryptocurrency issuer computer associated with the mobile device, and use the resource provider identifier to identify the cryptocurrency custodian computer associated with the access device. The hub computer can update the state of the off-chain channels corresponding to these two computers based on the interaction value, then transmit an authorization response message.