A Universal Privacy-Preserving Multi-Blockchain Aggregated Identity Scheme

Abstract

Cryptocurrencies offer various benefits in terms of privacy protection and cross-border transactions, but they have also been used for illicit activities such as money laundering due to their anonymous nature and the difficulty of cross-border regulation. Additionally, the unethical actions of some virtual asset service providers (VASPs), such as rug pulls and the embezzlement of user funds, have further eroded the trust between users and VASPs. Implementing identity management on blockchains can help restore trust between users and VASPs. However, current solutions have privacy concerns as identity providers have access to the asset balances and transaction records of each user’s wallet account, and no solution can support all public blockchains unconditionally. To address these issues, this paper proposes a multi-chain aggregated identity scheme. In this scheme, the identity provider will issue a non-fungible token (NFT) for users who have undergone verification, and wallet accounts from different blockchains will be added to a cryptographic accumulator. The accumulator value is then bound to the identity NFT through a smart contract by the user. This allows the user to prove to others that the identity of the wallet account owner has been verified. The use of accumulators also allows users to combine proof for multiple wallets into a single proof, which significantly improves the efficiency and provides a way for VASPs such as centralized exchanges to demonstrate Proof of Reserves (PoR) to users. Importantly, this scheme preserves privacy as neither the identity provider nor the VASPs can link the user’s real identity with the wallet accounts. Only regulators can access the user’s identity data held by the identity provider and the user’s wallet account held by the VASP to link real identities with wallet accounts for the purpose of sanctions or criminal investigations. Additionally, the scheme supports all blockchains by allowing wallet accounts from any public blockchain to be added to the accumulator. Furthermore, the NFT implementation in the scheme helps prevent identity loss or theft, as it can only be transferred by the identity provider.