Alexander Lipton

Alexander Lipton, Vadim Kaushansky, Christoph Reisinger

In this paper, we study the non-linear diffusion equation associated with a particle system where the common drift depends on the rate of absorption of particles at a boundary. We provide an interpretation as a structural credit risk model with default contagion in a large interconnected banking system. Using the method of heat potentials, we derive a coupled system of Volterra integral equations for the transition density and for the loss through absorption. An approximation by expansion is given for a small interaction parameter. We also present a numerical solution algorithm and conduct computational tests.

Thomas Hardjono, Alexander Lipton, Alex Pentland

We introduce the contract service provider (CSP) model as an analog of the successful Internet ISP model. Our exploration is motivated by the need to seek alternative blockchain service-fee models that departs from the token-for-operations (gas fee) model for smart contracts found on many popular blockchain platforms today. A given CSP community consisting of multiple CSP business entities (VASPs) form a contract domain which implement well-defined contract primitives, policies and contract-ledger. The nodes of the members of CSP community form the blockchain network. We discuss a number of design principles borrowed from the design principles of the Internet Architecture, and we discuss the interoperability of cross-domain (cross-chain) transfers of virtual assets in the context of contract domains.

Thomas Hardjono, Alexander Lipton, Alex Pentland

The emerging virtual asset service providers (VASP) industry currently faces a number of challenges related to the Travel Rule, notably pertaining to customer personal information, account number and cryptographic key information. VASPs will be handling virtual assets of different forms, where each may be bound to different private-public key pairs on the blockchain. As such, VASPs also face the additional problem of the management of its own keys and the management of customer keys that may reside in a customer wallet. The use of attestation technologies as applied to wallet systems may provide VASPs with suitable evidence relevant to the Travel Rule regarding cryptographic key information and their operational state. Additionally, wallet attestations may provide crypto-asset insurers with strong evidence regarding the key management aspects of a wallet device, thereby providing the insurance industry with measurable levels of assurance that can become the basis for insurers to perform risk assessment on crypto-assets bound to keys in wallets, both enterprise-grade wallets and consumer-grade wallets.

Thomas Hardjono, Alexander Lipton, Alex Pentland

In order for VASPs to fulfill the regulatory requirements from the FATF and the Travel Rule, VASPs need access to truthful information regarding originators, beneficiaries and other VASPs involved in a virtual asset transfer instance. Additionally, in seeking data regarding subjects (individuals or organizations) VASPs are faced with privacy regulations such as the GDPR and CCPA. In this paper we a propose privacy-preserving claims issuance model that carries indicators of the provenance of the data and the algorithms used to derive the claim or assertion. This allows VASPs to obtain originator and beneficiary information without necessarily having access to the private data about these entities. Secondly we propose the use of a consortium trust network arrangement for VASPs to exchange signed claims about subjects and their public-key information or certificate.

Thomas Hardjono, Alexander Lipton, Alex Pentland

The recent FATF Recommendations defines virtual assets and virtual assets service providers (VASP), and requires under the Travel Rule that originating VASPs obtain and hold required and accurate originator information and required beneficiary information on virtual asset transfers. In this paper we discuss the notion of key ownership evidence as a core part of originator and beneficiary information required by the FATF Recommendation. We discuss approaches to securely communicate the originator and beneficiary information between VASPs, and review existing standards for public key certificates as applied to VASPs and virtual asset transfers. We propose the notion of a trust network of VASPs in which originator and beneficiary information, including key ownership information, can be exchanged securely while observing individual privacy requirements.

Thomas Hardjono, Alexander Lipton, Alex Pentland

In this paper we discuss a design philosophy for interoperable blockchain systems, using the design philosophy of the Internet architecture as the basis to identify key design principles. Several interoperability challenges are discussed in the context of cross-domain transactions. We illustrate how these principles are informing the interoperability architecture of the MIT Tradecoin system.