Hot wallet protection using a layer-2 blockchain network

Patent metadata

Field	Value
Publication number	US-12530675-B2
Application number	US-202418630315-A
Country	US
Kind code	B2
Filing date	Apr 9, 2024
Priority date	May 6, 2022
Publication date	Jan 20, 2026
Grant date	Jan 20, 2026

Abstract

Methods and systems for digital hot wallet protection are provided. A payment channel is established via a Layer-2 network of a cryptocurrency blockchain for transferring a cryptocurrency balance from a first digital wallet of a service provider to a second digital wallet of a trusted entity over a plurality of commitment transactions. A transaction receipt for each commitment transaction is transmitted to the trusted entity via a secure communication channel previously established between the service provider and the trusted entity outside of the Layer-2 network. A transaction log of the service provider is modified so that it no longer represents the current transaction state of the payment channel. Responsive to detecting a breach of the first wallet, a transaction is broadcast to a Layer-1 network of the blockchain for transferring the total cryptocurrency balance from the first wallet to the second wallet.

First claim

What is claimed is:

1 . A system comprising:
one or more processors; and one or more machine-readable storage media having instructions stored thereon that, in response to being executed by the one or more processors, cause the system to perform operations comprising:
detecting a breach of a first digital wallet associated with a service provider, wherein the first digital wallet comprises a cryptocurrency balance associated with a cryptocurrency blockchain having a layer one network and a layer two network;
notifying the service provider of the detected breach of the first digital wallet;
invoking a fraud feature based on the detected breach, wherein invoking the fraud feature comprises:
determining a payment channel between the first digital wallet and a second digital wallet on the layer two network of the cryptocurrency blockchain;
determining a transaction log of at least two commitment transactions between the first digital wallet and the second digital wallet;
determining the at least two commitment transactions transfer the cryptocurrency balance from the first digital wallet to the second digital wallet via the payment channel based on the transaction log designating one or more private keys from portions of the cryptocurrency balance, and wherein each of the at least two commitment transactions represents a current transaction state indicating a commitment to transfer the cryptocurrency balance by the service provider from the first digital wallet to the second digital wallet prior to an exchange of the one or more private keys for the cryptocurrency balance on the layer one network of the cryptocurrency blockchain;
submitting, on the layer two network of the cryptocurrency blockchain, the at least two commitment transactions via the payment channel;
determining, based on the transaction log, a transaction receipt recording the current transaction state indicating the commitment to transfer the cryptocurrency balance by the service provider, wherein the transaction receipt was previously received from the service provider via a secure communication channel outside of the layer two network; and
transmitting the transaction receipt to the service provider; and

broadcasting a transaction to the layer one network of the cryptocurrency blockchain for transferring the cryptocurrency balance from the first digital wallet to the second digital wallet.

2 . The system of claim 1 , wherein the submitting of the at least two commitment transactions is based on the transaction log that was used for invoking the fraud feature.

3 . The system of claim 2 , wherein the transaction log represents the cryptocurrency balance transferred from the first digital wallet associated with the service provider to the second digital wallet associated with a trusted entity.

4 . The system of claim 1 , wherein the service provider communicates with a trusted entity for detecting the breach.

5 . The system of claim 4 , wherein the payment channel is established between the service provider and the trusted entity, and wherein the trusted entity identifies a compromised node indicating the breach of the first digital wallet.

6 . The system of claim 5 , wherein the trusted entity is a second-layer entity.

7 . The system of claim 1 , wherein the service provider establishes an open channel for transferring predetermined micropayments between two digital wallets.

8 . The system of claim 7 , wherein the open channel enables the at least two commitment transactions.

9 . A method comprising:
detecting a breach of a first digital wallet associated with a service provider, wherein the first digital wallet comprises a cryptocurrency balance associated with a cryptocurrency blockchain having a layer one network and a layer two network; notifying the service provider of the detected breach of the first digital wallet; invoking a fraud feature based on the detected breach, wherein invoking the fraud feature comprises:
determining a payment channel between the first digital wallet and a second digital wallet on the layer two network of the cryptocurrency blockchain;
determining a transaction log of at least two commitment transactions between the first digital wallet and the second digital wallet;
determining the at least two commitment transactions transfer the cryptocurrency balance from the first digital wallet to the second digital wallet via the payment channel based on the transaction log designating one or more private keys from portions of the cryptocurrency balance, and wherein each of the at least two commitment transactions represents a current transaction state indicating a commitment to transfer the cryptocurrency balance by the service provider from the first digital wallet to the second digital wallet prior to an exchange of the one or more private keys for the cryptocurrency balance on the layer one network of the cryptocurrency blockchain;
submitting, on the layer two network of the cryptocurrency blockchain, the at least two commitment transactions via the payment channel;
determining, based on the transaction log, a transaction receipt recording the current transaction state indicating the commitment to transfer the cryptocurrency balance by the service provider, wherein the transaction receipt was previously received from the service provider via a secure communication channel outside of the layer two network; and
transmitting the transaction receipt to the service provider; and
broadcasting a transaction to the layer one network of the cryptocurrency blockchain for transferring the cryptocurrency balance from the first digital wallet to the second digital wallet.

10 . The method of claim 9 , wherein the submitting of the at least two commitment transactions is based on the transaction log that was used for invoking the fraud feature.

11 . The method of claim 10 , wherein the transaction log represents the cryptocurrency balance transferred from the first digital wallet associated with the service provider to the second digital wallet associated with a trusted entity.

12 . The method of claim 9 , wherein the service provider communicates with a trusted entity for detecting the breach.

13 . The method of claim 12 , wherein the payment channel is established between the service provider and the trusted entity, and wherein the trusted entity identifies a compromised node indicating the breach of the first digital wallet.

14 . The method of claim 13 , wherein the trusted entity is a second-layer entity.

15 . The method of claim 9 , wherein the service provider establishes an open channel for transferring predetermined micropayments between two digital wallets.

16 . The method of claim 15 , wherein the open channel enables the at least two commitment transactions.

17 . A method comprising:
detecting a breach of a first digital wallet associated with a service provider, wherein the first digital wallet comprises a cryptocurrency balance; notifying the service provider of the detected breach of the first digital wallet; determining a transaction log of at least two commitment transactions between the first digital wallet and a second digital wallet; submitting, on a layer two network of a cryptocurrency blockchain, at least two commitment transactions via a payment channel that transfers the cryptocurrency balance from the first digital wallet to a second digital wallet via the at least two payment channels based on the transaction log designating one or more private keys from portions of the cryptocurrency balance, and wherein each of the at

Assignees

• Paypal Inc

Inventors

• Burgis Jakub
• Johnson Raoul
• Marshall Andrew
• Saad Muhammad

Classifications

• G06Q20/401

  Transaction verification · CPC title

• G06Q20/389

  Keeping log of transactions for guaranteeing non-repudiation of a transaction · CPC title

• G06Q2220/00

  Business processing using cryptography · CPC title

• H04L9/50 Primary

  using hash chains, e.g. blockchains or hash trees · CPC title

• G06Q20/3676

  Balancing accounts · CPC title