# Confidential Transactions Architecture ## Overview Design for opt-in confidential transaction support in AITBC, enabling participants to encrypt sensitive transaction data while maintaining selective disclosure and audit capabilities. ## Architecture ### Encryption Model **Hybrid Encryption with Envelope Pattern**: 1. **Data Encryption**: AES-256-GCM for transaction data 2. **Key Exchange**: X25519 ECDH for per-recipient key distribution 3. **Envelope Pattern**: Random DEK per transaction, encrypted for each authorized party ### Key Components ``` ┌─────────────────┐ ┌──────────────────┐ ┌─────────────────┐ │ Transaction │───▶│ Encryption │───▶│ Storage │ │ Service │ │ Service │ │ Layer │ └─────────────────┘ └──────────────────┘ └─────────────────┘ │ │ │ ▼ ▼ ▼ ┌─────────────────┐ ┌──────────────────┐ ┌─────────────────┐ │ Key Manager │ │ Access Control │ │ Audit Log │ └─────────────────┘ └──────────────────┘ └─────────────────┘ ``` ## Data Flow ### 1. Transaction Creation (Opt-in) ```python # Client requests confidential transaction transaction = { "job_id": "job-123", "amount": "1000", "confidential": True, "participants": ["client-456", "miner-789", "auditor-001"] } # Coordinator encrypts sensitive fields encrypted = encryption_service.encrypt( data={"amount": "1000", "pricing": "details"}, participants=transaction["participants"] ) # Store with encrypted payload stored_transaction = { "job_id": "job-123", "public_data": {"job_id": "job-123"}, "encrypted_data": encrypted.ciphertext, "encrypted_keys": encrypted.encrypted_keys, "confidential": True } ``` ### 2. Data Access (Authorized Party) ```python # Miner requests access to transaction data access_request = { "transaction_id": "tx-456", "requester": "miner-789", "purpose": "settlement" } # Verify access rights if access_control.verify(access_request): # Decrypt using recipient's private key decrypted = encryption_service.decrypt( ciphertext=stored_transaction.encrypted_data, encrypted_key=stored_transaction.encrypted_keys["miner-789"], private_key=miner_private_key ) ``` ### 3. Audit Access (Regulatory) ```python # Auditor with court order requests access audit_request = { "transaction_id": "tx-456", "requester": "auditor-001", "authorization": "court-order-123" } # Special audit key escrow audit_key = key_manager.get_audit_key(audit_request.authorization) decrypted = encryption_service.audit_decrypt( ciphertext=stored_transaction.encrypted_data, audit_key=audit_key ) ``` ## Implementation Details ### Encryption Service ```python class ConfidentialTransactionService: """Service for handling confidential transactions""" def __init__(self, key_manager: KeyManager): self.key_manager = key_manager self.cipher = AES256GCM() def encrypt(self, data: Dict, participants: List[str]) -> EncryptedData: """Encrypt data for multiple participants""" # Generate random DEK dek = os.urandom(32) # Encrypt data with DEK ciphertext = self.cipher.encrypt(dek, json.dumps(data)) # Encrypt DEK for each participant encrypted_keys = {} for participant in participants: public_key = self.key_manager.get_public_key(participant) encrypted_keys[participant] = self._encrypt_dek(dek, public_key) # Add audit escrow audit_public_key = self.key_manager.get_audit_key() encrypted_keys["audit"] = self._encrypt_dek(dek, audit_public_key) return EncryptedData( ciphertext=ciphertext, encrypted_keys=encrypted_keys, algorithm="AES-256-GCM+X25519" ) def decrypt(self, ciphertext: bytes, encrypted_key: bytes, private_key: bytes) -> Dict: """Decrypt data for specific participant""" # Decrypt DEK dek = self._decrypt_dek(encrypted_key, private_key) # Decrypt data plaintext = self.cipher.decrypt(dek, ciphertext) return json.loads(plaintext) ``` ### Key Management ```python class KeyManager: """Manages encryption keys for participants""" def __init__(self, storage: KeyStorage): self.storage = storage self.key_pairs = {} def generate_key_pair(self, participant_id: str) -> KeyPair: """Generate X25519 key pair for participant""" private_key = X25519.generate_private_key() public_key = private_key.public_key() key_pair = KeyPair( participant_id=participant_id, private_key=private_key, public_key=public_key ) self.storage.store(key_pair) return key_pair def rotate_keys(self, participant_id: str): """Rotate encryption keys""" # Generate new key pair new_key_pair = self.generate_key_pair(participant_id) # Re-encrypt active transactions self._reencrypt_transactions(participant_id, new_key_pair) ``` ### Access Control ```python class AccessController: """Controls access to confidential transaction data""" def __init__(self, policy_store: PolicyStore): self.policy_store = policy_store def verify_access(self, request: AccessRequest) -> bool: """Verify if requester has access rights""" # Check participant status if not self._is_authorized_participant(request.requester): return False # Check purpose-based access if not self._check_purpose(request.purpose, request.requester): return False # Check time-based restrictions if not self._check_time_restrictions(request): return False return True def _is_authorized_participant(self, participant_id: str) -> bool: """Check if participant is authorized for confidential transactions""" # Verify KYC/KYB status # Check compliance flags # Validate regulatory approval return True ``` ## Data Models ### Confidential Transaction ```python class ConfidentialTransaction(BaseModel): """Transaction with optional confidential fields""" # Public fields (always visible) transaction_id: str job_id: str timestamp: datetime status: str # Confidential fields (encrypted when opt-in) amount: Optional[str] = None pricing: Optional[Dict] = None settlement_details: Optional[Dict] = None # Encryption metadata confidential: bool = False encrypted_data: Optional[bytes] = None encrypted_keys: Optional[Dict[str, bytes]] = None algorithm: Optional[str] = None # Access control participants: List[str] = [] access_policies: Dict[str, Any] = {} ``` ### Access Log ```python class ConfidentialAccessLog(BaseModel): """Audit log for confidential data access""" transaction_id: str requester: str purpose: str timestamp: datetime authorized_by: str data_accessed: List[str] ip_address: str user_agent: str ``` ## Security Considerations ### 1. Key Security - Private keys stored in HSM or secure enclave - Key rotation every 90 days - Zero-knowledge proof of key possession ### 2. Data Protection - AES-256-GCM provides confidentiality + integrity - Random IV per encryption - Forward secrecy with per-transaction DEKs ### 3. Access Control - Multi-factor authentication for decryption - Role-based access control - Time-bound access permissions ### 4. Audit Compliance - Immutable audit logs - Regulatory access with court orders - Privacy-preserving audit proofs ## Performance Optimization ### 1. Lazy Encryption - Only encrypt fields marked as confidential - Cache encrypted data for frequent access - Batch encryption for bulk operations ### 2. Key Management - Pre-compute shared secrets for regular participants - Use key derivation for multiple access levels - Implement key caching with secure eviction ### 3. Storage Optimization - Compress encrypted data - Deduplicate common encrypted patterns - Use column-level encryption for databases ## Migration Strategy ### Phase 1: Opt-in Support - Add confidential flags to existing models - Deploy encryption service - Update transaction endpoints ### Phase 2: Participant Onboarding - Generate key pairs for all participants - Implement key distribution - Train users on privacy features ### Phase 3: Full Rollout - Enable confidential transactions by default for sensitive data - Implement advanced access controls - Add privacy analytics and reporting ## Testing Strategy ### 1. Unit Tests - Encryption/decryption correctness - Key management operations - Access control logic ### 2. Integration Tests - End-to-end confidential transaction flow - Cross-system key exchange - Audit trail verification ### 3. Security Tests - Penetration testing - Cryptographic validation - Side-channel resistance ## Compliance ### 1. GDPR - Right to encryption - Data minimization - Privacy by design ### 2. Financial Regulations - SEC Rule 17a-4 - MiFID II transaction reporting - AML/KYC requirements ### 3. Industry Standards - ISO 27001 - NIST Cybersecurity Framework - PCI DSS for payment data ## Next Steps 1. Implement core encryption service 2. Create key management infrastructure 3. Update transaction models and APIs 4. Deploy access control system 5. Implement audit logging 6. Conduct security testing 7. Gradual rollout with monitoring