ZERO-KNOWLEDGE MERCHANT VERIFICATION SYSTEM FOR PRIVACY-PRESERVING PAYMENTS PROVISIONAL PATENT APPLICATION Inventor: Kinan Lemberg Address: 270 Bolton Rd, Koah, 4881, Australia Filing Date: June 4, 2025 CROSS-REFERENCE TO RELATED APPLICATIONS This application claims benefit of and incorporates by reference the following previously filed applications: - Mathematical Proof System for Minimum Payment Fee Achievement with Cryptographic Verification (Application No. 63/817,219) - Automated Regulatory Arbitrage System for Payment Processing Optimization (Application No. 63/817,247) - Cryptographic AI Response Validation System with Mathematical Gate Enforcement (Application No. 63/816,344) - Privacy-Preserving Validation Protocol (filed on or about June 2-3, 2025) - Immutable Audit Trail System for AI Validation Decisions (filed June 3, 2025) FIELD OF THE INVENTION This invention relates to merchant verification systems for payment processing, specifically to zero-knowledge proof protocols that verify merchant legitimacy and compliance without collecting, storing, or exposing sensitive business information. BACKGROUND OF THE INVENTION Traditional payment processors require extensive documentation from merchants before allowing them to accept payments. This process, known as merchant onboarding or Know Your Business (KYB), typically involves collecting sensitive information including business registration documents, tax identification numbers, bank statements, ownership structures, financial records, and personal information about beneficial owners. This creates significant problems: privacy risks from data breaches, lengthy onboarding times (often 3-7 days), high abandonment rates (up to 68% of applicants), operational overhead for manual review, and ongoing data storage liabilities. Current limitations in merchant verification include: 1. Privacy Violations: Merchants must expose sensitive business information to multiple parties, creating security and competitive risks. 2. Slow Onboarding: Manual review processes create friction, delaying merchant activation and causing lost revenue. 3. Data Storage Liability: Payment processors become targets for attacks due to valuable merchant data repositories. 4. Discrimination Risk: Human reviewers may introduce bias based on business type, location, or owner demographics. 5. Compliance Burden: Storing merchant data creates ongoing regulatory obligations under GDPR, CCPA, and other privacy laws. Existing attempts at streamlining merchant verification focus on automation of document collection and review but still require merchants to submit sensitive information. No current system enables complete merchant verification without data collection. There exists a critical need for a merchant verification system that satisfies all regulatory requirements while preserving merchant privacy through zero-knowledge proof protocols. SUMMARY OF THE INVENTION The present invention provides a zero-knowledge merchant verification system that proves merchant legitimacy and regulatory compliance without requiring the collection or storage of sensitive business information. The system leverages cryptographic protocols, trusted attestations, and smart contracts to enable instant merchant onboarding while maintaining or exceeding traditional compliance standards. The invention comprises: 1. Zero-Knowledge Proof Protocol: A cryptographic system that verifies merchant attributes without revealing underlying data. 2. Trusted Attestation Network: A network of authorized entities that provide cryptographic attestations about merchant legitimacy. 3. Smart Contract Verification Engine: Automated verification logic that processes proofs and attestations without human intervention. 4. Privacy-Preserving Compliance Layer: Maintains full regulatory compliance while protecting merchant information. 5. Instant Onboarding Interface: Enables merchants to complete verification in under 60 seconds. The system revolutionizes merchant onboarding by eliminating data collection while improving security, speed, and compliance. DETAILED DESCRIPTION OF THE INVENTION System Architecture Overview The Zero-Knowledge Merchant Verification System operates through cryptographic protocols that prove merchant attributes without exposing underlying data. The system replaces traditional document collection with mathematical proofs and trusted attestations. Component 1: Zero-Knowledge Proof Protocol The Zero-Knowledge Proof Protocol enables merchants to prove business attributes without revealing sensitive information. Core Protocol Structure: ``` MerchantProof = { commitment: Commit(merchant_attributes), proof: ZKProof { business_registration: ProveRegistration(reg_number, jurisdiction), tax_compliance: ProveTaxStatus(tax_id, compliance_status), banking_relationship: ProveBankAccount(account_hash, bank_attestation), business_operations: ProveOperations(revenue_range, business_type), ownership_structure: ProveOwnership(owner_hashes, sanctions_check) }, attestations: TrustedAttestation[], timestamp: unix_timestamp, validity_period: duration } ``` Zero-Knowledge Proof Generation: 1. Attribute Commitment ``` function commitMerchantAttributes(attributes): // Create Pedersen commitments to each attribute commitments = {} for attr in attributes: blinding_factor = random() commitment = g^attr * h^blinding_factor commitments[attr.name] = commitment return commitments ``` 2. Range Proofs for Numeric Attributes ``` function proveRevenueRange(actual_revenue, min_required, max_required): // Bulletproof range proof proof = BulletproofProve(actual_revenue, min_required, max_required) return { commitment: commit(actual_revenue), range_proof: proof, range: [min_required, max_required] } ``` 3. Set Membership Proofs ``` function proveBusinessType(actual_type, allowed_types): // Prove business type is in allowed set without revealing which merkle_tree = buildMerkleTree(allowed_types) path = getMerklePath(actual_type, merkle_tree) proof = { root: merkle_tree.root, membership_proof: generateMembershipProof(actual_type, path) } return proof ``` 4. Composite Proofs ``` function generateMerchantProof(merchant_data): proofs = { registration: proveRegistrationValid(merchant_data.registration), tax_status: proveTaxCompliant(merchant_data.tax_info), bank_account: proveBankingRelationship(merchant_data.banking), no_sanctions: proveSanctionsClean(merchant_data.owners), operating_history: proveOperatingDuration(merchant_data.founded_date) } return aggregateProofs(proofs) ``` Component 2: Trusted Attestation Network The system leverages a network of trusted entities to provide attestations about merchant attributes. Attestation Provider Types: 1. Government Registries - Business registration authorities - Tax authorities - Licensing bodies 2. Financial Institutions - Banks holding merchant accounts - Previous payment processors - Credit bureaus 3. Professional Services - Certified accountants - Legal firms - Compliance services Attestation Protocol: ``` TrustedAttestation = { provider: { identity: ProviderID, public_key: ECCPublicKey, accreditation: AccreditationProof }, attestation: { merchant_identifier: Hash(merchant_unique_id), attributes_verified: AttributeList, verification_method: MethodEnum, confidence_level: Float, timestamp: unix_timestamp }, signature: ECDSA_Sign(provider.private_key, attestation), validity: { not_before: timestamp, not_after: timestamp } } ``` Attestation Verification: ``` function verifyAttestation(attestation): // Verify provider is authorized if not isAuthorizedProvider(attestation.provider.identity): return false // Verify signature if not ECDSA_Verify(attestation.provider.public_key, attestation.attestation, attestation.signature): return false // Check validity period if current_time < attestation.validity.not_before or current_time > attestation.validity.not_after: return false // Verify accreditation is current if not verifyAccreditation(attestation.provider.accreditation): return false return true ``` Component 3: Smart Contract Verification Engine The verification logic is implemented in smart contracts for transparency and automation. Main Verification Contract: ```solidity contract MerchantVerification { struct MerchantProof { bytes32 commitmentHash; bytes zkProof; Attestation[] attestations; uint256 timestamp; uint256 validityPeriod; } struct VerificationRequirements { uint256 minRevenue; uint256 maxRevenue; string[] allowedBusinessTypes; string[] allowedJurisdictions; uint256 minOperatingHistory; uint256 minAttestations; } mapping(address => MerchantProof) public merchantProofs; mapping(address => bool) public verifiedMerchants; function verifyMerchant( MerchantProof memory proof, VerificationRequirements memory requirements ) public returns (bool) { // Verify zero-knowledge proofs require(verifyZKProof(proof.zkProof, requirements), "ZK proof invalid"); // Verify attestations require(proof.attestations.length >= requirements.minAttestations, "Insufficient attestations"); for (uint i = 0; i < proof.attestations.length; i++) { require(verifyAttestation(proof.attestations[i]), "Invalid attestation"); } // Store verification result merchantProofs[msg.sender] = proof; verifiedMerchants[msg.sender] = true; emit MerchantVerified(msg.sender, block.timestamp); return true; } } ``` Verification Libraries: ```solidity library ZKVerifier { function verifyRangeProof( bytes memory proof, uint256 commitment, uint256 min, uint256 max ) internal pure returns (bool) { // Bulletproof verification logic return BulletproofVerify(proof, commitment, min, max); } function verifyMembershipProof( bytes memory proof, bytes32 merkleRoot, bytes32 commitment ) internal pure returns (bool) { // Merkle proof verification return MerkleVerify(proof, merkleRoot, commitment); } } ``` Component 4: Privacy-Preserving Compliance Layer The system maintains full regulatory compliance while protecting merchant privacy. Compliance Features: 1. Selective Disclosure ``` function generateComplianceReport(merchant_proof, regulator_request): // Only reveal information specifically requested by regulators disclosed_attributes = [] for attribute in regulator_request.required_attributes: if merchant_proof.can_prove(attribute): proof = merchant_proof.generate_proof_for(attribute) disclosed_attributes.append({ attribute: attribute, proof: proof, // No actual data revealed, only proof of compliance }) return ComplianceReport(disclosed_attributes, regulator_signature) ``` 2. Audit Trail Without Data ``` AuditRecord = { merchant_hash: Hash(merchant_identifier), verification_timestamp: timestamp, requirements_satisfied: RequirementList, attestation_providers: ProviderHashList, // No actual merchant data stored compliance_proof: ZKProof, auditor_access_key: EncryptedKey } ``` 3. Regulatory Portal - Regulators can verify compliance without accessing merchant data - Query specific attributes with proper authorization - Cryptographic proof of compliance status - Real-time verification without data exposure Component 5: Instant Onboarding Interface The system provides a streamlined interface for merchant verification. Onboarding Flow: 1. Initial Connection (5 seconds) - Merchant connects existing business wallet - System detects available attestations - No manual data entry required 2. Attestation Collection (20 seconds) - Automatic request to attestation providers - Parallel processing of multiple attestations - Real-time status updates 3. Proof Generation (15 seconds) - Client-side proof generation - No sensitive data transmitted - Progress visualization 4. Smart Contract Verification (15 seconds) - Automated verification execution - Immediate result notification - Merchant dashboard activation 5. Completion (5 seconds) - Verification certificate issued - Payment processing enabled - Total time: Under 60 seconds Integration with Related Patents The system leverages innovations from related patents: 1. Mathematical Proof Integration (Application No. 63/817,219) - Optimal fee calculation for verified merchants - Proof of best rates for privacy-conscious businesses 2. Regulatory Arbitrage Integration (Application No. 63/817,247) - Route payments optimally while maintaining privacy - Jurisdiction selection without revealing merchant details 3. Privacy-Preserving Validation - Extends privacy concepts to merchant verification - Unified privacy framework across all validations ADVANTAGES OVER PRIOR ART The present invention provides revolutionary advantages: 1. Complete Privacy: Unlike any existing system, merchants never reveal sensitive business information. 2. Instant Verification: 60-second onboarding versus 3-7 days for traditional systems. 3. Reduced Liability: Payment processors store no merchant data, eliminating breach risks. 4. Perfect Compliance: Exceeds regulatory requirements through cryptographic proof. 5. Zero Discrimination: Automated verification eliminates human bias. 6. Global Scalability: Works across all jurisdictions without modification. INDUSTRIAL APPLICABILITY The invention enables: 1. Payment Processors: Instant merchant onboarding with zero data liability 2. E-commerce Platforms: Privacy-preserving seller verification 3. Cryptocurrency Exchanges: KYB compliance without data collection 4. Marketplaces: Vendor verification without competitive information exposure 5. B2B Platforms: Supplier verification with trade secret protection 6. Financial Services: Any service requiring business verification CLAIMS Claim 1: A zero-knowledge merchant verification system comprising: a) a zero-knowledge proof protocol that verifies merchant attributes without revealing underlying data; b) a trusted attestation network providing cryptographic attestations about merchant legitimacy; c) a smart contract verification engine that processes proofs and attestations automatically; d) a privacy-preserving compliance layer maintaining regulatory adherence without data storage; and e) an instant onboarding interface enabling verification in under 60 seconds. Claim 2: The system of claim 1, wherein the zero-knowledge proof protocol comprises: a) commitment schemes for merchant attributes; b) range proofs for numerical attributes like revenue; c) set membership proofs for categorical attributes; d) composite proof aggregation for multiple attributes; and e) cryptographic binding to prevent proof replay. Claim 3: The system of claim 1, wherein the trusted attestation network comprises: a) authorized attestation providers including government and financial entities; b) cryptographic signatures ensuring attestation authenticity; c) validity periods for time-bound attestations; d) confidence levels for different verification methods; and e) accreditation verification for provider authorization. Claim 4: The system of claim 1, wherein the smart contract verification engine comprises: a) automated proof verification logic; b) configurable verification requirements; c) parallel attestation processing; d) immutable verification records; and e) event emission for downstream systems. Claim 5: The system of claim 1, wherein the privacy-preserving compliance layer comprises: a) selective disclosure for regulatory requests; b) audit trails without merchant data; c) compliance proofs without information revelation; d) regulatory portal for authorized queries; and e) cryptographic access controls. Claim 6: The system of claim 1, wherein the instant onboarding interface comprises: a) automatic attestation provider detection; b) parallel attestation collection; c) client-side proof generation; d) real-time verification status; and e) immediate payment processing activation. Claim 7: A method for zero-knowledge merchant verification comprising: a) receiving merchant connection without data collection; b) identifying available attestation providers; c) collecting cryptographic attestations about merchant attributes; d) generating zero-knowledge proofs of compliance; e) executing smart contract verification; f) issuing verification without storing merchant data; and g) enabling instant payment processing. Claim 8: The method of claim 7, further comprising: a) providing selective disclosure for regulatory queries; b) maintaining audit trails without sensitive data; c) updating attestations as they expire; d) revoking verification if compliance changes; and e) enabling merchant-controlled data sovereignty. Claim 9: The system of claim 1, integrated with payment processing systems to: a) enable instant merchant activation; b) reduce onboarding abandonment rates; c) eliminate data breach liability; d) maintain regulatory compliance; and e) provide competitive advantage through privacy. Claim 10: A computer-readable medium storing instructions that, when executed by a processor, cause the processor to perform the method of claim 7. ABSTRACT A zero-knowledge merchant verification system that enables instant onboarding for payment processing without collecting, storing, or exposing sensitive business information. The system uses cryptographic zero-knowledge proofs to verify merchant attributes, leverages trusted attestations from authorized providers, implements smart contract-based automated verification, maintains regulatory compliance through privacy-preserving mechanisms, and provides sub-60-second onboarding. Unlike traditional KYB processes requiring extensive documentation and creating data liabilities, this system proves merchant legitimacy mathematically while preserving complete privacy. Applications include payment processing, e-commerce platforms, marketplaces, and any service requiring business verification without data exposure. The system eliminates discrimination, reduces fraud, and enables global scalability while exceeding traditional compliance standards.