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Under current conditions, an exchange will likely need to require any KYC’d user desiring to do such a withdrawal/deposit to prove they own the private key associated with the public key which will be involved in the transaction by require requiring the user to make a small “test deposit” of a randomly assigned amount of the specific digital asset within a specified time frame. Users will need to make such test deposits for every different chain which they conduct withdrawals/deposits. In addition, if the user is using a deterministic wallet that rotates out public keys for each transaction, the user will have to continually make such test deposits. Each such transaction will cost the user funds for paying the underlying blockchain’s transaction fees which on some chains could be far in excess of the amount of the test deposit itself.
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Among other capabilities, the FIO Protocol provides human readable wallet “names” called FIO Addresses that can be mapped to public addresses of any blockchain by the owner of the corresponding FIO Private Key. FIO Addresses are different from previous “wallet name” attempts in a number of ways. Most pertinent to the Travel Rule Discovery problem is the structure of FIO Addresses which includes the concept of a Username and Domain. The FIO Domain is a separate Non-Fungible Token (NFT) which has control over rules on how FIO Address NFTs can be created that utilize the FIO Domain NFT:
The FIO Protocol can enable a verify once for every chain solution for solving the exchange to wallet Travel Rule challenge.
FIO Addresses can technically be mapped to any character string. Today, they are mapped to the public addresses of associated blockchains being utilized by the owner. However, additionally, they could be mapped to a digital signature from any other blockchain that is generated by the user who owns the FIO Private key.
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Below are diagrams that describe this process for: 1) the first one time verification of a user’s control of their wallet; 2) The withdrawing (sending) of coins/tokens from the exchange and ; 3) The depositing of coins/tokens into the exchange.