Certificate of Deposit Trading via Blockchain Smart Contracts
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Solution Overview
Problem
Current technologies for trading non-negotiable financial assets, such as certificates of deposits (CDs), impose transfer restrictions, do not allow for termination before maturity, fail to leverage interest rate fluctuations, incur high fees, and lack an efficient marketplace for brokers or dealers.
Innovation Solution
A system utilizing blockchain technology, smart contracts, and CDCoins to facilitate the trading of non-negotiable financial assets, enabling issuance, identification, and transaction processing of CDs, with features like transferability and interest payment flexibility, and creating a digital marketplace (CDXchange) for trading these assets.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Stability of the object's composition
If transfer restrictions are imposed on certificates of deposit, then the assets maintain their non-negotiable nature and stability, but their usability in dynamic investment portfolios is reduced
Solution Approach 1:
The patent segments the certificate of deposit into a base asset held by the bank and derivative securities (shares representing ownership interests) that can be freely traded. This allows the CD itself to remain stable and non-negotiable while the derivative shares provide adaptability for dynamic investment portfolios.
Solution Approach 2:
The patent introduces derivative securities as an intermediary between the non-negotiable CD and the investor's need for tradability. These derivative shares act as a mediator that enables trading and portfolio management without affecting the underlying CD's non-negotiable status.
2Ease of manufacture
If current technologies are used for issuing certificates of deposit, then the issuance process is simple, but expensive fees are charged from the issuer
Solution Approach 1:
The patent replaces traditional mechanical issuance processes with blockchain technology and smart contracts. This substitution automates the issuance, reduces intermediary involvement, and eliminates expensive issuance fees while maintaining process simplicity through programmable logic.
3Reliability
If traditional marketplace structures are used for trading certificates of deposit, then the trading infrastructure is established, but no efficient marketplace exists for brokers or dealers
Solution Approach 1:
The patent creates a universal digital marketplace platform that serves multiple functions: issuing derivative securities, enabling secondary market trading, providing price discovery, and facilitating broker-dealer activities. This multi-functional platform improves marketplace efficiency while relying on established blockchain infrastructure.
4Duration of action of moving object
If certificates of deposit are held to maturity without early termination, then the full term interest is earned, but the assets cannot be terminated before maturity
Solution Approach 1:
The patent creates derivative shares that are copies representing ownership interests in the CD. These derivative shares can be traded or sold before the CD matures, allowing investors to exit their position early without affecting the underlying CD's full term structure or interest accrual.
Data Source
AI summary
The present disclosure provides a method of facilitating trading non-negotiable financial assets. Further, the method may include receiving an issue data from at least one issuer device associated with at least one issuer, issuing a certificate of deposit (CD) based on the issue data, receiving a purchase request data from at least one investor device associated with at least one investor, identifying the CD based on the CD identifier, processing a transaction for the CD using one or more investor data, generating one or more transaction attributes associated with the transaction based on the processing, storing the one or more transaction attributes in a distributed ledger using a smart contract, and transmitting the CD to the at least one investor device.