Blockchain Lending Protocol for Digital Asset Collateral Management
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Solution Overview
Problem
Current blockchain technology lacks a mechanism to deposit, hold, and distribute collateral in the form of stable value digital assets for security tokens on the same underlying blockchain, limiting the investment potential of stored digital assets.
Innovation Solution
A system and method for lending digital assets, including providing a digital asset computer system connected to a decentralized network that allows for the deposit, loan ordering, and matching of digital assets, and a method for holding collateral in smart contracts on an underlying blockchain, enabling the creation, transfer, and management of stable value tokens and security tokens.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Reliability
If digital assets are stored in digital wallets using peer-to-peer blockchain technology, then security and independence are maintained, but the assets cannot be invested or earn interest while stored
Solution Approach 1:
The system segments digital assets into two functional categories: collateral assets held in secure digital wallets and investment assets deployed through lending protocols. This allows the same underlying blockchain technology to simultaneously maintain security for stored assets while enabling investment opportunities through the lending platform, resolving the contradiction between security and investment potential
Solution Approach 2:
The lending protocol acts as an intermediary layer between digital asset holders and borrowers. Users can deposit assets into the lending protocol while maintaining ownership and control through smart contracts, enabling these assets to earn interest without compromising the security benefits of blockchain technology. The intermediary facilitates investment potential while preserving the underlying security architecture
2Productivity
If traditional banks are involved in capital markets, then established benchmark rates and interest mechanisms exist, but central authorities are required which compromises independence
Solution Approach 1:
The lending protocol implements self-service mechanisms where smart contracts automatically manage lending, borrowing, and interest rate adjustments without requiring central authorities. The system uses algorithmic interest rate determination based on supply and demand dynamics, eliminating the need for bank involvement while maintaining independent operation on the blockchain, thus achieving both productivity and independence
Solution Approach 2:
The patent replaces the mechanical system of traditional banking with an automated smart contract-based lending protocol. Interest rate mechanisms that previously required central bank intervention and manual processes are substituted with self-executing code on the blockchain that automatically manages capital allocation and interest distribution, achieving independence while maintaining functional equivalence
3Productivity
If digital assets are used for lending and investment, then investment potential is realized, but a mechanism for depositing and managing collateral is required
Solution Approach 1:
The lending protocol implements a universal collateral management system that can handle multiple types of digital assets (cryptocurrencies, tokens, etc.) through a single standardized interface. The smart contracts provide multi-functional capabilities including deposit, withdraw, liquidation, and interest distribution across diverse asset classes, reducing system complexity while enabling broad investment potential
Data Source
AI summary
The present invention relates to a method, system, and program product for depositing, holding and/or distributing collateral in the form of a stable value token for a security token, the tokens being on the same underlying blockchain. Furthermore, the present invention relates to methods, systems and program products for lending digital assets, such as crypto currency, and related products.