Blockchain Net Settlement Using Minimum Inter-Issuer Transactions
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Solution Overview
Problem
Financial institutions face significant strain on payment networks and incur high fees due to the large number of daily settlement transactions, necessitating a more efficient and less energy-intensive settlement process.
Innovation Solution
A centralized processing server collects settlement information from a group of financial institutions and determines the minimum number of transactions required for net settlement, generating a list of transactions that is then published on a blockchain for secure and transparent distribution, reducing the overall number of transactions.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Productivity
If traditional settlement processes are used with thousands of financial institutions performing hundreds of settlement transactions daily, then settlement accuracy and individual transaction tracking are maintained, but the number of transactions becomes extremely large (potentially millions daily), causing significant strain on payment networks, high fees, and excessive energy consumption
Solution Approach 1:
The patent merges multiple individual settlement transactions into a single net settlement transaction. By calculating the net position (amounts owed and amounts due) for each financial institution across multiple transactions, the system consolidates these into one transaction per institution, reducing millions of transactions to thousands while maintaining settlement accuracy
Solution Approach 2:
The patent segments the settlement process into distinct phases: (1) collecting individual transaction data, (2) calculating net positions for each institution, (3) generating net settlement transactions, and (4) publishing to blockchain. This segmentation allows complex multi-transaction settlements to be processed systematically and efficiently
2Loss of energy
If the number of settlement transactions is reduced through netting, then energy consumption and fees are significantly reduced, but the complexity of determining net positions and generating minimal transaction sets increases
Solution Approach 1:
The patent introduces a centralized processing server as an intermediary that performs the complex net position calculations and generates the minimal transaction set. This intermediary handles the computational complexity centrally, preventing it from propagating through the entire network and simplifying the overall system architecture
Solution Approach 2:
The patent changes the fundamental parameter of settlement from individual transaction amounts to net positions (amounts owed and amounts due). This parameter transformation simplifies the data structure and enables more efficient calculation of minimal transaction sets required for settlement
3Reliability
If net settlement transactions are published on a blockchain for transparency and security, then regulatory compliance and trust are improved, but the requirement for all entities to verify and process blockchain data increases system complexity and processing time
Solution Approach 1:
The patent performs preliminary actions by having the processing server pre-calculate net positions, pre-generate the minimal transaction set, and pre-validate the settlement data before publishing to the blockchain. This preliminary processing ensures that once data is on the blockchain, verification is streamlined and time-consuming re-calculations are avoided
Data Source
AI summary
A method for performing simplified net settlement among entities facilitated by blockchain includes: receiving a plurality of settlement transactions including an amount, payer, payee, where each payer and payee are one of a plurality of entities; processing the settlement transactions to determine an amount owed or an amount due for each of the plurality of entities; determining a minimum amount of transactions for settlement among the plurality of entities based on the determined amounts owed or due; generating a list of net settlement transactions of the determined minimum amount, each net settlement transaction including an amount, payer, and payee based on the determined amounts owed or due for each entity; and transmitting the generated list of net settlement transactions to a blockchain node in a blockchain network for inclusion in a new blockchain data entry added to a blockchain associated with the blockchain network.