Complex Token Matching on Distributed Ledgers for Private Trading
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Solution Overview
Problem
Traditional digital token systems, such as those used in cryptocurrency exchanges, rely solely on real number values, leading to issues like privacy breaches and unfair advantages for high-frequency traders due to latency differences, and inefficiencies in transaction processing.
Innovation Solution
Implementing complex number values with magnitude and phase components, recorded on a distributed ledger, using smart contracts to match buyers and sellers based on bid and ask prices' magnitudes and phases, and adjusting frequencies to prevent unfair trading advantages.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Loss of information
If real number values are used for digital tokens, then the system is simple and easy to understand, but user privacy is compromised and transaction visibility is too high
Solution Approach 1:
The patent applies dimensionality change by transitioning from real number values (1D) to complex number values (2D with real and imaginary components). This allows the system to encode additional information in the imaginary component while maintaining the familiar real component for value representation, thereby enhancing privacy without completely overcomplicating the system structure
Solution Approach 2:
The patent changes the parameter representation from simple real numbers to complex numbers with multiple components (real and imaginary parts). This parameter change enables the system to hide the actual monetary value within the complex number structure, where only the magnitude is visible but the phase information remains private, thus protecting user privacy while maintaining system functionality
2Reliability
If traditional order books are used with magnitude-based matching, then the matching process is straightforward, but high-frequency traders gain unfair advantages due to latency differences
Solution Approach 1:
The patent introduces phase as an additional dimension to price matching, transforming the matching criterion from 1D (magnitude only) to 2D (magnitude and phase). This prevents high-frequency traders from gaining unfair advantages by requiring both components to align for a match, thereby ensuring fairness while adding a layer of complexity to the trading mechanism
Solution Approach 2:
The patent applies preliminary action by pre-assigning phases to bid and ask prices before matching occurs. This allows the system to establish fair matching criteria in advance, where both magnitude and phase must be considered, preventing last-minute manipulation by high-frequency traders and ensuring equitable trading conditions for all participants
3Productivity
If complex number values with multiple components are used, then transaction efficiency is improved and privacy is enhanced, but the system complexity increases
Solution Approach 1:
The patent applies universality by making the complex number structure serve multiple functions simultaneously: the real component represents the monetary value, the imaginary component provides privacy protection, the magnitude enables visibility for matching, and the phase provides additional security layers. This multi-functionality improves transaction efficiency while managing system complexity through a unified mathematical framework
Solution Approach 2:
The patent uses composite materials analogy by combining real and imaginary components into a unified complex number structure. This composite approach allows the system to leverage the strengths of both components: the real part for value representation and the imaginary part for privacy enhancement, creating a more efficient and secure trading system without proportionally increasing complexity
Data Source
AI summary
To record an exchange of value in a distributed ledger, a client device interacts with a distributed ledger maintained by participants in a distributed ledger network, for example via a digital wallet. The distributed ledger includes a set of consensus rules including at least one consensus rule that digital token values recorded in the distributed ledger include complex values having at least two components. The client device generates a transaction indicating an exchange of value of a digital token having at least two components, where the transaction is stored in the distributed ledger, and transmits the transaction to at least one other participant in a distributed ledger network of participants maintaining the distributed ledger. The participants append data to the distributed ledger in response to determining that the data satisfies the set of consensus rules.