Custodial Wallet Settlement With Deferred Blockchain Confirmation
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Solution Overview
Problem
Bitcoin transactions take too long to process and incur unpredictable fees, hindering large-scale retail adoption of cryptocurrencies due to the inefficiencies of blockchain technology.
Innovation Solution
A decentralized network system that facilitates near-instantaneous terminal transfers using custodial digital wallets, allowing value transfers between parties without immediate blockchain confirmation, and maintains a ledger for instant updates and balances.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Reliability
If blockchain confirmation is required for cryptocurrency transfers, then transaction security is improved, but transaction processing time increases to 10 minutes or more
Solution Approach 1:
The system segments the transfer process into two distinct phases: an instant settlement phase that updates custodial wallet ledgers immediately, and a deferred blockchain confirmation phase that occurs in the background. This segmentation allows the user to receive immediate confirmation of their transfer while the blockchain processes the transaction asynchronously, resolving the contradiction between instant availability and blockchain security confirmation.
Solution Approach 2:
The patent introduces custodial wallets as an intermediary layer between users and the blockchain. These custodial wallets maintain local ledgers that can be updated instantly without requiring blockchain confirmation. The intermediary absorbs the time delay of blockchain processing, allowing users to experience instantaneous transfers while the underlying blockchain transaction completes in the background.
2Productivity
If blockchain network usage increases, then network utilization is improved, but transaction fees increase and processing time increases
Solution Approach 1:
The system performs preliminary actions by pre-funding custodial wallets and maintaining local ledgers that can be updated immediately. When a transfer is initiated, the custodial wallet can instantly credit the recipient's account from pre-existing balances without waiting for blockchain confirmation. This preliminary preparation allows the system to handle high transaction volumes instantly while batch-processing blockchain confirmations later, decoupling network utilization from processing time and fees.
3Adaptability or versatility
If cryptocurrency valuation is volatile, then investment opportunity is improved, but retail adoption risk increases
Solution Approach 1:
The patent introduces stablecoins as an intermediary asset between volatile cryptocurrencies and fiat currency. Retail users can instantly convert volatile cryptocurrencies to stablecoins (which are pegged to fiat currency value) through the custodial wallet system. This intermediary mechanism eliminates valuation risk for retailers while preserving the ability to hold and trade volatile cryptocurrencies, as users can quickly stabilize their positions when needed.
Data Source
AI summary
A cloud-based service creates and maintains custodial digital wallets for parties to value transfers. Each wallet funded by the corresponding party with cryptocurrency and/or a fiat currency. The cloud-based service provides value transfers between two parties having custodial wallets without any on-chain blockchain operations making such transfers nearly instantaneous. The cloud-based service also provides transfers between one party with a custodial wallet and another party without a custodial wallet by using a liquidity wallet and/or a liquidity account to perform the transfers nearly instantaneously and by initiating any needed blockchain operations on the blockchain to properly reflect any debit or redemption made from the liquidity wallet on the blockchain.