Digital Currency Stabilization via Hedging and Balance Adjustment

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Solution Overview

Problem

Digital currencies face volatility issues, which hinder consumer adoption due to unpredictable buying power and value fluctuations, necessitating a system that maintains valuation stability while allowing transactional use.

Innovation Solution

A digital currency account stabilization system that uses a stabilizing entity to maintain the value of a digital currency account balance against a reference currency, opening hedging positions and adjusting the account balance by adding or deducting digital currency to maintain the initial value, allowing for seamless transactional use.

Engineering Contradictions & Design Principles

VSEngineering Contradiction Analysis

1Adaptability or versatility

If digital currency is used to enable decentralized financial transactions, then transactional flexibility and innovation are improved, but value volatility and consumer risk increase

Engineering Contradiction:

Improvetransactional flexibilityVSAvoidvalue stability

Core Design Contradiction:

Adaptability or versatilityVSReliability

Solution Approach 1:

The patent introduces a stabilizing entity as an intermediary between the digital currency system and users. This entity assumes the role of risk manager by opening hedging positions and adjusting account balances to maintain stable valuation, thereby separating the transactional flexibility benefit from the volatility risk for end users

Inventive Principle:

Principle #24Intermediary (Mediator)

Solution Approach 2:

The system continuously monitors the value of digital currency accounts and uses feedback mechanisms to automatically adjust account balances. When volatility is detected, the stabilizing entity adds or removes digital currency from accounts to maintain target valuation, creating a self-regulating feedback loop that maintains stability while preserving transactional use

Inventive Principle:

Principle #23Feedback

2Productivity

If digital currency value is allowed to fluctuate freely, then investment opportunities and market efficiency are improved, but consumer adoption and trust decrease

Engineering Contradiction:

Improvemarket efficiencyVSAvoidconsumer adoption

Core Design Contradiction:

ProductivityVSEase of operation

Solution Approach 1:

The patent segments the digital currency experience into two distinct functions: transactional use (maintained by the user) and value stabilization (managed by the stabilizing entity). This segmentation allows the system to maintain market efficiency through trading while presenting consumers with stable valuation, effectively separating investment opportunities from consumer risk

Inventive Principle:

Principle #1Segmentation

Solution Approach 2:

The stabilizing entity operates autonomously by automatically opening hedging positions and adjusting account balances without requiring user intervention. This self-service mechanism maintains market efficiency through continuous trading while presenting consumers with a stable, user-friendly experience

Inventive Principle:

Principle #25Self-service

Data Source

PatentUS10558954B1System for maintaining account valuation of digital currency accounts

Publication Date: 2020.02.11 BLOCKCHAIN DEV CO LLC

AI summary

A digital currency account stabilization system for maintaining valuation of a digital currency account balance against a reference currency. The digital currency account balance is maintained in a currency account and has an initial value. Hedging positions are opened to maintain the valuation of the currency account at the initial value. When the valuation of the digital currency fluctuates, digital currency is added or deducted from the currency account to maintain the initial value.