Distributed Ledger Creditworthiness Scoring via Smart Contracts

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Solution Overview

Problem

Lending organizations face challenges in determining creditworthiness for individuals moving between countries due to unrecognizable credit histories and security/data privacy concerns when exchanging credit information through third-party agencies, which can lead to compliance issues with varying international laws.

Innovation Solution

A ledger management platform utilizing a secure distributed ledger network to broadcast encrypted creditworthiness questions to multiple nodes, generating responses, and determining a credit score while ensuring compliance with data privacy laws through smart contracts and blockchain technology.

Engineering Contradictions & Design Principles

VSEngineering Contradiction Analysis

1Reliability

If third-party agencies are used to exchange credit information between countries, then creditworthiness information can be obtained, but security and data privacy concerns arise leading to compliance issues

Engineering Contradiction:

Improvecreditworthiness information accuracyVSAvoidsecurity and data privacy risks

Core Design Contradiction:

ReliabilityVSObject-affected harmful factors

Solution Approach 1:

The patent introduces a distributed ledger network as an intermediary between lending organizations and credit information sources. This intermediary uses blockchain technology with cryptographic hashing and digital signatures to enable secure, privacy-preserving creditworthiness verification without requiring traditional third-party agencies that pose security and compliance risks.

Inventive Principle:

Principle #24Intermediary (Mediator)

Solution Approach 2:

The patent replaces the mechanical system of traditional third-party credit agencies with a cryptographic system based on distributed ledger technology. Credit information is verified through cryptographic hashes and digital signatures stored on the blockchain, eliminating the need for centralized intermediaries and their associated security and compliance vulnerabilities.

Inventive Principle:

Principle #28Mechanics substitution (Replace mechanical system)

2Adaptability or versatility

If credit histories from different countries are exchanged through traditional methods, then creditworthiness can be assessed, but compliance issues with varying international laws occur

Engineering Contradiction:

Improveinternational credit assessment capabilityVSAvoidlegal compliance

Core Design Contradiction:

Adaptability or versatilityVSReliability

Solution Approach 1:

The distributed ledger network provides a universal platform that can store and verify creditworthiness information from multiple countries simultaneously. The blockchain structure accommodates diverse international credit data while maintaining a single standardized verification mechanism that complies with various international legal frameworks through its decentralized, transparent, and immutable nature.

Inventive Principle:

Principle #6Universality (Multi-functionality)

3Ease of operation

If manual credit assessment processes are used, then credit decisions can be made, but human subjectivity and resource waste increase

Engineering Contradiction:

Improvecredit decision capabilityVSAvoidassessment efficiency

Core Design Contradiction:

Ease of operationVSProductivity

Solution Approach 1:

The system enables automated creditworthiness assessment where the distributed ledger network itself performs the verification function. Lending organizations can independently query the blockchain for credit information and automatically assess creditworthiness based on cryptographic proofs, eliminating the need for manual review processes and reducing both human subjectivity and resource consumption.

Inventive Principle:

Principle #25Self-service

4Productivity

If centralized databases are used to store credit information, then credit data can be accessed, but security vulnerabilities and single points of failure exist

Engineering Contradiction:

Improvecredit information accessibilityVSAvoiddata security

Core Design Contradiction:

ProductivityVSReliability

Solution Approach 1:

The patent segments the centralized credit information database into a distributed network of ledger nodes. Creditworthiness data is divided into cryptographic hashes and digital signatures distributed across multiple blockchain nodes, eliminating the single point of failure inherent in centralized databases while maintaining accessibility through the decentralized network.

Inventive Principle:

Principle #1Segmentation

Data Source

PatentUS12190374B2Secure system

Publication Date: 2025.01.07 CAPITAL ONE SERVICES LLC

AI summary

A device may receive application questions for an individual applying for credit with an organization. The device may broadcast the application questions to additional devices that have access to a distributed ledger for sharing credit worthiness information to cause at least one of the additional devices to generate an application response to the application questions and to process the application response using a smart contract. The device may receive one or more application responses that have been encrypted. Each of the application responses may include particular credit worthiness information relating to the individual. The device may decrypt the application responses. The device may determine a credit worthiness score for the individual using the application responses. The device may perform one or more actions that allow the device or another device associated with the organization to use the credit worthiness score to determine whether to approve the individual for credit.