Distributed Ledger Interchange for Real-Time Settlement
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Solution Overview
Problem
Current financial transaction settlement systems are costly, cumbersome, and overly reliant on third parties, making them unsuitable for the modern online economy, with high transaction fees and security overheads.
Innovation Solution
A distributed ledger-based interchange system using a blockchain network to manage transactions between entities, where transactions are approved by peer votes and settled in real time, reducing the need for centralized banks and enhancing security and transparency.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Reliability
If traditional settlement systems (ACH, SWIFT) are used, then transaction security is maintained through third-party intermediaries, but transaction costs increase due to fees and overhead
Solution Approach 1:
The patent extracts and eliminates the third-party intermediary (centralized bank) from the settlement process by implementing a distributed ledger system where peer nodes directly validate and settle transactions between themselves, removing the need for centralized authorization while maintaining security through cryptographic consensus
Solution Approach 2:
The patent introduces a blockchain-based distributed ledger as a new intermediary that replaces traditional centralized banks, providing a decentralized mechanism for transaction validation and settlement that reduces costs while maintaining security through cryptographic protocols and consensus algorithms
2Ease of operation
If traditional centralized bank systems are used, then transaction processing is controlled through centralized authority, but system complexity increases due to reliance on third parties
Solution Approach 1:
The patent segments the centralized bank authority into multiple distributed peer nodes that each independently validate transactions, dividing the centralized control function across many participants and simplifying the overall system architecture by eliminating the need for a single point of control
Solution Approach 2:
The patent enables peer nodes to autonomously validate and settle transactions without requiring centralized authorization, allowing the system to self-regulate through cryptographic consensus mechanisms and smart contracts, thereby reducing operational complexity despite the distributed nature
3Reliability
If traditional batch settlement processes are used, then transaction security is verified through multiple checks, but settlement time increases due to processing delays
Solution Approach 1:
The patent implements continuous real-time settlement processing where transactions are validated and settled immediately as they occur on the blockchain, eliminating batch processing delays while maintaining security through ongoing cryptographic verification and consensus validation at each network node
Solution Approach 2:
The patent performs preliminary validation of transactions through cryptographic signature verification and consensus checks before settlement is finalized on the blockchain, ensuring security is established in advance while enabling immediate settlement without subsequent batch processing delays
Data Source
AI summary
Techniques are described for a distributed ledger based interchange system for transferring value between entities. A decentralized and distributed ledger system, such as a blockchain network, may include treasury accounts each associated with an institution that participates in the system. A particular transaction may be submitted for approval based on the votes of the peers in the distributed ledger based interchange system. If at least a threshold number of votes indicate approval, the transaction is approved. A signal may be sent to the institutional systems indicating that accounts of the sending and receiving entities may respectively be debited and credited the value of the transaction. Settlement may occur between the treasury accounts of the sending and receiving institutions on the distributed ledger system, and settlement may be performed in real time with respect to the transaction.