NFT-Backed Instrument Tracking for Near-Real-Time Valuation
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Solution Overview
Problem
Conventional methods face challenges in securitizing non-fungible tokens (NFTs) due to their price volatility and lack of free cash flow, making it difficult to provide investment platforms and facilitate NFT investment or securitization.
Innovation Solution
Utilizing blockchain technology to create subsets of NFTs, track ownership transfers, and represent these subsets as financial instruments, enabling automatic valuation and transparent management on the blockchain, thereby standardizing the protocol for NFT-based securitization.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Adaptability or versatility
If NFTs are used as investment assets, then investment diversity and potential returns are improved, but price volatility and lack of cash flow make them unfavorable for conservative investors
Solution Approach 1:
The patent segments NFT portfolios into multiple tranches with different risk profiles (senior, mezzanine, equity tranches). Each tranche represents a portion of the underlying NFT assets and provides different return characteristics, allowing conservative investors to access NFT exposure through lower-risk senior tranches while maintaining investment diversity.
Solution Approach 2:
The patent transforms NFTs from individual volatile assets into pooled securities with modified risk parameters. By aggregating multiple NFTs and creating tranches with different seniority levels, the patent changes the risk-return parameters to accommodate various investor risk appetites, particularly enabling conservative investors to participate in NFT investments.
2Adaptability or versatility
If conventional securitization methods are used for NFTs, then investment platforms can be established, but the process is complex and lacks standardization
Solution Approach 1:
The patent creates a universal securitization framework that can handle multiple types of NFTs and investment scenarios through standardized tranches. This multi-functional system accommodates various NFT categories (art, collectibles, virtual real estate) while maintaining consistent processing procedures, reducing complexity through standardization.
Solution Approach 2:
The patent replaces complex manual securitization processes with automated blockchain-based systems. Smart contracts automatically perform valuation, tranche allocation, and cash flow distribution, eliminating manual intervention and reducing operational complexity while establishing standardized procedures.
3Measurement precision
If manual valuation methods are used for pooled NFT assets, then valuation can be performed, but it cannot keep pace with the quick transaction speed of NFTs
Solution Approach 1:
The patent replaces manual valuation processes with automated algorithms executed on blockchain networks. Smart contracts continuously monitor NFT market data and automatically revalue pooled assets in near-real-time, keeping pace with rapid NFT transactions while maintaining accurate valuations through programmatic consistency.
Solution Approach 2:
The patent implements continuous automated valuation through blockchain-based smart contracts that operate without interruption. Unlike manual methods that occur periodically, the automated system continuously updates NFT portfolio values as transactions occur, ensuring valuation accuracy matches the speed of NFT market movements.
4Loss of information
If legacy tools are used for investment tracking, then tracking can be performed, but automatic valuation and transparent management are not possible
Solution Approach 1:
The patent replaces legacy manual tracking tools with automated blockchain-based systems. Smart contracts automatically track NFT ownership, calculate tranche valuations, and record cash flows on the immutable blockchain ledger, enabling both automatic valuation and complete information transparency simultaneously.
Solution Approach 2:
The patent introduces the blockchain as an intermediary layer between NFT assets and investors. This blockchain intermediary automatically processes valuation and tracking information, providing transparent, immutable records that are automatically updated without manual intervention, achieving both automation and transparency.
Data Source
AI summary
Systems, apparatuses, methods, and computer program products are disclosed for tracking NFT-backed instruments. An example method includes identifying a plurality of NFTs on a distributed blockchain ledger, associating an instrument with the cryptographic NFTs, determining a value of the cryptographic NFTs based on transactions on the distributed blockchain ledger that are associated with one or more of the cryptographic NFTs, monitoring the distributed blockchain ledger to detect transaction data of a block of the distributed blockchain ledger, the transaction data indicative of a transaction associated with a first cryptographic NFT of the cryptographic NFTs, determining a modified value of the cryptographic NFTs responsive to the transaction data, and terminating the instrument associated with the cryptographic NFTs in response to a comparison of the modified value to a predetermined threshold value indicating that the modified value is less than the predetermined threshold value.