NFT Instrument Tracking With Real-Time Valuation Thresholds
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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 fixed income, 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 estimate holistic values, enabling the creation of standardized financial instruments that automatically value NFT subsets, allowing for transparent and efficient management and regulatory oversight.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Adaptability or versatility
If NFTs are used as investment assets, then investment diversification and yield potential are improved, but price volatility and lack of fixed income make them unfavorable for conservative investors
Solution Approach 1:
The patent segments NFTs into tranches with different risk profiles (senior, mezzanine, equity tranches), allowing conservative investors to purchase lower-risk senior tranches that provide fixed income, while maintaining exposure to the broader NFT asset class. This segmentation transforms the single volatile NFT asset into multiple instruments with stabilized return profiles.
Solution Approach 2:
The patent changes the risk-return parameters of NFT investments by creating structured products with predetermined cash flow characteristics. Senior tranches are structured to provide fixed income with priority claims on cash flows, effectively changing the volatility and return parameters to match conservative investor preferences.
2Adaptability or versatility
If conventional securitization methods are used for NFTs, then investment platforms can be provided, but the process is complex and lacks standardization
Solution Approach 1:
The patent creates a universal securitization framework that can be applied to diverse NFT types (art, collectibles, virtual real estate, domain names) using standardized tranche structures and smart contract templates. This multi-functional approach allows the same securitization mechanism to handle various NFT categories without requiring custom complex processes for each type.
Solution Approach 2:
The patent implements automated valuation and cash flow distribution through smart contracts that self-execute based on predetermined rules. The system automatically monitors NFT values, calculates cash flows to different tranches, and distributes payments without manual intervention, reducing operational complexity and enabling scalable investment platforms.
3Ease of manufacture
If NFT valuation is performed manually using legacy tools, then traditional securitization processes can be followed, but valuation is slow and cannot keep pace with rapid NFT transactions
Solution Approach 1:
The patent replaces manual mechanical valuation processes with automated computational systems using smart contracts and oracle integrations. These systems continuously fetch NFT market data, calculate valuations algorithmically, and update security values in real-time, substituting slow human-driven processes with fast automated computational mechanisms.
Solution Approach 2:
The patent implements continuous automated valuation monitoring that operates without interruption, constantly tracking NFT market prices and updating security valuations. This continuous action ensures valuation keeps pace with rapid NFT transactions, eliminating the gaps and delays inherent in manual periodic valuation processes.
4Reliability
If standardized protocols are implemented for NFT management, then regulatory oversight and risk allocation clarity are improved, but implementation requires technological infrastructure changes
Solution Approach 1:
The patent introduces blockchain smart contracts as intermediaries that encode and enforce standardized securitization protocols, risk allocation rules, and regulatory compliance requirements. These smart contract intermediaries automatically ensure protocol adherence and provide transparent audit trails, reducing the need for complex external oversight infrastructure while improving reliability.
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.