Smart Commodity Contracts for Dynamic Carry Cost Accounting
Find Innovative SolutionsGenerate Solutions
Solution Overview
Problem
Existing systems lack an efficient method for managing and accounting for carry costs associated with the handling and storage of physical commodities in smart commodity contracts, particularly in the context of future deliveries, where prices are nominal and actual costs are unknown.
Innovation Solution
A computer method and graphical user interface (GUI) for executing smart commodity contracts that utilize a distributed ledger to manage and update carry costs, including displaying reserve account balances, receiving electronic payments, and transferring tokens representing the contracts, allowing for real-time adjustments based on actual handling costs.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Ease of manufacture
If carry costs are estimated in advance and included in the nominal price, then the contract can be executed with predetermined pricing, but the accuracy of cost representation deteriorates because actual handling costs are unknown at the time of contract formation
Solution Approach 1:
The smart contract dynamically updates carry cost estimates by incorporating actual handling cost data as it becomes available. The system transitions from static predetermined pricing to dynamic cost adjustment, allowing the nominal price to reflect real-cost data while maintaining the forward-dated contract structure. This resolves the contradiction by making the pricing mechanism adaptable rather than fixed.
Solution Approach 2:
The system implements feedback loops where actual handling cost information is continuously fed back into the smart contract to update carry cost estimates. This feedback mechanism allows the contract to self-correct and improve cost representation accuracy over time while maintaining ease of execution through automated adjustments.
2Reliability
If the smart contract includes reserve account balance requirements for carry costs, then cost management is improved, but the complexity of the transaction system increases due to additional account management requirements
Solution Approach 1:
The smart contract automatically manages reserve account balances through self-executing code that monitors carry cost estimates and adjusts reserves accordingly. This automation eliminates the need for manual account management while maintaining reliable cost coverage, resolving the contradiction by replacing complex manual processes with autonomous system behavior.
Solution Approach 2:
The reserve account mechanism serves multiple functions simultaneously: it acts as a cost buffer, an incentive structure for efficient handling, and an automated adjustment mechanism. This multi-functionality consolidates what would otherwise require separate systems into a single integrated solution, improving reliability without proportionally increasing complexity.
3Measurement precision
If actual carry cost data is received and used to update the smart contract, then cost accuracy is improved, but the time required for contract finalization increases due to ongoing updates
Solution Approach 1:
The system performs preliminary actions by establishing the smart contract with initial carry cost estimates and reserve requirements before actual handling costs are known. This allows the contract framework to be set up in advance while leaving room for subsequent updates, resolving the contradiction by separating contract formation from cost finalization.
Solution Approach 2:
The smart contract maintains continuous operation by accepting cost updates throughout the handling period rather than requiring a single finalization event. This continuous action allows cost accuracy to improve over time without creating discrete delays, as the contract remains active and functional throughout the update process.
Data Source
AI summary
A distributed ledger-based commodity trading method and graphical user interface (GUI) includes creating and using a smart contract that specifies variable or unknown carry costs, and covering actual carry costs with a reserve account of a cryptographic currency or cryptographic token.