Smart Contract Platform for Dynamic Collateral Valuation
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Solution Overview
Problem
Lending transactions face issues such as opacity, asymmetry of information, moral hazard, complexity in application and negotiation processes, and difficulty in determining collateral value and financial health of entities, which existing systems fail to adequately address.
Innovation Solution
A lending transaction enablement platform incorporating data-integrated microservices, including data collection and monitoring, blockchain, and smart contract services, along with IoT, crowdsourcing, and robotic process automation to facilitate transparent and adaptive lending processes.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Loss of information
If traditional lending systems are used, then operational simplicity is maintained, but transparency and information symmetry deteriorate
Solution Approach 1:
The patent introduces a blockchain-based intermediary platform that acts as a neutral mediator between lenders and borrowers. This platform uses smart contracts to automatically execute lending terms, maintain transparent records of all transactions, and provide verifiable information to all parties, thereby resolving information asymmetry without requiring complex manual verification processes
Solution Approach 2:
The system implements real-time feedback mechanisms through smart contracts that automatically monitor loan conditions, collateral values, and repayment status. This continuous feedback loop provides all parties with up-to-date information about the lending state, eliminating information gaps while maintaining system transparency through automated reporting
2Productivity
If manual application and negotiation processes are used, then system complexity is reduced, but processing time and operational efficiency worsen
Solution Approach 1:
The patent implements self-service capabilities through automated smart contracts that handle application processing, term negotiation, and loan execution without manual intervention. The system automatically evaluates borrower credentials, negotiates optimal terms based on predefined algorithms, and executes agreements, thereby dramatically increasing processing speed while the automation handles the complexity internally
Solution Approach 2:
The system performs preliminary actions by pre-configuring smart contracts with standardized loan terms, risk assessment criteria, and automated decision-making algorithms before lending operations begin. This preparation allows rapid processing of loan applications without requiring complex real-time negotiations, as the framework for decision-making is already established
3Adaptability or versatility
If static loan terms are used, then contract simplicity is maintained, but adaptability to changing conditions worsens
Solution Approach 1:
The patent implements dynamic loan terms through smart contracts that can automatically adjust interest rates, repayment schedules, and collateral requirements based on real-time conditions such as market rates, borrower credit changes, and collateral value fluctuations. This dynamic capability is embedded in the contract code itself, allowing flexibility without requiring complex manual renegotiations
4Measurement precision
If traditional collateral valuation methods are used, then valuation simplicity is maintained, but accuracy and reliability worsen
Solution Approach 1:
The patent implements a universal collateral valuation system that automatically handles multiple asset types (real estate, vehicles, equipment, inventory) through integrated data sources and valuation algorithms. The system connects to various data providers, market databases, and asset tracking systems to automatically determine collateral values, providing accurate and reliable valuations across diverse asset classes without requiring separate manual processes for each type
Data Source
AI summary
A system and method of a smart contract and distributed ledger platform with blockchain custody service includes a blockchain service circuit structured to interface with a distributed ledger; a data collection circuit structured to receive data related to items of collateral or data related to environments of the items of collateral; a valuation circuit structured to determine a value for each of the plurality of items of collateral based on a valuation model and the received data; and a smart contract circuit structured to interpret a smart lending contract for a loan, and to modify the smart lending contract by assigning, based on the determined value for each of the items of collateral, at least a portion of the items of collateral as security for the loan such that the determined value of the items of collateral is sufficient to provide security for the loan.