Smart Contract Obligation Objects for Continuous Forward Rate Agreements

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Solution Overview

Problem

Current systems for conducting electronic transactions in distributed ledger systems, such as the Ethereum blockchain, lack efficient mechanisms for managing continuous forward rate agreements (CFRAs) in cryptocurrencies, particularly in maintaining predetermined interest rates and collateral value stability amidst fluctuating extrinsic rates.

Innovation Solution

The method involves creating smart contracts that manage CFRA by generating obligation objects with associated lender and borrower tokens, determining interest rates based on extrinsic or intrinsic rates, and executing transactions to maintain predetermined interest rates, including adjusting loan amounts and collateral values in response to rate changes, ensuring stability and fairness between lenders and borrowers.

Engineering Contradictions & Design Principles

VSEngineering Contradiction Analysis

1Adaptability or versatility

If smart contracts execute CFRAs with variable interest rates based on extrinsic rates, then the system adapts to market conditions, but the predetermined interest rate stability deteriorates

Engineering Contradiction:

Improveadaptation to market conditionsVSAvoidpredetermined interest rate stability

Core Design Contradiction:

Adaptability or versatilityVSStability of the object's composition

Solution Approach 1:

The patent implements dynamic interest rate adjustment mechanisms where the smart contract periodically queries extrinsic rates and automatically adjusts the variable interest rate component. This allows the CFRA to adapt to market conditions while maintaining the predetermined base rate structure, resolving the contradiction between adaptability and stability through dynamic parameter adjustment.

Inventive Principle:

Principle #15Dynamics

Solution Approach 2:

The system changes the interest rate parameter from a fixed value to a composite structure consisting of a predetermined base rate and a variable component. This parameter transformation enables the contract to maintain stability through the base rate while adapting to market conditions through the variable component, effectively resolving the technical contradiction.

Inventive Principle:

Principle #35Parameter changes

2Stability of the object's composition

If the system dynamically adjusts loan amounts and collateral values, then the interest rate stability is maintained, but the system complexity increases

Engineering Contradiction:

Improveinterest rate stabilityVSAvoidsystem complexity

Core Design Contradiction:

Stability of the object's compositionVSDevice complexity

Solution Approach 1:

The smart contract autonomously performs the complex tasks of querying extrinsic rates, calculating adjusted interest rates, and modifying loan amounts and collateral values without external intervention. This self-service capability maintains interest rate stability while managing system complexity by embedding the adjustment logic within the automated contract execution flow.

Inventive Principle:

Principle #25Self-service

Solution Approach 2:

The system implements feedback loops where the smart contract continuously monitors extrinsic rates and automatically adjusts loan parameters in response. This feedback mechanism maintains interest rate stability by dynamically responding to market changes, while the automation of this process manages complexity through programmed rules rather than manual intervention.

Inventive Principle:

Principle #23Feedback

3Ease of operation

If manual management of CFRA transactions is performed, then the system is easier to control, but the transaction efficiency and automation level decrease

Engineering Contradiction:

Improvecontrol simplicityVSAvoidtransaction efficiency

Core Design Contradiction:

Ease of operationVSProductivity

Solution Approach 1:

The patent replaces manual mechanical control of CFRA transactions with automated smart contract execution. The smart contract automatically handles rate queries, calculations, and transaction adjustments, dramatically improving transaction efficiency while maintaining ease of operation through simplified user interfaces and automated processes that require minimal manual intervention.

Inventive Principle:

Principle #28Mechanics substitution (Replace mechanical system)

4Measurement precision

If the smart contract queries extrinsic rates frequently, then the interest rate accuracy improves, but the energy consumption and computational cost increase

Engineering Contradiction:

Improveinterest rate accuracyVSAvoidenergy consumption

Core Design Contradiction:

Measurement precisionVSUse of energy by moving object

Solution Approach 1:

The smart contract implements periodic querying of extrinsic rates at predetermined intervals rather than continuous monitoring. This periodic action maintains interest rate accuracy by capturing market rate changes at regular intervals while significantly reducing energy consumption and computational costs compared to continuous querying, effectively resolving the technical contradiction.

Inventive Principle:

Principle #19Periodic action

Data Source

PatentUS11468509B2Systems and methods for tokenized control of smart contracts

Publication Date: 2022.10.11 AKIVA CAPITAL HLDG INC

AI summary

Methods and systems for automatically conducting a continuous forward rate agreement in a cryptocurrency using smart contracts. An obligation object is generated and provided with control of a first smart contract, which may be a collateralized debt position smart contract, and control of a lender amount. The obligation object is executed to update balances for first and second parties until the obligation object is liquidated or terminated. Additional parties may be introduced. Upon liquidation or termination, the obligation object accounts to each of the parties based on their balances, and based on tokens generated to track positions in the obligation object.