Smart Contract Provisional Payment Settlement on Distributed Ledger
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Solution Overview
Problem
Current systems lack an efficient and automated method for settling provisional payments for commodities using smart contracts, particularly in a distributed ledger context, which complicates the tracking of commodity values over time and the determination of net settlement values.
Innovation Solution
A computer method that establishes a provisional price and partial payment price for a commodity on a server computer, records these on a distributed ledger, tracks the commodity value over time, and transfers the net settlement value to or from the purchaser, utilizing margin reserve requirements and options for settlement prices based on tracked values.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Ease of operation
If manual settlement processes are used for provisional payments, then flexibility in handling individual cases is maintained, but processing time and operational complexity increase significantly
Solution Approach 1:
The smart contract automatically executes settlement by self-determining the net settlement value through programmed logic that tracks commodity value changes and calculates differences between provisional and actual prices, eliminating manual intervention and accelerating the settlement process
Solution Approach 2:
The system pre-establishes the provisional price and settlement terms in advance through the smart contract before the commodity delivery occurs, allowing automatic calculation and execution of settlement based on predetermined rules rather than requiring post-delivery negotiations and manual processing
2Reliability
If distributed ledger technology is implemented for tracking commodity values, then transparency and verification are improved, but system complexity and implementation difficulty increase
Solution Approach 1:
The smart contract serves multiple functions within a single system: it tracks commodity values over time, calculates price differences, determines net settlement amounts, and executes transfers automatically, thereby reducing the need for separate complex systems while maintaining high reliability through the distributed ledger's inherent verification capabilities
3Productivity
If automatic smart contracts are used for commodity transactions, then settlement speed and efficiency are improved, but adaptability to unusual market conditions or edge cases decreases
Solution Approach 1:
The smart contract incorporates dynamic tracking of commodity values throughout the holding period, automatically adjusting the settlement calculation based on actual market price movements rather than relying on fixed predetermined values, thereby maintaining both automation efficiency and adaptability to varying market conditions
Data Source
AI summary
A computer method for making a smart contract for a commodity includes establishing, in a server computer, a provisional price for a commodity on a first date for delivery at a future second date, and establishing, in the server computer, a partial payment price on the first date corresponding to the commodity. The computer method includes receiving, into the server computer, the partial payment price from a purchaser of the commodity, and tracking a value for the commodity as time passes from the first date to the second date. The computer method includes establishing, with the server computer, a settlement price for the commodity on or after the second date, and transferring a net settlement value to or from the purchaser of the commodity