Cryptographic Token Circulation Groups for Compliant Settlement
Find Innovative SolutionsGenerate Solutions
Solution Overview
Problem
Traditional ledger systems are inefficient and slow due to sequential settlement among multiple intermediaries, leading to high transaction costs, counterparty credit risk, and regulatory compliance challenges, while digital asset transactions face issues with ACH transfers and traditional banking methods.
Innovation Solution
A bank-issued electronic negotiable instrument (Avit) implemented via a smart contract, allowing for simultaneous settlement and compliance with regulatory frameworks, using a cryptographic token system that includes circulation and non-circulation groups managed by a central authority.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Reliability
If traditional ledger systems are used for digital asset transactions, then regulatory compliance and security are maintained, but transaction speed and efficiency deteriorate due to sequential settlement among multiple intermediaries
Solution Approach 1:
The patent segments the circulation of cryptographic tokens into separate circulation groups (first circulation group and second circulation group) with different transfer rules. This segmentation allows different portions of tokens to have different liquidity characteristics, enabling faster settlement for certain groups while maintaining regulatory compliance through controlled transfer restrictions in other groups.
Solution Approach 2:
The patent implements dynamic transfer restrictions that can be adjusted based on regulatory requirements and market conditions. The smart contract allows for flexible modification of circulation rules, enabling the system to adapt between more restrictive (compliance-focused) and more permissive (speed-focused) modes operationally.
2Reliability
If traditional banking methods with multiple intermediaries are used, then transaction security is improved, but transaction costs and settlement time increase
Solution Approach 1:
The patent merges the functions of multiple intermediaries into a single smart contract on the blockchain. The smart contract simultaneously performs validation, settlement, and compliance checking that traditionally required separate intermediaries, reducing settlement time while maintaining security through cryptographic verification.
Solution Approach 2:
The patent introduces a blockchain-based smart contract as a new intermediary that automates and streamlines the settlement process. This digital intermediary replaces traditional manual processing while maintaining security through programmable rules and cryptographic verification, significantly reducing settlement time.
3Productivity
If cryptographic tokens allow free circulation for liquidity, then transaction speed improves, but regulatory compliance and security control deteriorate
Solution Approach 1:
The patent divides cryptographic tokens into separate circulation groups with different transfer restrictions. The first circulation group allows more flexible transfers for speed, while the second circulation group imposes stricter controls for compliance, enabling the system to achieve both objectives simultaneously through differentiated token cohorts.
Solution Approach 2:
The patent applies different transfer rules to different circulation groups based on their specific purposes and risk profiles. Rather than applying uniform restrictions across all tokens, the system tailors circulation characteristics to local needs, allowing high-speed transactions where appropriate while maintaining strict compliance where required.
Data Source
AI summary
A custom cryptographic token and smart contract that is configured to exist in one of two groups and is issued by the same bank or depository institution that also collects corresponding fiat currency deposits. The two groups are a circulation group and a non-circulation group. The non-circulation group is not associated with any given user, but rather an issuing entity. Custom cryptographic tokens residing in the circulation group are associated with a user and are traded according to smart contract protocol.