Virtual Currency Futures Settlement Without Clearing Counterparty Custody
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Solution Overview
Problem
Existing systems face challenges in clearing derivative contracts based on virtual currencies due to the risks associated with the pseudonymous nature and lack of recourse in virtual currency transactions, making it difficult for clearing counter-parties to confirm physical delivery without taking possession of the virtual currencies.
Innovation Solution
A system where a clearing counter-party computer provides settlement instructions for direct transfer between buyer and seller computers, confirms delivery by accessing a publicly viewable ledger, and optionally uses a trusted depository to hold virtual currency, ensuring delivery without taking possession.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Reliability
If the clearing counter-party takes possession of virtual currencies to confirm delivery, then delivery confirmation is achieved, but security risks and loss exposure increase
Solution Approach 1:
The patent introduces a trusted depository as an intermediary that holds the virtual currencies instead of the clearing counter-party. The depository acts as a mediator between the seller and clearing counter-party, allowing the clearing counter-party to confirm delivery through the depository's records without directly possessing the virtual currencies, thereby reducing security risks while maintaining delivery confirmation reliability
Solution Approach 2:
The patent uses a copy or representation of the virtual currency delivery (through the trusted depository's records and confirmation mechanisms) instead of requiring the clearing counter-party to handle the actual virtual currencies. This allows verification of delivery through documentary evidence rather than direct possession, reducing exposure to security risks associated with holding virtual currencies
2Object-affected harmful factors
If the clearing counter-party does not take possession of virtual currencies, then security risks are minimized, but difficulty in confirming physical delivery increases
Solution Approach 1:
The trusted depository serves as an intermediary that provides a reliable mechanism for confirming delivery without requiring the clearing counter-party to possess the virtual currencies. The depository maintains records and provides confirmation that the virtual currencies have been delivered to the appropriate account, making detection and measurement of delivery feasible without direct possession
Solution Approach 2:
The system implements feedback mechanisms where the trusted depository provides confirmation to the clearing counter-party that delivery has occurred. This feedback loop allows the clearing counter-party to verify delivery status through the depository's records and notifications, making delivery confirmation possible without taking possession of the virtual currencies
Data Source
AI summary
Systems and methods are disclosed for settling futures contracts that are based on virtual currencies. A clearing counter-party operates a clearing counter-party computer that may oversee physical delivery of virtual currency between a buyer and seller. The clearing counter-party computer does not take possession of the virtual currency and monitors a publicly viewable ledger to confirm that transactions have taken place.