IP Verse

Methods For Exchanging And Evaluating Virtual Currency

Patent No. US11107049 (titled "Methods For Exchanging And Evaluating Virtual Currency") was filed by Bprotocol Foundation on Nov 19, 2020.

What is this patent about?

’049 is related to the field of virtual currency exchange and valuation, specifically addressing the challenges of determining the value of custom cryptocurrency tokens issued on platforms like Ethereum. The background acknowledges the limitations of traditional FOREX methods when applied to the potentially unlimited variety of tokens, especially those with limited trading volume. The invention aims to provide a solution for evaluating these tokens without relying solely on transactions between willing parties.

The underlying idea behind ’049 is to establish a secure ledger network that uses a smart contract to automatically determine the price of a cryptocurrency token based on its status, the status of another related cryptocurrency token, and a predefined reserve ratio constant. This allows for the valuation and exchange of tokens even with limited trading volume, by linking the token's value to a reserve of another cryptocurrency.

The claims of ’049 focus on a secure ledger network with at least one hardware processor configured to execute computer-readable program code. The network receives a request to validate a smart contract that defines rules for transactions involving a first cryptocurrency token. Upon validation, the smart contract is stored in the secure ledger. When a transaction request is received, the network executes the smart contract to determine the price of the first token based on its status, the status of another token, and a reserve ratio constant , and then updates the ledger with the transaction's completion.

In practice, the system works by maintaining a reserve of another cryptocurrency token for each custom token. The smart contract uses the total amount of the custom token in circulation, the total reserve of the other cryptocurrency, and a predefined reserve ratio to calculate the custom token's price. This allows for the automated and transparent exchange of tokens, as the price is algorithmically determined and recorded on the secure ledger.

This approach differentiates itself from prior solutions by providing a built-in liquidity mechanism for custom tokens. Instead of relying on traditional exchanges and order books, the smart contract acts as an automated market maker, continuously calculating the token's value based on its reserve and supply. This eliminates the need for a critical mass of traders and reduces the costs associated with listing and maintaining liquidity on exchanges, making it easier to issue and trade custom tokens.

How does this patent fit in bigger picture?

Technical landscape at the time

In the mid-2010s when ’049 was filed, blockchain technology was gaining traction at a time when virtual currencies were typically implemented using distributed ledgers. At this time, smart contracts were becoming more prevalent, allowing for the automation of agreements and transactions on the blockchain. The ability to issue and trade custom virtual currencies, or tokens, on platforms like Ethereum was relatively new, and the challenges associated with determining the value of these tokens were becoming apparent.

Novelty and Inventive Step

The examiner approved the claims because the prior art did not reasonably teach the specific technique of performing a transaction by determining a price of a cryptocurrency token based on the total amount of the first cryptocurrency token in circulation, a total reserve of a second cryptocurrency token, and a reserve ratio constant. The examiner stated that validating a smart contract and adding it to a blockchain ledger, as well as executing smart contracts and generating an assurance proof of the execution, were conventional at the time of the invention, but the combination of these elements with the specific price determination technique was not found in the cited references.

Claims

This patent contains 5 claims, with claim 1 being independent. Independent claim 1 is directed to a secure ledger network for executing cryptocurrency transactions. The dependent claims generally elaborate on and refine the features of the secure ledger network described in the independent claim.

Key Claim Terms New

Definitions of key terms used in the patent claims.

Term (Source)Support for SpecificationInterpretation
First cryptocurrency token
(Claim 1)		“With the recent ability to issue a variety of Tokens using virtual currency networks, shortcomings regarding the ability to determine the value of such Tokens were identified. Traditionally, value of a currency is determined by the price of a transaction between willing parties. That is how FOREX exchange rates are calculated. Each currency is listed with its exchange rate to another currency. While listing and managing the exchange rates of the 180 existing recognized currencies is manageable, employing this method on an unlimited variety of Token types, is not viable.”A cryptocurrency token for which a transaction is being performed, and whose price is determined based on its status, the status of another cryptocurrency token, and a reserve ratio constant.
Other cryptocurrency token
(Claim 1)		“As mentioned above, smart contract enabled virtual currency networks allow creating any type of Token including Tokens with a reserve in yet another Token. Such may be referred to as ‘hierarchical Tokens’. The inventive method therefore allows evaluating such hierarchical Tokens by pricing a descendant Token in terms of any ancestor Token.”A cryptocurrency token whose status is used, along with the status of the first cryptocurrency token and a reserve ratio constant, to determine the price of the first cryptocurrency token.
Reserve ratio constant
(Claim 1)		“The method for evaluating a Token comprises the steps of: a. retrieving Token state parameters from blockchain including Total Tokens in Circulation, Total Reserve, and Reserve Ratio Constant; b. determining said Token price in terms of underlying Token using said state parameters. c. Determining the Token price is done by dividing number of underlying tokens in reserve by the product of Total Tokens in Circulation and the Reserve Ratio Constant.”A predefined ratio between the total reserve of the second cryptocurrency token and a token market cap, used in determining the price of the first cryptocurrency token.
Secure ledger network
(Claim 1)		“There may be provided a secure ledger network for executing cryptocurrency transactions, the secure ledger network may include at least one hardware processor, a non-transitory machine-readable storage medium having an executable computer readable program code, the at least one hardware processor configured to execute the computer-readable program code to: receive, by the secure ledger network, a request to validate a smart contract that determines at least one rule for performing a transaction related to a first cryptocurrency token, wherein an execution of the transaction may include determining a price of the first cryptocurrency token based on a status of the first cryptocurrency token, and a status of an other cryptocurrency token; determine whether to validate the smart contract; when determining to validate the smart contract then updating a secure ledger maintained by the secure ledger network with the smart contract; receiving, by the secure ledger network, a request to execute a transaction related to the first cryptocurrency token; performing the transaction by executing, by the secure ledger network, the smart contract; and updating the secure ledger about a completion of the transaction. The secure ledger may be a blockchain or may differ from a block chain.”A network that executes cryptocurrency transactions and maintains a secure ledger, which can be a blockchain or another type of secure ledger.
Smart contract
(Claim 1)		“Basically, a network member uploads a computer program written in one of several permitted languages to the blockchain. The member may then condition the release of an amount of ETH (the currency underlying Ethereum) upon reaching the end of this program. Various network members thereafter run the program concurrently and reach a consensus on the resulted output.”A set of rules for performing a transaction related to a cryptocurrency token, which is validated and stored on the secure ledger network.

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US11107049

BPROTOCOL FOUNDATION
Application Number
US16952122
Filing Date
Nov 19, 2020
Status
Granted
Expiry Date
Jan 8, 2038
External Links
Slate, USPTO, Google Patents