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Anonymous Peer-to-Peer Trading Based on a Chain of Trusted Entities and a Distributed Matching Algorithm

IP.com Disclosure Number: IPCOM000228171D
Publication Date: 2013-Jun-10
Document File: 7 page(s) / 86K

Publishing Venue

The IP.com Prior Art Database

Abstract

This patent disclosure describes a decentralized anonymous trading system that is based on a chain of trusted entities. This trading system includes the following components: a) an overlay network of trusted entities in which a trusted entity maintains a reliable connection with entities that it trusts; b) a distributed overlay-based publish / subscribe system using which each entity can publish the existence of a financial product or the possible trading of such a product; c) a distributed matching engine; and d) a transaction engine. As opposed to existing trading systems, the patent disclosure describes a decentralized multi-party trading system that does not incur a substantial commission fee on parties that use it.

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--Peer Trading Based on a Chain of Trusted Entities and a

Peer Trading Based on a Chain of Trusted Entities and a

Distributed Matching Algorithm


1. Background:

The problem solved by this patent disclosure:
How to support anonymous trading of a financial product among an arbitrary number of peers (entities, e.g., persons) in a distributed fashion using a network of trusted financial entities?

For example, if a person P wants to borrow 1000$ for a year and he/she is willing to pay an interest of at most 6% and there are at least 10 people each of them wants to have at least 5% yield on an amount of money that is equals or greater than 100$, then how

Anonymous Peer - -to

to to-

we can facilitate this transaction among P and the aforementioned 10 people so that P

will be able to get 1000$ for a year with an interest I between 5% and 6% and each of the aforementioned 10 people will get the same interest I on at least 100$, without that

the identity of any of the aforementioned people will be disclosed to each other.

Known solutions:


1) Nowadays, a person who wants to trade a financial product can do so by using a service of a financial institute, e.g., a bank.

For example, a person who wants to get some interest on his/her money is putting a given amount of money in the bank, and the bank is giving the client a relatively very small interest (denoted as X) on his/her money. The bank typically uses this money in order to achieve a higher yield, e.g., loaning this money to another client collecting substantially higher interest rate (denote as Y) from this client, i.e., Y > X.

    Drawbacks of the aforementioned solution:
The bank collects a substantial commission from both the loaner and the debtor using the relatively small interest rate it gives for a client on money in a checking account and the relatively high interest rate it collects from a client who is taking a loan.

For example, with respect to the aforementioned example, typically Y is substantially bigger than X, and hence both the loaner and the debtor loose a substantial amount of money for the above transaction compared to a direct loan between the loaner and the debtor in which the interest rate can be set to Z where X < Z < Y, so that loaner can get a higher interest rate on his money and the debtor can pay a substantially lower internet rate for the money he/she borrows.

    2) A centralized auction website, e.g., eBay, allows people and businesses to buy and sell a broad variety of goods and services worldwide.

Drawbacks of the aforementioned solution:
The centralized auction website collects a substantial commission fee for each transaction.

For example, eBay collects an insertion fee of up to $4 on each transaction and an additional final value fee that is collected as a percentage of the overall total selling price.

    In summary, virtually all of the trading systems are centralized and they incur a substantial commission fee on parties that use their centralized trading service...