Goldman Sachs & Co., SETLcoin Patent
Following a standard prosecution trajectory, Goldman Sachs received U.S. Patent No. 9,704,143 (“the ’143 patent”) on July 11, 2017. This patent, entitled CRYPTOGRAPHIC CURRENCY FOR SECURITIES SETTLEMENT, claims priority back to May 16, 2014.
In the interim between filing and issuance, the first-named inventor Paul Walker moved from Goldman Sachs to OpenFin. The co-inventor, Phil Venables remains at Goldman Sachs as the Chief Operational Risk Officer.
The ‘143 patent, provides a means for exchanging tradable elements within a distributed ledger system, aka Blockchain. The ‘143 Patent introduces this new “cryptographic currency” called the SETLcoin, including a Positional Item inside Cryptographic currency (PIC) and a position (e.g. quantity).
The foundation for electronic trading is the wallet (Fig. 5) having the user account information. Traders exchange tradable elements using the wallet, including the Message Engine(s) 510 generating transaction messages and communicating with various network nodes (205-215 : Fig. 2). In the ‘143 Patent, these various network nodes enable the distributed ledger system.
As part of the ‘143 Patent SETLcoin disclosure, the Transaction Message (302 : Fig. 3) includes:
- Receiver’s address (HASH Value w/ Crypto Protocol)
- Coin History (optional)
- Digital Signature
The SETLcoin includes an interesting feature allowing for various embodiments. What the SETLcoin is made of can vary, including: a specific stock/currency; a number of identical stocks/currencies, or an amalgamation of stocks/currencies. In other words, the SETLcoin can be one share of IBM stock, twenty bitcoins, or a mini mutual fund composed of a variety of assets.
The ‘143 Patent uses the combination of PIC and position with trader encryption data (public/private keys) to facilitate the exchange on the network using the distributed ledger to authenticate and settle the transaction. For example, a commitment protocol (716 : Fig. 7) insures transaction integrity by in-essence locking-in the traders and assets until settlement can be reasonably assured.
The commitment protocol (CP 716) includes two phases:
Phase I : commitment request phase; and
Phase II : commit phase.
During Phase I, a network node (referred here as a coordinator) prepares the processes necessary to exchange a SETLcoin. The wallet 500 can provide the first line of defense against fraudulent transactions, prohibiting a commitment request in excess of the wallet funds.
During Phase II, the commit phase, the wallets 500 exchange information to verify ownership and settle the exchange. The wallets may verify each party is online, have received and sent the necessary keys, generated and exchanged public addresses, generated proper authentication messages, and verified authenticity and ownership. (col. 12, ll. 57-64).
With proper verification during Phase II, the wallets then broadcast transaction messages to the network so the transaction can be authenticated and verified.
Therefore, the ‘143 Patent uses the SETLcoin as a placeholder or identifier for a quantity of tradable instrument(s). Using the wallet 500, traders interact across the network, with exchange and settlement operations verified, executed and settled using a distributed ledger within the network.
The Patent was acquired by Munck Wilson Mandala.