Winklevoss IP : Cryptocurrency Trust Exchange
U.S. Patent No. 9,898,782
Title: SYSTEMS, METHODS, AND PROGRAM PRODUCTS FOR OPERATING EXCHANGE TRADED PRODUCTS HOLDING DIGITAL MATH-BASED ASSETS
Priority dates: June 28, 2013 – May 6, 2014
Issued : February 20, 2018
U.S. Patent No. 9,898,782 (“the ‘782 Patent”) is a leviathan, holding at least a dozen distinct inventions relating to cryptocurrencies and exchanges. With fourteen (14) provisional priority claims, this specification looks to be a template for large portfolio of patents to be arriving for years to come.
With an 80+ column specification, 39 sheets of drawings, and in excess of 140 prior art references, some lucky partner is sending his or her child to college on this work of authorship.
In order to digest, summarize, and be left with a readable blog post – focus shall be on the claims of the ‘782 Patent. As further patents within this family issue (including U.S. Patent No. 9,892,460), additional blog posts shall be forthcoming.
As claims control, the ‘782 Patent has a single independent claim with 27 dependent claims. Claim 1, running 54 lines long, would challenge even the best auctioneer to finish in a single breath.
1. A computer-implemented method comprising, the steps of:
(a) determining, by a trust computer system comprising one or more computers, share price information based at least in part upon a first quantity of digital math-based assets held by a trust at a first point in time and a second quantity of shares in the trust at the first point in time, the trust computer system being operatively connected to a decentralized digital asset network that uses a decentralized electronic ledger in the form of a blockchain maintained by a plurality of physically remote computer systems to track at least one of asset ownership or transactions in a digital math based asset system;
(b) receiving, at the trust computer system from one or more authorized participant user devices of an authorized participant, the one or more authorized participant user devices being operatively connected to the decentralized digital asset network, an electronic request to redeem a third quantity of shares;
(c) determining, by the trust computer system, a fourth quantity of digital math-based assets based at least in part upon the share price information and the third quantity of shares;
(d) obtaining, by the trust computer system, one or more destination digital asset account identifiers that provide access through the decentralized digital asset network to one or more destination digital asset accounts for receipt by the authorized participant of a transfer of the fourth quantity of digital math-based assets from the trust;
(e) obtaining, using the trust computer system, one or more origin digital asset account identifiers that provide access through the decentralized digital asset network to one or more origin digital asset accounts for the transfer;
(f) initiating, using the trust computer system, the transfer of the fourth quantity of digital math-based assets from the one or more origin digital asset accounts as accessed through the decentralized digital asset network using the one or more origin digital asset account identifiers to the one or more destination digital asset accounts as accessed through the decentralized digital asset network using the one or more destination digital asset account identifiers;
(g) broadcasting, using the trust computer system, occurrence of the transfer to the decentralized electronic ledger;
(h) verifying, by the trust computer system using the decentralized electronic ledger, a receipt of the fourth quantity of digital math-based assets at the one or more destination digital asset accounts; and
(i) canceling or causing to be canceled, using the trust computer system, the third quantity of shares from the authorized participant.
For all the multi-worded terms and the repetition for avoidance of indefiniteness, Claim 1 basically recites a digital asset exchange that exchanges shares in a trust as proxy for underlying digital assets within the trust.
Remove the mechanical pencil from your pocket protector and insure you have extra lead, as we are going to get technical.
Claim 1 recites a computer-implemented method with nine delineated steps, (a) – (i).
Step (a) is a trust computer determining share price information. This price information is based on two factors at a first point in time: (i) a first quantity of assets held by the trust; and (ii) a second quantity of shares in the trust.
Step (b) is receipt by the trust computer of a “request to redeem a third quantity of shares.”
Step (c) now translates this “third quantity of shares” into a “fourth quantity of assets.”
In steps (a) – (c), the computer-implemented method determines a trust share price, where the share holds digital assets (such as a cryptocurrency). Upon receipt of a request to sell shares, the trust computer translate this “share” redemption into a number of assets.
- First Quantity : Number of assets held by the trust at T1
- Second Quantity : Number of shares in the trust at T1
- Third Quantity : Number of shares sough to be redeemed
- Fourth Quantity : Conversion of Third Quantity into number of assets.
So at this point, we have a trust holding a number of digital assets, the investors own those assets via shares in the trust. A person can, instead of selling the digital asset on the open market, exchange shares in the trust.
Steps (d)-(i) recite the settlement process. As the trust uses a Blockchain distributed ledger and settlement is performed using the same digital assets held by the trust, step (d) provides for obtaining “destination digital asset account identifiers” for subsequent settlement.
As the trust has to find digital assets for settlement, step (e) provides for obtaining “one or more origin digital asset accounting identifiers.”
Step (f) is the electronic transfer of the fourth quantity of digital assets from the origin to the destination. Step (g) is broadcasting the transfer to the “decentralized electronic ledger.” Step (h) is verifying the receipt of the fourth quantity of assets; and finally step (i) is cancelling the third quantity of shares from the redeemer.
Therefore, for all its length, claim 1 recites a particularly focused invention. Steps (d)-(i) are general settlement steps. The value of the ‘782 Patent appears in steps (a)-(c), including share cost analysis, translation of share value into digital asset price, and enabling exchange within the trust itself.
The ‘782 Patent provides an interesting take on cryptocurrencies.
A lot of the IP in this area relates to making cyrptocurrencies more liquid in the marketplace. We see Goldman Sachs using SETLCoins for improving settlements. We see Bank of America improving the tracking of user identities for added transaction security. We see Coinlab detecting real-world identities for transactions.
The ‘782 Patent is for investing in cryptocurrencies, platforms for digital asset holdings. The ‘782 Patent applies well known trading principles, e.g. an exchange traded fund, but uses cryptocurrencies instead of stocks. The ‘782 Patent then integrates settlement into the Blockchain using distributed ledger security and settlement technology.
The dependent claims also offer a good review of system refinements. For example, Claim 3 allows for inclusion of trust account operating expenses integrated into the settlement costs, but pricing those operating costs into the “fourth quantity.”
With the breadth of the specification, the many unique technological gems and the early priority, this patent family will have a lot more to offer in the coming years.
The patent was prosecuted by Amster, Rothstein & Evenstein LLP.