Transaction Settlement System and Method for Blockchain

Transaction Settlement System and Method for Blockchain

Glossary

Term Definitions Blockchain A transaction data store that is replicated and synchronized by multiple nodes in a blockchain network. Blockchain Network One or more nodes that communicate data with each other and maintain a copy of the blockchain. Cryptocurrency A digital currency whose ownership and usage can be tracked on the blockchain of a blockchain network. Native Token A type of cryptocurrency that is tracked by a blockchain network. A transaction can be included in a piece of data in a blockchain that may include metadata describing the transaction and data about the activities between the parties. Cryptocurrency Wallet A software program, service, device, or other medium that stores encrypted information for interacting with a blockchain network. Smart Contract A computer-executable instruction executed by a node that can be automatically executed in response to detecting a specified condition or receiving specified data. Digital Stablecoin A cryptocurrency whose value is stable and is usually pegged to a fiat currency or acquired at a constant exchange rate. A sending party generates a blockchain transaction describing a transfer of a certain amount of digital stablecoins, which may include data such as the amount of digital stablecoins sent, the source cryptocurrency wallet address, the destination cryptocurrency wallet address, and a digital signature. The corresponding first amount is substantially equal to the second amount, which may be based on an established exchange rate and may take into account asset exchange fees or other similar surcharges. Creation creates new instances of digital stablecoins, which increases the supply of digital stablecoins tracked by the applicable blockchain network. Destruction configures digital stablecoins so that they can no longer be sent to users, held by users, or otherwise used, effectively removing them from circulation tracked by the applicable blockchain network. Trust Entity An entity that holds fiat currency and interacts with a blockchain network to facilitate the exchange between digital stablecoins and fiat currency, such as a bank or other financial institution. Trust Entity Computing System A computing system used by a trust entity, for example, to communicate with a blockchain network, manage financial accounts, and process transactions related to digital stablecoins. Token Cross-Chain Bridge A system that allows users to exchange cryptocurrencies and digital stablecoins between different blockchain networks without using a cryptocurrency exchange.

Short Answer Questions

What are the main differences between digital stablecoins and traditional cryptocurrencies?

What role do trust entities play in a blockchain-based transaction settlement system?

How do users pay merchants with digital stablecoins using a blockchain-based transaction settlement system?

How do merchants exchange digital stablecoins for fiat currency?

What is the process for creating and destroying digital stablecoins?

How do blockchain-based transaction settlement systems handle transaction fees?

What is the purpose of a token cross-chain bridge?

How can users use the token cross-chain bridge to exchange cryptocurrencies for digital stablecoins?

What are the advantages of blockchain-based transaction settlement systems over traditional payment systems?

How do blockchain-based transaction settlement systems ensure transaction security?

Test question answers

What are the main differences between digital stablecoins and traditional cryptocurrencies? Digital stablecoins are designed to maintain a stable value and are usually pegged to fiat currencies or other stable assets. On the other hand, the value of traditional cryptocurrencies fluctuates and is affected by market supply and demand.

What role does the trust entity play in the blockchain-based transaction settlement system? The trust entity acts as an intermediary between fiat currencies and digital stablecoins. It holds the fiat currencies deposited by users and issues corresponding digital stablecoins on the blockchain network. It also redeems digital stablecoins in exchange for fiat currencies upon user requests.

How can users use blockchain-based transaction settlement systems to pay merchants with digital stablecoins? Users can pay merchants with digital stablecoins by transferring digital stablecoins from their cryptocurrency wallets to the merchant's cryptocurrency wallet address through the blockchain network.

How can merchants exchange digital stablecoins for fiat currencies? Merchants can exchange them for fiat currencies by sending a certain amount of digital stablecoins to smart contracts on the blockchain network. The smart contract will instruct the trusted entity to deposit the corresponding fiat currency into the merchant's account.

What is the process of issuing and destroying digital stablecoins? Digital stablecoins are issued when users deposit fiat currency into a trusted entity and the trusted entity issues the corresponding digital stablecoins on the blockchain network. Digital stablecoins are destroyed when users exchange digital stablecoins for fiat currency and the smart contract destroys these tokens to reduce the supply.

How do blockchain-based transaction settlement systems handle transaction fees? Blockchain-based transaction settlement systems may charge a small fee for transactions. These fees are usually deducted from the amount of digital stablecoins sent or collected by the smart contract that executes the transaction.

What is the purpose of a token cross-chain bridge? A token cross-chain bridge allows users to exchange cryptocurrencies and digital stablecoins between different blockchain networks without using a cryptocurrency exchange.

How do users use a token cross-chain bridge to exchange cryptocurrencies for digital stablecoins? Users can use a token cross-chain bridge to exchange cryptocurrencies for digital stablecoins by sending a certain amount of cryptocurrency to a specific address associated with the token cross-chain bridge. The token cross-chain bridge will then verify the transaction and issue the corresponding digital stablecoin to the user on another blockchain network.

What are the advantages of blockchain-based transaction settlement systems over traditional payment systems? Blockchain-based transaction settlement systems provide faster transaction speeds, lower fees, greater transparency, and enhanced security.

How do blockchain-based transaction settlement systems ensure transaction security? Blockchain-based transaction settlement systems take advantage of the decentralized and encrypted features of blockchain technology. Transactions are verified and added to the blockchain by multiple nodes in the network, which makes it very difficult to tamper with or reverse transactions.