Central Authorized Transfer System for Blockchain Tokens

What kind of system is being described as a need? What problem does this system attempt to solve compared to traditional blockchain technology?

What role does the central institutional repository play in this system?

What does "vetted user" mean?

How does the administrative entity utilize the user's confidential password?

Explain the role of smart contracts in blockchain token transfers.

How does the administrative entity verify a user's order to purchase blockchain tokens?

What is the process for updating a user's blockchain token balance in the blockchain network?

How do third-party trading systems interact with this system?

Describe how the administrative entity utilizes an application programming interface to interact with the third-party trading system.

Why does the administrative entity need to confirm the completion of a transaction with the third-party trading system?

Short Answer Question

The need for a system that can track ownership of blockchain tokens to meet regulatory requirements. Unlike traditional blockchain technology, which may allow anonymous ownership, this system aims to maintain a record of the identities of all token holders through a central institutional repository.

The central institutional repository acts as a database of vetted users who have been approved to participate in blockchain token transactions. The administrative entity uses this repository to verify user identities and ensure that all transactions meet regulatory standards.

"Vetted User" means a user whose identity and related information have been verified and approved by the Management Entity in accordance with regulatory requirements to participate in blockchain token transactions.

The Management Entity uses the user's confidential password to identify and access the digital wallet associated with the user and authorize the transfer of blockchain tokens.

The smart contract defines the rules and requirements for executing blockchain token transfers. It acts as an automated agreement between the Management Entity and the user regarding token ownership and transfers.

The Management Entity verifies the user's purchase order by comparing the order information with the central authority repository and the smart contract to verify the user's identity, compliance, and legality of the transaction.

When blockchain tokens are transferred between users, the Management Entity creates a transaction function that is published to the blockchain network. The smart contract executes the function and updates the balance on the blockchain ledger to reflect the change in ownership.

The third-party trading system interacts with the system through the application program interface provided by the Management Entity. The interface allows the trading system to request user verification, asset information, and transaction confirmation.

The Management Entity provides application program interfaces that enable third-party trading systems to request user verification, verify order information, and receive transaction confirmations. These interfaces act as a secure communication channel between the Management Entity system and the third-party trading system.

The management entity needs to confirm the transaction to the third-party trading system because the management entity is responsible for managing the digital wallet and performing the actual token transfer on the blockchain network. The confirmation notifies the third-party trading system to update its records and reflect the successful transaction to the user.

Essay Questions

Instructions: Please answer each of the following questions in short essay format.

Detail the limitations of traditional blockchain technology for trading financial assets and how the system you describe addresses these limitations.

Explain the concept of "vetted users" and their importance in this system. Detail the role of the KYC process in creating a list of vetted users.

Describe the different roles that smart contracts play in this system. Provide examples of specific rules or requirements that smart contracts can implement to govern the transfer of blockchain tokens.

Compare and contrast the way the management entity handles direct transfers between users versus transfers through a third-party trading system.

Discuss the potential advantages and challenges of using this system to represent fractional ownership of physical assets. Consider factors such as liquidity, transparency, and regulation compared to traditional ownership models.

Glossary

Term Definitions Blockchain A distributed ledger technology that records transactions in a secure and tamper-proof manner. Blockchain tokens represent digital units of ownership of digital assets or physical assets. Central Authority Repository A database maintained by a governing entity that contains the identities and related information of vetted users. Confidential Password A unique code or password used by users to verify their identity and authorize transactions. Digital Wallet A secure digital container for storing and managing blockchain tokens. Vetted User A user whose identity and related information has been verified and approved by a governing entity in accordance with regulatory requirements. Smart Contract A computer program that automatically executes the terms of an agreement. Third-party Trading System An independent platform that provides users with a platform for trading blockchain tokens. Application Programming Interface (API) A set of definitions and protocols that allow different software systems to communicate and interact with each other. Transaction Function A set of instructions that indicates the transfer of blockchain tokens on a blockchain network.