Patent Application
20170270492
The present invention relates to a functional international Bitcoin bank.
A disruption in the financial sector has occurred, a new currency has emerged—Bitcoin. Advantages include: a finite number of coins, no government generates them, there is a record of every transaction (Blockchain), and it is now recognized as a global digital currency. Europe, for example, has reclassified Bitcoin from a commodity to a currency (Sam Schechner, Wall Street Journal, EU Rules Bitcoin Is a Currency, Not a Commodity-Virtually, Oct. 22, 2015) It is anticipated that there will be 12 million Bitcoin wallets by the end of 2015 (Coindesk, State of Bitcoin 2015: Ecosystem Grows Despite Price Decline, Jan. 17, 2015)
For the consumer, there is no machine, hardware that encompasses the ability for the customer to purchase Bitcoins, store them, exchange them for local currency, document them, protection against theft and provide traditional banking services of savings accounts, checking accounts, credit cards, and loans, and deal with the currency fluctuation of Bitcoins.
For example: If a consumer holds Bitcoins, how does he securely save them? How does hedge against the fluctuation in their values? How does he seamlessly and easily convert them into various currencies? How does he buy additional Bitcoin?
Some of these services are provided by individual companies but hardware, and websites are disparate systems, without seamless integration from a customer's point of view.
At present there is not encompassing security mechanism that can secure, the customer's funds, and, in today's society, a threat to all of us—terrorism. There is no mechanism for effectively detecting, and mitigating possible use of Bitcoins for terrorism, funding other illegal activities such as drug trafficking, human trafficking, etc.
Terrorism is all prevalent. The recent Paris attacks, attack in Malaysia, and more have to be funded somehow. A key to stopping such attack is to prevent the funding. These inventions will mitigate such funding through the use of Bitcoins.
Illegal activities such and drug and human trafficking, unfortunately, occur with great frequency in today's age. These activities need to be funded in order to operate. These inventions will mitigate illegal activities such drug trafficking, human trafficking from using Bitcoins to fund their operations. See Applications WO2012172117, U.S. Pat. No. 9,135,787, CN104463001, US20130166455, US20150046337, US20150227897, US20130238478, and US2013024623, the contents of each of which are hereby incorporated by reference.
Aspects of the invention include systems and methods using a newly invented hardware architecture for securing Bitcoins physically and electronically against hacking, denial of service and spoofing. Other Aspects of the invention include systems and methods, machines, and hardware for hedging fluctuations in values using social media and other external sources and devices and using weighted meta data and meta data on the meta data. Aspects include systems and methods, and hardware for seamlessly converting Bitcoins into different currencies in a secure and authenticated way. Systems and methods, and hardware for procuring Bitcoins for the bank in a secure, authenticated and efficient way are described. Systems and methods, and hardware for storing Bitcoins for the bank in a secure authenticated and efficient way. Either by using hardware storage online or off-line (Cold Storage) augmented with the invented device.
In certain aspects the invention includes systems, methods and hardware of arbitrage that includes social media data, tip data, news, and data from other devices, as well as associated meta-data. Systems, methods, and hardware are described in certain aspects that mitigate use of Bitcoins for terrorism, and illegal activities such as drug trafficking and human trafficking, using weighted meta data and meta data on the meta data, for alerting appropriate authorities. Aspects include systems, methods, and hardware for procuring Bitcoins for the bank in a secure authenticated, efficient, and authenticated way. The hardware authenticates with the use of meta data and meta meta data, or associated with the exchanges in mining.
Architecture
Forming a bank based on services offered by different entities and aggregating them under one linked entity. This invention is hardware that would provide customers the ability to streamline their bitcoin banking needs. Beginning with traditional banking services such as saving accounts in secure, online and offline storage to checking accounts with active bitcoin debit cards.
This hardware architecture virtualizes every entity so that to the customer each entity is seamlessly integrated. The invention entails hardware that surrounds these entities with systems and methods that can mimic a customer accessing each of the functional entities.
Equation 1 below describes the surround function. Where f is a function of access, and access is the services the customer obtains that are under the architecture of the bank. faccess access allows the customer to take advantage of all the services that the bank provides in one simple customer interface. Xn represents the entities under the architecture of the bank.
access=faccess[X1∩X2∩X3∩ . . . Xn] Equation 1
In
Table 2 lists examples of existing machines and systems that perform some of those functions, but not in a secure or integrated way.
The BTC Machine integrates all these other machines seamlessly, securely, globally, with high performance.
Table 1 below describes all of the functions of the bank from a customer's point of view, that are enabled by
Table 2 below contains a list of existing companies that provide some of these functions:
Step 1—Customer Receives or Purchases Bitcoins
Option 1—Cash Conversion
Step 2—Hardware Scans all Exchanges
Customer selects to exchange Bitcoin to a currency. Banks unique, and specially designed invented hardware scans information from exchanges to determine most favorable exchange for customer. Bank's hardware asks exchanges for the following information:
Step 3—Hardware Stores Exchange Data
Bank's unique, and specially designed invented hardware receives requested data from exchanges and stores data to later optimize best result for customer.
Step 4—Optimization and Curation
International Bitcoin Bank gathers all the information provided by exchanges and passes the information to the optimization hardware. The optimization hardware calculates variables through maximization formula to obtain optimum exchange rates. Hardware selects best result to create exchange for customer.
Step 6—Transfer to Recipient's Selected Bank Account
Unique, and specially designed invented hardware curates, verifies, and, after mitigating from terrorism, securely transfers customer's new currency into selected bank account.
Option 2—Bitcoin Storage
Step A—Customer Indicates Transfer to Online Bitcoin Account
Customer chooses to transfer Bitcoins to personal online Bitcoin account. These can be stored on their online bank account or on our secure hardware in cold storage.
Step B—Secure Account Login
Customer is prompted to securely log into account where they desire to transfer Bitcoins.
Step C—Transfer to Recipient's Bitcoin Account
Unique, and specially designed invented hardware curates, verifies, and, after mitigating from terrorism, securely transfers customer's Bitcoins to desired Bitcoin account.
Hedging Bitcoin Investment in Bank
The invention of the hedging hardware will be used to create the best solutions for maintaining or growing the value of a basket of investments that include Bitcoins. Where within that basket there are bitcoins and other elements. These elements in the baskets will be called the hedged elements. Bitcoins values fluctuate enormously (see
The process of hedging the Bitcoin investment is a two-step process. One to pick elements that behave inversely to the value of bitcoins taking into account meta data. Two, adding these elements to a basket. The percentage of each element that is added to the basket is determined by a formula using the meta data associated with each element. That meta data changes with time and hence the composition of the basket changes with time.
Step 1
Select from examples of the following sets of elements include:
1. Commodities
2. Currencies
3. Crypto-currencies
4. Mining Accessories
5. Traded Stocks
6. Government Bonds
7. Real Estate
8. Bonds
9. Certificate of Deposits
Example of meta data include:
Equation 2 below explains how the hedging hardware will select the best neutral or inversely correlated elements.
E
i(Max T Score)=r(B≈E1≈E2≈E3 Equation 2: EQUATION FOR PICKING ELEMENTS
Where:
r=regression
B=Bitcoin value
E=Value of element
Hence, we have now picked the elements and move on to Step 2
Step 2
Places in a basket the best performing elements for hedging Bitcoins. Where best is determined by a collection of percentages of each element. The meta data of each element which best optimized stability and inverse correlation to value of Bitcoins.
Where: Ex is specific element's meta data associated with specific i
Examples of weighting would be on a scale of 1 to 10, the reliability of the news source, New York Times, would be weighted very high.
This hardware would use meta data (weightings to each of the meta data values, these then would be summed in a machine using regression analysis) to identify the best exchanges, including:
Where:
B is the Bitcoin value
Basket is the collection of elements plus Bitcoins
Converting into Currencies
This invention is hardware to create the optimal value when converting Bitcoins into different currencies. Bitcoins values fluctuate enormously (
Mathematical Expression:
The process of optimization and conversion to USD can be possibly described in mathematical form from Equation 3 below
Let:
rBu=Exchange rate
cB=Fixed cost to convert B into different currencies
xBU=Amount of ‘Bitcoin’ (represented as B) exchanged for currency USD (represented as U)
yB=Whether any of Bitcoin, B, is exchanged for other currencies
UB=Cap on the total amount of Bitcoin that can be converted
Note that the amount of currency U we end up with after exchanging from B is
r
BU
*X
BU
Ultimately, we want to end up with as much of currency U as possible, so our objective function is the amount of Bitcoin and any other currencies exchanged into currency U:
Security of Bitcoins
The Need
The need for a secure bitcoin bank is prominent. Currently, there is no bitcoin bank. The aggregation of services to form a bank will not only be highly innovative but will lead to further advancement in the bitcoin and banking community.
Mt. Gox, used to be one of the largest bitcoin exchanges in the world. Based out of Japan, Mt. Gox, was launched in July 2010, by 2013—handled 70% of all bitcoin transactions in the world and in 2014, Mt. Gox filed for bankruptcy and closed its website due to the disappearance (likely stolen), an amount of 850,000 bitcoins.
Flexcoin, one of the first bitcoin banks which was created in 2011, which allowed for a centralized location to store and access bitcoins from anywhere in the world. In March of 2014, they were attacked by a hacker who was able to withdraw bitcoins from accounts into his own private account. Over the three years that flexcoin was running, they repelled thousands of attacks but this led to the demise of their company.
Both of these banks went out of business because of security breaches where the bitcoin was stored. Bitcoin will be particularly attractive to hackers because it is money, stored electronically, is anonymous and international.
The security of bitcoins in the entire architecture is multi-faceted. Encryption of all data passed between customers and our invention, and all the entities the bank interfaces with, is secured with this invention. Partial bitcoin storage offline via cold storage. Cold storage will be provided through invented hardware that stores Bitcoins through multiple layers of encryption and physical protection. Unique personal wallet id generation will also be used to provide another layer of security. Bitcoins will be stored behind a firewall on servers which have never been connected to the internet to ensure security.
Security while using the bank's services is of outmost importance. That is why we created the hardware system which guarantees the security of payment processes for all customers. This hardware system would encrypt and secure any and all data transmission. Equation 2 below expresses how the machine will use weighted meta data to create alert.
Where: x is meta data associated with i
Examples of weighting would be on a scale of 1 to 10, the date, September 11, would be weighted very high. The meta data associated with a tip, if a tip was from a reliable informant, would be higher that an anonymous tip. This hardware would use meta data (weightings to each of the meta data values, these then would be summed in a machine using regression analysis) to combat the following types of security breaches with associated meta data.
Security within the Architecture
There are three vulnerabilities to a bitcoin bank are hacking, denial of service, and spoofing. The uniquely invented hardware will take the following meta-data into account to prevent any of these events to occur:
Hacking
Meta-data retrieved by invented hardware to prevent hacking will include:
Denial of Service
Meta-data retrieved by invented hardware to prevent Denial of Service will include:
Spoofing
Meta-data retrieved by invented hardware to prevent Spoofing will include:
Storage
The bank would offer storage options for either or both online and offline storage for customers. The online storage would use enhanced, with our invented hardware, servers to securely store and keep track of all transactions. Offline storage would use secure and efficient hardware that would store Bitcoins for customers. Hardware has been invented in order to authenticate person which brings storage from online to offline or offline back online. This transaction will also require invented hardware to communicate between online and offline (or offline to online) storage when customer asks to do so.
Online Storage
Hardware either within or external to the server which is connected through a network.
Cold Storage
Step 1
Customer securely logs-in to bank account
Step 2
Customer selects to store Bitcoins in Cold Storage
Step 3
Authorized worker securely moves customer's Bitcoin data from Invented Bank Server using invented transfer hardware
Step 4
Authorized worker securely moves customer's Bitcoin data from invented hardware to invented cold storage hardware
Step 5
When customer requests to withdraw Bitcoins, authorized worker securely moves customer's Bitcoin data from invented cold storage hardware to invented hardware
Step 6
When customer requests to withdraw Bitcoins, authorized worker securely moves customer's Bitcoin data from invented hardware to invented bank server
Authorized Worker Security
The Authorized Worker, who is responsible for the authorization of the transfer of bitcoins from the invented bank server to the invented cold storage hardware using the inverted transfer hardware
Examples of possible but not limited to security requirements in place for the authorized worker:
Arbitrage
The bank would utilize hardware that optimizes the value of the currencies from the organization we're buying Bitcoins from. This hardware would utilize data given to the machine from the different organization under the architecture in order, maximize returns, use current trends, and predict trends. Equation 4 below expresses how the machine will use weighted meta data to create alert.
Where: x is meta data associated with i
Examples of weighting would be on a scale of 1 to 10, the news source, New York Times, would be weighted very high. This hardware would use meta data (weightings to each of the meta data values, these then would be summed in a machine using regression analysis) to identify the best exchanges, including:
Detection and Mitigation of Terrorism and Other Illegal Activities
There are opportunities for bad people to use these devices and networks for transferring money that would be used for terrorism. This invention uncaptured in a machine uses meta data and meta data on meta data, to detect (weightings to each of the meta data values, these then would be summed in a machine using regression analysis) the possibility and alert the appropriate authorities. Equation 5 below expresses the calculation that the machine would follow.
Where: x is meta data associated with i
Examples of weighting would be on a scale of 1 to 10, the date, September 11, would be weighted very high. The meta data associated with a tip, if a tip was from a reliable informant, would be higher that an anonymous tip. This hardware system would use meta data including:
Procuring Bitcoins
This invention includes hardware has been invented to create the best solutions for procuring Bitcoins. This invention seeks to find the best organization to purchase bitcoins from. Equation 6 below expresses the calculation that the machine would follow.
Where: x is meta data associated with i
Examples of weighting would be on a scale of 1 to 10, the date, September 11, would be weighted very high. The meta data associated with a tip, if a tip was from a reliable informant, would be higher that an anonymous tip. This hardware system would use meta data including:
Implementation
To implement this Bank, we would use the infrastructure of different partners and locate them under the architecture we created for the bank. This would allow for the bank to provide multiple services to the client. The bank could add services easily since the architecture is designed to support additions. The hardware invented for different services will be integral to securing, mitigating from architecture, curating, optimizing exchanges, and transferring Bitcoins and different currencies within the bank's architecture.
Step 1—Customer Receives or Purchases Bitcoins
Step 2—Hardware Scans all Exchanges
Customer selects to exchange 1 Bitcoin to a USD. Banks unique, and specially designed invented hardware scans information from exchanges to determine most favorable exchange for customer. Bank's hardware asks exchanges for the following information:
Step 3—Hardware Stores Exchange Data
Bank's unique, and specially designed invented hardware receives requested data from exchanges and stores data to later optimize best result for customer.
Step 4—Optimization and Curation
International Bitcoin Bank gathers all the information provided by exchanges and passes the information to the optimization hardware. The optimization hardware calculates variables through maximization formula to obtain optimum exchange rates. Hardware selects best result to create exchange for customer.
Step 5—Secure Currency Conversion
Hardware securely completes conversion of Bitcoins to desired currency
Step 6—Transfer to Recipient's Selected Bank Account
Unique, and specially designed invented hardware curates, verifies, and, after mitigating from terrorism, securely transfers customer's new USD's into selected bank account.
This application claims priority to U.S. Provisional patent application Ser. No. 62/261,546, filed Dec. 1, 2015, the contents of which are herein incorporated by reference in their entirety.
| Number | Date | Country | |
|---|---|---|---|
| 62261546 | Dec 2015 | US |
