System Overview
This invention provides a system and method for creating, redeeming, and transferring tokens. The system includes:
- A publisher (I)
- A first user (A)
- A second user (B)
The publisher generates tokens and can be entities such as banks, financial institutions, mints, or corporations. The publisher is associated with a first processing device and communicates via a network to execute various methods.
Key Components:
Publisher (I):
- Generates tokens
- Associated with data storage
- Communicates via network
First User (A):
- Can request token creation
- Redeem tokens
- Transfer token values to other users
Second User (B):
- Receives transferred tokens
- Can redeem tokens
Peer-to-Peer Distributed Ledger:
- Records transactions
- Typically a blockchain based on Bitcoin protocol
Token Transaction Types
1. Token Creation Transaction
- First user transfers fiat currency to publisher
- Publisher "tokenizes" cryptocurrency amount
- Creates first token (T1) representing the contract value
2. Token Redemption Transaction
- First user sends tokenized cryptocurrency back to publisher
- Publisher sends fiat currency to first user
- Tokenized cryptocurrency may be used for future transactions
3. Value Transfer Transaction
- First user transfers token value to second user
- Requires publisher authorization
- Creates third token (T3) for second user
4. Partial Redemption Transaction
- First user redeems portion of token value
- Remaining value stays with first user as second token (T2)
5. Partial Value Transfer Transaction
- First user transfers portion of token value to second user
- Remaining value stays with first user as second token (T2)
Token Creation Process
Registration Method
- Account verification
- Wallet creation
- Key pair generation
Token Creation Steps:
- Receive token creation request
- Determine user public key
- Allocate cryptocurrency amount
- Create redemption script hash
- Send transaction to distributed ledger
Token Redemption Process
- Receive redemption request
- Retrieve redemption script
- Obtain user private key
- Sign redemption script
- Send transaction to ledger
Value Transfer Process
- Receive transfer request
- Retrieve original token details
- Create new token for recipient
- Allocate cryptocurrency amount
- Create new redemption script
- Send transaction to ledger
Security Features
- Dual signatures required (user and publisher)
- Immutable record on blockchain
- Cryptographic proof of token ownership
- Prevention of unauthorized token spending
Token Types and Contracts
Tokens can represent various contracts:
- Fiat Currency: Representing monetary value
- Limited Edition Items: With fixed quantities
- Property Shares: Representing partial ownership
- Event Tickets: With access rights
- Vouchers: For specific services
Contract Parameters:
- NumShares: Total available shares
- ShareVal: Value per share
- PeggingRate: Cryptocurrency to value ratio
- TotalIssuance: Maximum value (if limited)
Processing Devices
The system utilizes processing devices for:
- Publisher operations
- User interfaces
- Blockchain maintenance
- Transaction processing
Each device includes:
- Processor
- Memory
- Network communication module
- Security features
👉 Learn more about blockchain token systems
FAQ Section
Q: What cryptocurrencies can be used in this token system?
A: The system is designed to work with any cryptocurrency, though Bitcoin is most commonly used as the base protocol.
Q: How secure are the token transactions?
A: Extremely secure - all transactions require cryptographic signatures and are recorded on an immutable blockchain ledger.
Q: Can tokens represent physical assets?
A: Yes, tokens can represent ownership of physical assets like property, collectibles, or merchandise.
Q: What happens if I lose my private key?
A: Without your private key, you cannot redeem tokens. Some publishers offer key recovery services through secure channels.
Q: How are transaction fees handled?
A: Fees are typically paid by the publisher, though some systems may require users to contribute to transaction costs.
Q: Can tokens be divided indefinitely?
A: Tokens have minimum divisible amounts based on their underlying parameters, preventing infinite division.