According to the patent application revealed by the bank, the system envisions a platform whereby participating institutions can function as nodes to form a distributed network. The goal of the concept is to eliminate intermediaries in the existing system and improve the liquidity of financial assets.
When a user from one institution initiates a transaction request, it triggers a smart contract causing every node to validate the transaction based on the information provided, including the senders account balance, name and transaction amount. A transaction would be considered complete once the network has received sufficient validations from participating nodes for consensus above a pre-determined threshold.
According to the bank, the patent initiation was influenced by the slow and costly existing system when sending interbank or cross-border transactions for both ordinary payments and financial instruments, such as precious metals and futures products.
The patent application marks the banks latest filing related to blockchain technology, according to the China State Intellectual Property Office. As previously reported by CoinDesk, the bank is also seeking to patent a blockchain system that can verify user information over a distributed network.
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