Ripple Labs obtains patent for On-Demand Liquidity in the U.S.

Ripple Labs

Ripple Labs Inc. received the patent for On-Demand Liquidity from the U.S. Patent and Trademark Office on Jan. 26.
The patent relates to foreign exchange and cross-border payments.

Back on December 19, 2019, Ripple Labs Inc. applied for a patent for On-Demand Liquidity (ODL). Now it was granted a few days ago, on January 26, 2021. The patent, number 10,902,416 (application number 16/797,442), was granted by the Patent Office for “a network computing system implementing on-demand liquidity for cross-medium transaction services.”

The grantee listed for this patent is Ripple Labs Inc. The invention is attributed to Warren Paul Anderson, Dadi Armannsson, Jesse Brauner, Gunnar Kristjansson, Conner McNamara, Yana Novikova, David Opler. The abstract of the US patent application describes ODL as follows:

A computing system can facilitate cross-medium transactions through use of a digital currency. The computing system can provide a guaranteed exchange rate and manage customer pools and/or slippage balances in digital wallets to adjust digital currency transfer amounts in order to align them with the guaranteed exchange rate.

Details from the patent for ODL

Despite the fact that how On-Demand liquidity (ODL) works is actually well-known, there are some surprises in the document. For example, the patent for the XRP-based payment solution states that the technology “is not limited to banking institutions or currencies, but may rather be implemented for any exchange of value (e.g., commodities, other digital currencies and assets, bonds, stocks, securities, etc.).”

Further, the document notes that ODL can be used not only by banks and financial institutions, but also by corporations and government entities, likely covering use in the context of a digital central bank currency (CBDC):

In various implementations, the originating institution and the destination institution can also comprise clients of the transaction service, and can include cross-medium or cross-border transaction entities, such as large financial institutions, multi-national corporate entities, governmental entities, non-governmental organizations, and the like.

Meanwhile, the basic concept of ODL described in Ripple Labs’ patent holds no surprises. Twitter user “XRPatience,” who first discovered the patent approval, described the system very accurately with the following few words:

  1. Accept request for fiat->fiat
  2. Lookup exchange rate
  3. Convert to ODL (xrp)
  4. Send xrp to destination
  5. Convert to destination fiat

The whole process is done “in seconds or fractions of a second”. ODL guarantees a fixed exchange rate by querying a variety of exchanges for rates before executing the transaction, taking into account current or predicted volatility. Minor differences in the guaranteed exchange rate can be compensated for with the help of clients’ digital currency pools held on each of the participating exchanges.

For very large orders, the system can split the orders into smaller “chunks” and send each chunk to separate exchanges for conversion to ODL before sending all chunks to the final destination for conversion to the target fiat. Transactions can also be automatic or manual, with a fixed 10-minute period for a user to accept the exchange rate before the transaction expires and a new quote must be obtained.

ODL works on “desktop computers, mobile devices or smartphones, personal digital assistants (PDAs), laptops, tablet devices, virtual reality (VR) and/or augmented reality (AR) devices, portable computing devices, television sets (IP Television), etc.,” according to the patent. In addition, an ODL integrated device could work on “custom hardware, in-vehicle devices or on-board computers, etc.”

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