TECHNICAL FIELD
[0001] The present disclosure generally relates to a field of secure exchange of traded securities. More specifically, the present invention relates to the system and method of representing and managing traded securities through collateralization using blockchain technology.
BACKGROUND
[0002] Blockchain has applications far beyond cryptocurrencies. Just as the internet democratized access to information, blockchain can democratize access to value and money. Since it allows payments to be finished without any bank or any intermediary, blockchain can be used in various financial services such as digital assets, remittance and online payment, through smart contracts and tokenization.
[0003] The application of blockchain can also be extended to traditional stock exchanges. The present multi-layered processes in pre-trade, trade and post trade, with the involvement of various stakeholders like customer bank, Custodian bank, central registry, clearing houses, settlement house and the exchanges itself, makes it a cumbersome process which is time consuming and cost inefficient due to expensive database management and many intermediaries and can be prone to security risks due to centralised ledger. At the same time, the present multi-layered process lacks transparency for an end user.
[0004] Several blockchain based technologies related to trading using blockchain are known. For example, one of such technology talks about creation of an exchange traded product or exchange traded fund (ETF) made from digital asset like crypto currencies like bitcoin, ether, ripple and also crypto coins like ICOs tokens of various companies. The said technology describes the creation of exchange traded product by pooling in crypto currencies from various initial purchasers, grouping them and trading them as per the demand. Net Asset Value (NAV) is determined by gathering price information from various exchanges around the globe where these crypto assets are being traded. The listing of the exchange traded product is suggested on a central exchange which involve clearing agency like DTC or NSCC.

[0005] However, the scope of said conventional technology is limited to crypto or digitised assets and does not talk about the traditional securities or physical asset, but mostly crypto currencies, which are already available on blockchain. Also, there are various stakeholders that are involved in the process of formation of exchange traded fund like crypto exchanges, central exchanges, clearing houses, etc. which increases the cost of operation of funds and hence defeating the very own purpose of cryptocurrencies, which are by nature easy to trade without any intermediaries at a very low cost. Also, formation of an exchange traded fund for crypto currencies does not make sense, apart from owning a bundle of crypto together, as the crypto currencies can be owned fractionally up to four decimal places, unlike traditional securities or assets which cannot be owned fractionally as of now. Also, the method of calculation of net asset value is impractical as it involves information gathering of crypto price from various exchanges the crypto currencies are being traded on for the exchange traded fund in consideration. Further said technology also does not describe a secured process of checking of integrity of assets and verification of initial purchaser or the offeror of such crypto currency for the formation of exchange traded fund. Lack of such systems can lead to fraudulent or manipulated crypto currencies, which can lead to collapse of such exchange traded fund.
[0006] Further, in another conventional technology techniques for trading, clearing and settling securities transactions using blockchain technology are described. In particular, said technology describes a method of performing purchase of securities by pooling of funds from investors, whose funds go to security owner or issuer and uploading of purchased security related data on blockchain as well as all transaction related data on blockchain. Further this technology describes transfer of ownership of these blockchain uploaded representation of securities (or virtual data token) from one investor to another, through smart contracts and representing and managing these securities representation through wallets.
[0007] However, said technology mentions a generalised approach to represent a security on blockchain, without touching the aspect of ownership transfer of actual securities from the issuer, as under the current regulatory system, the ownership of securities is held with a Depository system like Central Depository (Pte) Limited (CDP) in Singapore or Central

Depository Service Limited (CDSL) and National Securities Depository Limited (NSDL) in India for equity related securities. These Depository systems are regulated and secured by government law body like Reserve Bank of India (RBI) and Security Exchange Board of India (SEBI) in India. Hence, the above-mentioned method can only be applicable in real world when the present Depository systems are replaced by the system mentioned in above invention and gets regulatory approval from government law body as well as recognition of smart contracts as legal contracts. Hence, this limits the Industrial application of the above-mentioned invention due to possibility of fraudulent activity by the issuer. This technique does not inculcate parallel markets of the securities, which are also traded on other exchanges for example shares of a public company, which are traded on central exchanges like National Stock Exchange (NSE) in India and Singapore Exchange (SGX) in Singapore along with the virtual data token being traded on the system mentioned in said technique, which makes it a second-rate system. Other than this, there are various aspects mentioned but not explained in the prior art about nature of smart contracts, details of cryptography used in cryptographic portfolio, methods of storing of data on blockchain and verification of security ownership and transfers.
[0008] Therefore, these methods do not suffice for a risk proof system which also comply with the present regulatory framework and presents the true representation of the securities with the use of blockchain technology, specifically for the case of exchange traded securities. Also, it does not provide any dedicated mechanism to check the authenticity of the securities. In view of the foregoing, there exists a need in the art to provide a solution which overcomes the above-mentioned problems.
SUMMARY
[0009] The present disclosure overcomes one or more shortcomings of the prior art and provides additional advantages discussed throughout the present disclosure. Additional features and advantages are realized through the techniques of the present disclosure. Other embodiments and aspects of the disclosure are described in detail herein and are considered a part of the claimed disclosure

[0010] Exemplary embodiments are directed to systems and methods for a system and method of representing and managing securities through digital tokens on blockchain with a dedicated two-way secure method using collateralization and smart contracts to authenticate the securities.
[0011] In one non-limiting embodiment of the present disclosure, a method for representing and managing securities through digital tokens over a network is disclosed. The method being implemented by a system which comprises a plurality of user devices (120) communicatively coupled with each other via the network, wherein each of the user devices comprises a processor, a cryptographic wallet, and a distributed blockchain ledger; a computing system (110) communicatively coupled with the plurality of the user devices (120), wherein the computing system (110) comprises a processor and a distributed blockchain ledger; and a digital token minter (140) communicatively coupled with the computing system (110). The method comprises receiving information related to securities from one or more user devices (120) and storing the received information related to securities on the distributed blockchain ledger. Further, the method comprises and generating a proof of security (POS) as a mark of verification of securities based on the information related to securities and storing the POS on the distributed blockchain ledger. Furthermore, the method comprises generating digital tokens equivalent to the securities, in response to generating of the POS and storing the generated digital tokens in the cryptographic wallet of the one or more user devices (120).
[0012] In yet another non-limiting embodiment of the present disclosure, the method comprises, before receiving information related to securities from one or more user devices (120), receiving a registration request from the one or more user devices (120). The registration request comprises information related to user of the user device (120) including at least one of know your customer (KYC) details, Anti-money laundering (AML) details, and digital signature of the user. The method further comprises generating a cryptographic wallet and a distributed blockchain ledger for the one or more user devices (120), in response to registration of the one or more user devices (120).

[0013] In yet another non-limiting embodiment of the present disclosure, the method further includes, in response to receiving and storing the information related to securities on the distributed blockchain ledger, generating a No Objection Certificate (NOC) and uploading said NOC on the distributed blockchain ledger by a custodian system (150).
[0014] In yet another non-limiting embodiment of the present disclosure, the method further comprises receiving a request from the one or more user devices (120) for redemption of digital tokens of the user, the request comprising digital signature of the user and number of the digital tokens to be redeemed, validating if the cryptographic wallet of the user has the requested number of the digital tokens to redeem, and sending a request to a custodian system (150) to release securities equivalent to the number of digital commerce tokens.
[0015] In yet another non-limiting embodiment of the present disclosure, the method further comprises updating the asset registry using smart contract by the computing system (110), after redemption of the digital tokens.
[0016] In yet another non-limiting embodiment of the present disclosure, a system for representing and managing securities through digital tokens over a network is disclosed. The system comprises a plurality of user devices (120) communicatively coupled with each other via the network, wherein each of the user devices (120) comprises a processor, a cryptographic wallet, and a distributed blockchain ledger. The system further comprises a computing system (110) communicatively coupled with the plurality of the user devices (120), the computing system (110) comprises a processor and a distributed blockchain ledger. The computing system (110) is configured to receive information related to securities from one or more user devices (120), store the received information related to securities on the distributed blockchain ledger, and generate a proof of security (POS) as a mark of verification of securities based on the information related to securities and store the POS on the distributed blockchain ledger. The system further comprises a digital token minter (140) communicatively coupled with the computing system (110), wherein the digital token minter (140) is configured to generate digital tokens equivalent to the securities, in response to generating of the POS and store the generated digital tokens in the cryptographic wallet of the one or more user devices (120).

[0017] In yet another non-limiting embodiment of the present disclosure, the computing system (110) is configured to receive a registration request from the one or more user devices (120). The registration request comprises information related to user of the user devices (120) including at least one of: know your customer (KYC) details, Anti-money laundering (AML) details, and digital signature of the user. The computing system (110) is further configured to generate a cryptographic wallet and a distributed blockchain ledger for the one or more user devices (120), in response to registration of the one or more user devices (120).
[0018] In yet another non-limiting embodiment of the present disclosure, in response to receiving and storing the information related to securities on the distributed blockchain ledger, a custodian system (150) is configured to generate a No Objection Certificate (NOC) and upload the NOC on the distributed blockchain ledger.
[0019] In yet another non-limiting embodiment of the present disclosure, the computing system (110) further configured to receive a request from the one or more user devices (120) for redemption of digital tokens of the user, the request comprising digital signature of the user and number of the digital tokens to be redeemed, validate if the cryptographic wallet of the user has the requested number of the digital tokens to redeem, and send a request to a custodian (150) to release securities equivalent to the number of digital commerce tokens.
[0020] In yet another non-limiting embodiment of the present disclosure, the system further comprises an assert registry, wherein the computing system (110) configured to update the asset registry using smart contract, after redemption of the digital tokens.
OBJECTIVES OF THE INVENTION
[0021] An object of present invention is to provide a system and method of representing exchange traded securities through digital commerce tokens on blockchain with a dedicated two-way secure method using collateralization and smart contracts to authenticate the securities.

[0022] Another object of present invention is to provide a system which can be retrofit over the present regulatory and legal framework to extend the application of current exchanges to international markets with better efficiency and low cost for commerce.
[0023] Yet another obj ect of this invention is to provide a method to represent the true value of these digital token on blockchain during parallel market commerce.
BRIEF DESCRIPTION OF THE DRAWINGS
[0024] The accompanying drawings, which are incorporated in and constitute a part of this disclosure, illustrate exemplary embodiments and, together with the description, serve to explain the disclosed embodiments. In the figures, the left-most digit(s) of a reference number identifies the figure in which the reference number first appears. The same numbers are used throughout the figures to reference like features and components. Some embodiments of system and/or methods in accordance with embodiments of the present subject matter are now described, by way of example only, and with reference to the accompanying figures, in which:
[0025] Fig. 1 is a block diagram of a network representing and managing securities through digital tokens according to one exemplary embodiment.
[0026] FIG. 2 is a flow diagram illustrating the on boarding process of users onto the system according to one exemplary embodiment.
[0027] FIG. 3 is a flow diagram illustrating the creation of a virtual security token through the process of verification of the authenticity of the security using proof of security protocol in accordance with an exemplary embodiment of the present invention.
[0028] FIG. 4 is a flow diagram that illustrates an exemplary method for implementing token redemption in accordance with an exemplary embodiment of the present invention.
[0029] FIG. 5 is a flow diagram that illustrates an exemplary method for trading and transferring ownership of a security in accordance with an exemplary embodiment of the present invention.

[0030] It should be appreciated by those skilled in the art that any block diagrams herein represent conceptual views of illustrative systems embodying the principles of the present subject matter. Similarly, it will be appreciated that any flow charts, flow diagrams, state transition diagrams, pseudo code, and the like represent various processes which may be substantially represented in computer readable medium and executed by a computer or processor, whether or not such computer or processor is explicitly shown.
DETAILED DESCRIPTION
[0031] In the present document, the word "exemplary" is used herein to mean "serving as an example, instance, or illustration." Any embodiment or implementation of the present subject-matter described herein as "exemplary" is not necessarily to be construed as preferred or advantageous over other embodiments.
[0032] While the disclosure is susceptible to various modifications and alternative forms, specific embodiment thereof has been shown by way of example in the drawings and will be described in detail below. It should be understood, however that it is not intended to limit the disclosure to the particular forms disclosed, but on the contrary, the disclosure is to cover all modifications, equivalents, and alternatives falling within the scope of the disclosure.
[0033] The terms "comprises", "comprising", "include(s)", or any other variations thereof, are intended to cover a non-exclusive inclusion, such that a setup, system or method that comprises a list of components or steps does not include only those components or steps but may include other components or steps not expressly listed or inherent to such setup or system or method. In other words, one or more elements in a system or apparatus proceeded by "comprises... a" does not, without more constraints, preclude the existence of other elements or additional elements in the system or apparatus.
[0034] In the following detailed description of the embodiments of the disclosure, reference is made to the accompanying drawings that form a part hereof, and in which are shown by way of illustration specific embodiments in which the disclosure may be practiced. These embodiments are described in sufficient detail to enable those skilled in the art to practice the

disclosure, and it is to be understood that other embodiments may be utilized and that changes may be made without departing from the scope of the present disclosure. The following description is, therefore, not to be taken in a limiting sense.
[0035] The present invention will be described herein below with reference to the accompanying drawings. In the following description, well known functions or constructions are not described in detail since they would obscure the description with unnecessary detail.
[0036] The present invention relates to a system that utilizes proof of security protocol to authenticate the ownership and to secure the exchange of securities through collateralization and smart contracts. The system may include a web-based or cloud-based platform that is accessible over a network using user devices (120) operated by users. In a non-limiting exemplary embodiment, the users may be any of funders, issuers, investors, administrators or other users.
[0037] In embodiments, the present invention generally relates to methods and systems of representing and managing traded securities through digital commerce token using blockchain technology. In an embodiment, the system in the present invention provides techniques to represent the true value of these digital commerce token during parallel market commerce in order to represent percentage point change in the value similar to exchange traded securities for digital commerce tokens. In another embodiment, the system in the present invention can be retrofit over the present regulatory and legal framework to extend the application of local exchanges to international markets with better efficiency and low cost for commerce.
[0038] Referring to figure 1, an exemplary network 100 is disclosed for representing and managing trade securities through digital token commerce tokens using blockchain via the network 100. The network 100 may include one of the Internet, a local area network, a wide area network, an intranet, a peer-to-peer network, and/or other similar technologies for connecting various entities as discussed below. In an aspect, various elements/entities such as a computing system 110, user devices 120, a depository 130, a digital token minter 140, a

custodian 150, a security indexer 160, and local exchange 170 etc. as shown in fig. 1 may communicate within the network 100 through web presence 180.
[0039] The users 125 of the user devices 120 may be any person such as funder, administrator, investor or any other users. A user 125 may purchase securities form the local security exchange 170. After purchasing the securities, the user 125 registers on the computing system 110 through his user device 120. The computing system 110 is an alternative investment marketplace in which all the listing of securities, generation of digital commerce tokens, listing of tokens, issuance, clearance, settling and trading of tokens are conducted via a single blockchain based peer to peer network of system of user devices to conduct transactions which happens simultaneously. The computing system 110 is different from a conventional security trading system where security transfer is enabled by various individual players on separate networks like exchanges, settlement houses, clearance houses, trading platforms, etc., which is time taking process. The computing system 110 is configured to manage all activities associated with generation and trading of tokens, starting from the purchase of securities and continuing throughout the lifecycles of the tokens. The computing system 110 relies on a distributed framework that enables real-time clearance and settlement of transactions, thus providing an alternative investment marketplace which is very liquid in comparison to conventional markets and which removes counterparty risks.
[0040] The user devices 120 may represent desktop computers, laptop computers, mobile devices (e.g., Smart phones or personal digital assistants), tablet devices, or other type of user devices, which have computing capabilities. The user devices 120 may be equipped with one or more computer storage devices (e.g., RAM, ROM, PROM, SRAM, etc.) and one or more processing devices (e.g., central processing units) that are capable of executing computer program instructions. The computer storage devices are preferably physical, non-transitory mediums. The user devices 120 may comprises at least one processor, memory and a cryptographic wallet. The memory may be a distributed blockchain ledger that stores all the transaction made by the user.
[0041] The computing system (110) may receive a registration request from the one or more user devices (120), wherein the registration request comprises information related to user of

the user devices (120) including at least one of: know your customer (KYC) details, Anti-money laundering (AML) details, and digital signature of the user. The user 125 of the one or more devices (120) uploads his details such as the KYC details, AML details, and digital signature onto the computing system 110 in order to register himself at the computing system 110. The computing system 110 verifies all the details and on successful verification, the computing system 110 generates a cryptographic wallet for the user 125 on his user device 120 and generates a distributed blockchain ledger for the user device 120. The computing system 110 may comprise at least one processor, memory and a distributed blockchain ledger. The distributed blockchain ledger may store the data related to all transaction on the computing system 110 by appending blocks in the blockchain ledger in response to every transaction or activity in the network. After successful registration, the user 125 uploads the details of the securities on the blockchain ledger through his user device 120 and provides relevant documents for verification.
[0042] In response to receiving the details related to the securities, proof of security (PoS) protocol is executed. The PoS verification process records and provides an audit trail of an asset on blockchain to create digital commerce tokens. Tokens are certified using sequential digital signatures from the entities in the chain of custody, namely the vendor, custodian, auditor, which are further validated with proof of purchase and depository receipts provided and uploaded onto cloud service for permanent record. The details of the securities are verified by the custodian 150 which may comprise an auditor to audit the details. The auditor may comprise at least one processor and memory. Once the custodian 150 successfully audits the details of securities, the securities are kept with the custodian 150 and a no objection certificate (NOC) is generated by the auditor of the custodian 150. The custodian 150 may update information related to securities on the asset registry and upload the NOC document on the blockchain ledger. In response, the processor of the computing system 110 generates a proof of security (PoS) certificate as a mark of verification of securities. In an exemplary embodiment, the custodian is a third-party service provider which may include, but not limited to banks and other government authorised financial institutes who keep digital ownership and data records of the securities on behalf of the owner in centralised servers.

[0043] After the generation of the PoS certificate, the securities are delivered to the custodian account from the user's sub-account under the depository 130. Those skilled will appreciate that to deliver securities to the custodian account from the user's sub-account under the depository 130, the computing system 110 must first inform the depository about generation of proof of security (PoS). In another exemplary embodiment, it shall be appreciated that the depository 130 initially holds the securities purchased by the user 120. The depository 130 may comprise at least one processor and memory. In another embodiment, after the generation of the PoS certificate by the computing system 110, the digital token minter 140 generates digital commerce tokens equivalent to the securities registered by the user 125, which are stored in the cryptographic wallet of the computing device 120. The digital token minter 140 may comprise at least on processor and memory. In an exemplary embodiment, the digital token minter is a machine that runs computations to generate an encrypted data which is authentic to each and every transaction. This encrypted data is further represented as a digital commerce token. Each token has a different encryption and hence is authentic to it just like normal physical currency. The digital token miners act to create blocks or entries on the blockchain ledger using data mining techniques. Mining involves digital token miners who add digital token transaction data to public ledger of past transactions. In an aspect, the digital commerce tokens generated in the above paragraphs may be used for exchange, trade, and redemption by the user 125. In an embodiment, the security indexer 160 comprising a processor and database system for memory may keep track of number of digital tokens generated corresponding to the securities.
[0044] The funder 125-A to commerce the tokens on secondary stage with users 125-A and 125-B present in the network 100 the stage of creation or destruction of a digital commerce token. The secondary stage is the stage to exchange the digital commerce token. Each stage is described in detail below in the description.
[0045] In contrast to conventional security trading systems which inefficiently perform trade-related activities (e.g., such as issuing securities and clearing/settling transaction) with a variety of different entities, the overall network 100 described herein provides an alternative investment system in which all offering and commerce activities are conducted through a single system that utilizes a blockchain-based, peer-to-peer network of computing devices to

conduct transactions. Said network 100 is configured to manage all activities associated with exchanging securities, starting from the issuance of the securities and continuing throughout the life cycles of the securities. It relies on a distributed framework that enables real-time clearance and settlement of transactions, thus providing an alternative investment system which is very liquid in comparison to existing markets and which removes counterparty risks.
[0046] According to an exemplary embodiment, the network works on a two-stage working model that has two stages i.e. a primary stage and a secondary stage. The primary stage is the stage of creation or destruction of a digital commerce token. The secondary stage is the stage to exchange the digital commerce token. Each stage is described in detail below in the description.
[0047] In an exemplary embodiment, the digital commerce token creation process at the primary stage involves a funder 125-C, who is the supplier of cash and who purchases the securities from a local security exchange and receives the securities under a depository sub-account. The funder 125-C and the custodian 150 register at the primary stage and upload their digital signatures on the computing system 110. The funder 125-C then updates security related data on an asset registry over the blockchain. The custodian 150 audits the security related data for the security purchased by the funder and generates a No-Obj ection-Certificate (NOC) as a proof of collateralization. The custodian 150 uploads the NOC on distributed blockchain ledger of the computing system 110. After receiving the NOC, the computing system 110 generates a proof-of-security (PoS) certificate. After the generation of the PoS certificate, the securities are delivered to the custodian account from the funder's sub-account under depository 130. An asset registry count is updated over the blockchain by running a smart contract. An asset registry is a book of records, basically a ledger on blockchain, that maintains the ownership status of securities (assets). Equivalent digital commerce tokens are generated by the digital token minter 140 and are issued to the funder 125-A to commerce the tokens on secondary stage with users 125-A and 125-B present in the network 100.
[0048] In an exemplary embodiment, the digital commerce token destruction process at the primary stage involves a funder 125-C, who is the supplier of cash and who purchases digital

commerce token from users 125-A and 125-B. The funder 125-C applies for redemption through the digital signature on the computing system 110. The computing system 110 receives a request from the user device of the funder 125-C for redemption of digital tokens of the funder 125-C. The request may comprise the digital signature of the funder 125-C and number of the digital tokens to be redeemed, but not limited thereto. Further, the computing system 110 may validate if the cryptographic wallet of the funder 125-C has the requested number of the digital tokens to redeem.
[0049] Further, the computing system 110 may send a request to a custodian (150) to release securities equivalent to the number of digital commerce tokens and the custodian 150 is prompted to release the equivalent securities by the computing system 110. The custodian 150 initiates the process of delivery of equivalent securities to the funder's sub-account with the depository 130. After delivery, a NOC certificate is generated by the custodian 150 and is updated on an asset registry over the blockchain. Equivalent digital commerce tokens are destroyed by the system 110 and the funder 125-C can further trade the issued securities with the local security exchange 170. An asset registry count is updated over the blockchain by running smart contracts, after redemption/destruction of the digital tokens. The smart contracts may take over the onerous administrative task of managing approvals between entities, calculating trade settlement amounts and then transferring the securities automatically once the transaction embedded within the smart contract has been verified and approved through NOCs. The asset registry count after the verification process of smart contracts is then automatically updated.
[0050] Figure 2 discloses an on-boarding process 200 for the users 125 such as funders, investors, administrators, and other users. At step 202, the processor of the computing system 110 allows the users 125, through user device 120, to register with the computing system 110 by utilizing the details such as know your customer (KYC) details and Anti-money laundering (AML) details, provided by the users 125 which are stored in a memory. At step 204, the processor of the computing system 110 verifies the details of the users 125. The process 200 at step 206, discloses that the processor stores the verified details on the distributed blockchain ledger of the computing system 110. This process evaluates the integrity of the user being onboarded using a user device. The user is asked to input various

details about his/her background like demographics, citizenship, net worth etc. and is also asked to submit various documents that authenticate his identity and other details required. All this information is stored on the blockchain ledger. The process 200, at step 208, further discloses that the processor of the computing system 110 creates cryptographic or virtual wallets and a distributed blockchain ledger for the user device 120. The users 125 can also link their already existing cryptographic wallets on the computing system 110. These wallets include encryption protocols for securely storing a virtual portfolio of securities. The cryptographic wallets can be used to store fiat currencies, cryptocurrencies or the digital commerce tokens that are backed by the securities.
[0051] Figure 3 illustrates an exemplary process 300 of creation of a virtual security token/digital token through the process of verification of the authenticity of the security using proof of security protocol. The process 300, at step 302, discloses that a funder 125-C purchases the securities from a local security exchange 170. The local security exchange 170 manages the ownership of securities through a depository 130. Both the local security exchange 170 and the depository 130 are licensed and regulated by the regulatory authority. The process 300, further discloses at step 304, post the cash is supplied to the local exchange and verification, the ownership of the securities is transferred in the name of the funder 125-C under his sub-account with the depository 130. The funder 125-C then registers himself on the computing system 110, where his onboarding takes place as described in the process discussed above. At step 306, the funder 125-C and the custodian 150 upload their digital signatures on the computing system 110 through smart contracts which demonstrates an agreement on the funder's end to give the right to the custodian 150 to hold his securities and to the computing system 110 to tokenize his securities into digital commerce token, and at Custodian's end to keep the securities of the funder 125-C safe as well as provide the data of securities purchased. At step 308, the process 300 discloses that the funder 125-C uploads the data related to the securities on the blockchain ledger and provides relevant documents for verification. The provided data is stored in an asset registry over the blockchain.
[0052] As next step, the process 300 discloses at step 310, proof of security protocol is executed, which helps in verifying and maintaining the identity of the securities that are being

collateralized and tokenized. The custodian 150 using an auditor that comprises at least one processor and memory, audits the data and documents provided by the funder 125-C to verify the ownership and integrity of the registered securities. Smart contracts may be implemented using one or more event-driven programs and protocols that utilize the blockchain ledger to facilitate, verify, execute and enforce the terms of an agreement related to implementing these functions. Furthermore, because the record keeping or auditing process for all transactions is "dematerialized" (e.g., conducted and stored electronically without need for physical papers or handwritten signatures), all of the relevant documentation is immediately available to the secondary market.
[0053] Once the securities are verified successfully, they are kept with the custodian 150 safely while the process of commerce of these securities takes place through the means of digital commerce tokens. In response, to step 312, the process 300 discloses generating a no objection certificate (NOC) by the auditor of the custodian 150. At step 314, the process 300 disclose updating by the auditor the security information on the asset registry and uploading the NOC document on the blockchain ledger. The process 300 then moves to step 316, which discloses that after uploading the NOC document on the blockchain ledger, the processor of the computing system 110 increments asset registry count, which means that the number of securities in the registry are updated and increased after successful registration of the securities of the funder 125-C. In response, the process 300 further discloses that at step 318, a Proof of security (PoS) certificate is generated by the processor of the computing system 110 as a mark of verification of securities and at step 320, generating digital commerce tokens by the digital token minter 140 in the blockchain, equivalent to the securities registered by the funder 125-C, and issuing the same to the funder 125-C. The funder 125-C keeps these tokens in his cryptographic wallet. Further, the process 300 at step 322, discloses that the processor of the computing system 110 runs a token ledger contract to update the number of tokens in the system 110 and to update the data regarding the tokens issued and their ownership.
[0054] Figure 4 illustrates an exemplary process 400 of token redemption in accordance with certain embodiments of the present invention. The process of token redemption can also

be referred as the process of destruction of the tokens. The process of token redemption is initiated by the funder 125-C who is the supplier of cash and who lists digital commerce tokens on the secondary platform in the system. The funder 125-C may want to do so when the trading value of the securities is lower than that on other local exchanges.
[0055] The process 400 at step 402 discloses that the user device 120-C provides the digital signature of the funder 125-C in the form of smart contracts signifying an agreement on funder's end that the funder 125-C wishes to redeem his digital commerce tokens into securities. Thus, the funder 125-C wants to destruct his digital commerce tokens for the same. After providing the digital signature, the process 400 at step 404, discloses that the computing system 110 runs a check to validate if the cryptographic wallet balance of funder 125-C has those many digital commerce tokens to destroy and redeem. In case the balance of the digital commerce token with the funder 125-C is enough, the process of redemption and destruction is initiated. The process 400 then moves to next step 406, which discloses that the computing system 110 prompts the custodian 150 to release securities equivalent to the number of digital commerce tokens applied for destruction. The process 400 at step 408, discloses that the auditor of the custodian 150 generates a NOC and uploads the NOC document to the blockchain ledger. The custodian 150 then delivers the concerned securities back to the funder's sub-account in the Depository. Further, at step 410 the process 400 discloses that the processor of the computing system 110 deploys new asset registry contracts and reduces asset registry count. Now, at step 412 of the process 400, digital commerce tokens equivalent to the released securities are destroyed by the computing system 110. Further, the token ledger is updated so as to demonstrate that the number of tokens has been reduced on the computing system 110. The securities delivered to the funder 125-C can further be traded by him over local security exchanges 170.
[0056] It should be appreciated by those skilled in the art that the processes as disclosed in figures 2, 3 and 4 need to be executed consequently in order to achieve the objective of the present invention.

[0057] Figure 5 is flow chart of an exemplary process 500 for securely exchange of generated and listed digital commerce tokens, between two users, with exemplary embodiments of the present invention. In exemplary embodiment, the process 500 at step 502 discloses that a user 125-A places request for purchasing securities on the computing system 110. In response, a processor of the system 110 matches a buying bid with some selling bid. At step 504, the process 500 discloses that order details for purchasing the securities are received by the computing system 110 and the processor of the computing system 110 retrieves destination address of the funder 125-C who holds the digital commerce token of those securities, based on the ownership of the security. Further, at step 506, the process 500 discloses initiating, by the processor of the computing system 110, the transaction from the user/traders' cryptographic wallet based on net asset value (NAV) of the securities. The money is deposited into the escrow account of the computing system 110 and from the escrow account, the payment is made to the destination cryptographic wallet of the funder 125-C of those securities. In a parallel process, digital commerce tokens of those securities are supplied to and are deposited in the cryptographic wallet of the user 125-A. Smart contracts may be utilized to transfer the securities among the users 125 and to verify that all transactions are in compliance with applicable regulatory rules and other restrictions. This is how commerce of digital commerce tokens takes place on the system using blockchain.
[0058] In an exemplary embodiment, the present disclosure describes a process for maintaining a True Value of the digital commerce token. Maintaining the True Value is a very integral part of the system so as to provide a fair market for all the user. The True Value of the digital commerce token is maintained with the help of funder(s) 125 in the computing system 110. The various security exchange markets where commerce of securities takes place are connected to do so. This embodiment hence eliminates the need of operating all operations through a central system and extends the application of local exchanges. The purpose of the computing system 110 is served by combining the demand and supply of all parallel markets and thus maintaining percentage point (PP) change of digital commerce token at a secondary stage similar to securities at security exchange. This is achieved by the computing system 110 through balancing of demand and supply of digital commerce token through purchase or selling of securities with reserve cash supplied by the funder, limiting

the change in PP for digital commerce token which means that when the prices on the system go high, the funder buys more securities from the local exchange 170 and registers them on the computing system 110, after which creation of the digital commerce tokens takes place and hence due to increased supply of the same, the prices are reduced leading to minimum change in the PP.
[0059] Similarly, when the prices of the securities on the computing system 110 go low, the funder 125-C buys more digital commerce tokens which are redeemed for securities and are then destructed. Hence due to decreased supply, the prices are increased, thereby the True Value is maintained.
[0060] The present system allows for instantaneous verification of transaction histories associated with the securities, because the blockchain ledger maintains a record of all transactions, thus removing counterparty risks. These advantages are accomplished using a technological framework that relies on novel protocols for communicating with nodes or computing devices in a peer to-peer network that maintains a distributed database. The protocols are incorporated, at least in part, into a new type of cryptographic wallet which is configured to utilize smart contracts in connection with certain transaction activities prior to appending blocks to distributed blockchain database. The cryptographic wallet further utilizes hashing techniques to store assets directly on the blockchain ledger itself while securely protecting assets stored in the wallet using encryption techniques. These and other technical aspects of the invention provide a technological framework that for managing security transactions that is efficient, transparent and self-managing, and which overcomes the shortfalls associated with prior art systems.
[0061] Although the present disclosure primarily describes the system in terms of securities collateralising, tokenizing and commerce, it should be recognized that the principles described herein can be utilized to exchange any type of asset, including any type of physical or digital asset, and is not limited to exchanging or trading securities.
[0062] In contrast to conventional security trading systems which inefficiently perform trade-related activities (e.g., such as issuing securities and clearing/settling transaction) with

a variety of different entities, the system described herein provides an alternative investment system in which all offering and commerce activities are conducted through a single system that utilizes a blockchain-based, peer-to-peer network of computing devices to conduct transactions. The system is configured to manage all activities associated with exchanging securities, starting from the issuance of the securities and continuing throughout the life cycles of the securities. It relies on a distributed framework that enables real-time clearance and settlement of transactions, thus providing an alternative investment system which is very liquid in comparison to existing markets and which removes counterparty risks. Certain embodiments of the system may also be configured to permit efficient borrowing and lending of securities. The system utilizes blockchain and Digital commerce token technology to provide a compliant framework for collateralising, commerce, archiving, clearing, settling, and recording securities transactions. The present system is built upon centralised Depository and exchanges and decentralised digital tokens over blockchain and extends the application of traditional exchanges by reducing the of cost in the present system, providing high scalability.

We Claim:
1. A method for representing and managing securities through digital tokens over a network,
the method being implemented by a system comprising: a plurality of user devices (120)
communicatively coupled with each other via the network, wherein each of the user devices
comprises a processor, a cryptographic wallet, and a distributed blockchain ledger; a computing
system (110) communicatively coupled with the plurality of the user devices (120), wherein the
computing system (110) comprises a processor and a distributed blockchain ledger; and a digital
token minter (140) communicatively coupled with the computing system (110), said method
comprising:
receiving information related to securities from one or more user devices (120);
storing the received information related to securities on the distributed blockchain ledger;
generating a proof of security (POS) as a mark of verification of securities based on the information related to securities;
storing the POS on the distributed blockchain ledger;
generating digital tokens equivalent to the securities, in response to generating of the POS; and
storing the generated digital tokens in the cryptographic wallet of the one or more user devices (120).
2. The method as claimed in claim 1, wherein before receiving information related to
securities from one or more user devices (120), the method comprises:
receiving a registration request from the one or more user devices (120), wherein the registration request comprises information related to user of the user device (120) including at least one of KYC details, AML details and digital signature of the user; and
generating a cryptographic wallet and a distributed blockchain ledger for the one or more user devices (120), in response to registration of the one or more user devices (120).
3. The method as claimed in claim 1, wherein in response to receiving and storing the
information related to securities on the distributed blockchain ledger, the method further includes:
generating a No Objection Certificate (NOC); and

uploading said NOC on the distributed blockchain ledger by a custodian system (150).
4. The method as claimed in claim 1, wherein the method further comprises:
receiving a request from the one or more user devices (120) for redemption of digital tokens of the user, the request comprising digital signature of the user and number of the digital tokens to be redeemed;
validating if the cryptographic wallet of the user has the requested number of the digital tokens to redeem; and
sending a request to a custodian system (150) to release securities equivalent to the number of digital commerce tokens.
5. The method as claimed in claim 4, wherein the method further comprises:
updating the asset registry using smart contract by the computing system (110), after redemption of the digital tokens.
6. A system for representing and managing securities through digital tokens over a network,
the system comprises:
a plurality of user devices (120) communicatively coupled with each other via the network, wherein each of the user devices (120) comprises a processor, a cryptographic wallet, and a distributed blockchain ledger;
a computing system (110) communicatively coupled with the plurality of the user devices (120), the computing system (110) comprises a processor and a distributed blockchain ledger, said computing system (110) is configured to:
receive information related to securities from one or more user devices (120), store the received information related to securities on the distributed blockchain ledger, and
generate a proof of security (POS) as a mark of verification of securities based on the information related to securities and store the POS on the distributed blockchain ledger; and
a digital token minter (140) communicatively coupled with the computing system (110), wherein the digital token minter (140) is configured to generate digital tokens equivalent to the

securities, in response to generating of the POS and store the generated digital tokens in the cryptographic wallet of the one or more user devices (120).
7. The system as claimed in claim 6, wherein the computing system (110) is configured to:
receive a registration request from the one or more user devices (120), wherein the
registration request comprises information related to user of the user devices (120) including at least one of: KYC details, AML details and digital signature of the user, and
generate a cryptographic wallet and a distributed blockchain ledger for the one or more user devices (120), in response to registration of the one or more user devices (120).
8. The system as claimed in claim 6, wherein in response to receiving and storing the information related to securities on the distributed blockchain ledger, a custodian system (150) is configured to generate a No Objection Certificate (NOC) and upload the NOC on the distributed blockchain ledger.
9. The system as claimed in claim 6, wherein the computing system (110) further configured to:
receive a request from the one or more user devices (120) for redemption of digital tokens of the user, the request comprising digital signature of the user and number of the digital tokens to be redeemed;
validate if the cryptographic wallet of the user has the requested number of the digital tokens to redeem; and
send a request to a custodian (150) to release securities equivalent to the number of digital commerce tokens.
10. The system as claimed in claim 9, further comprises an assert registry, wherein the computing
system (110) configured to update the asset registry using smart contract, after redemption of the
digital tokens.