A state-backed financial asset exchange in China's Chongqing city is looking to develop a blockchain solution that could be used for letter of credit (L/C) auctions.

The blockchain or distributed network platform aims to make online auctions of financial assets tamper-proof and transparent.

Patent application

A patent application filed at the China State Intellectual Property Office by the Chongqing Financial Asset Exchange (CQFAE) contemplates the creation of a system that allows multiple parties to bid for a financial asset over a distributed network.

The application says the proposed network would be run by a validator that is separate from the companies who participate in bidding for assets such as L/Cs or corporate bonds.

Malicious alterations

When companies submit their bid to the network, the validator authenticates the data and then broadcasts the new price for the next level of the auction, which is calculated based on various criteria encoded to smart contracts on the blockchain.

The asset exchange said the platform is desirable because the existing centralised database system is vulnerable to malicious alteration of data, either by bidding parties or even auction organisers.

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