Global online payments giant PayPal wants to patent a technology solution that will expedite cryptocurrency payment. They have filed a patent application with the US Patent and Trademark Office (USPTO). However, a Bitcoin expert believes that this technology already exists.
Crypto payment transactions take some time for processing, for e.g. a block in Bitcoin is processed every 10 minutes, combining multiple transactions. Earlier, due to explicit size limitation of Bitcoin blocks, there were scalability issues. Users had to wait for miners to successfully add their transactions into the next block. With the rise in the adoption of Segregated Witness (SegWit) technology, which bypasses the block size limitation significantly, transaction speed has improved. However, crypto payment transactions still can’t match the speed of the traditional online payment methods.
PayPal believes that being able to complete the payment transaction without every such transaction being recorded in the blockchain will expedite the transactions. Their patent application envisages using secondary wallets to achieve this.
A summary of PayPal‘s solution is as following:
- The first user has a primary wallet and the associated private encryption key.
- The first user will also have a secondary wallet, with the associated private key.
- The payment transaction will first transfer the cryptocurrency from the primary wallet to the secondary wallet.
- When the time comes to transfer some amount of the cryptocurrency to a second user, the second user is given a portion of the private key of the secondary wallet of the first user.
- This allows the second user to receive the amount of cryptocurrency specified in the transaction, from the secondary wallet of the first user.
Peter Todd, a Bitcoin developer and cryptography expert, believes that PayPal can’t patent this technology, since it already exists, and was developed by Opendime. Opendime is a hardware Bitcoin wallet, with multi-signature security mechanism suitable to banks. The distinguishing feature of Opendime is that this hardware wallet can’t be reused, and once funds in the wallet are used up, the USB stick must be destroyed. The private keys change hands outside of the blockchain. Essentially, this allows the user to use it just like cash, but the currency is Bitcoin, and not a fiat currency.
PayPal, headquartered in San Jose, California, USA, with their move into the blockchain space, joins other big businesses in exploring this technology, for e.g.:
- IBM is exploring their entry into the crypto space;
- Microsoft is planning to invest into blockchain start-ups via their venture capital (VC) arm;
- Intel has filed a patent application to use blockchain technology in genetic sequencing.
