Recent filings with the United States Patent and Trademark Office (USPTO) revealed a dossier of applications from Coinbase as well as a cryptocurrency filing from Bank of America.
On September 17, 2015 the USPTO published Bank of America Corporation’s (BoA) 20150262173, “System and Method for Wire Transfers Using Cryptocurrency” as well as the following nine applications from Coinbase Inc.: 20150262176, “Hot Wallet For Holding Bitcoin”; 20150262172, “User Private Key Control”; 20150262171, “Bitcoin Private Key Splitting For Cold Storage”; 20150262168, “Instant Exchange”; 20150262141, “Personal Vault”; 20150262140, “Send Bitcoin To Email Address”; 20150262139, “Bitcoin Exchange”; 20150262138, “Tip Button”; and 20150262137, “Off-Block Chain Transactions In Combination With On-Block Chain Transactions.”
Coinbase, which bills itself as “the easiest place to buy bitcoin," was founded in June 2012. According to its website, Coinbase has 2.6 million users, 4 million wallets and 40 thousand merchants, and is a “bitcoin wallet and platform where merchants and consumers can transact with the new digital currency bitcoin.”
The patent applications began the submission process in March 2014 or less than two years after Coinbase was founded. The Coinbase patents are numerous and we won’t go into detail on each one here, but the title of each application should serve as a good indicator of its contents. Not to mention the often drab contents of patent filings, which would bore most audiences!
The Bank of America patent application appears to be the first bank authored cryptocurrency application since Let’s Talk Bitcoin reported last October that community bank, “Independence Bancshares [was] Studying Virtual Currencies.” It also appears to be the first application from a major retail bank. The application comes as R3 announced on September 15, 2015 that, “Financial innovation firm R3 to spearhead crypto technology solutions for the multi-trillion dollar financial services sector.” Bank of America was not one of the nine banks to join R3--- though the press release stated that more banks are expected to pledge their support in the coming weeks.
Through its wealth management division, Bank of America was the first bank to initiate coverage of Bitcoin in 2013. The report compiled by strategists David Woo, Ian Gordon and Vadim Iaralov entitled “Bitcoin: a first assessment,“ which stated that “fair value analysis implies a maximum market capitalization of bitcoin of US$15 billion (1BTC = US$1,300)” at the time. The report concluded in part that:
“[…] Bitcoin could become a major means of payment for e-commerce and may emerge as a serious competitor to traditional money-transfer providers. As a medium of exchange, Bitcoin has clear potential for growth […].”
Following are some extracts from the BoA patent application:
“[...] fund transfers using cryptocurrency bypassing the use of traditional wire services [is] reducing dependency on third party networks and increasing the reliability of fund transfers. Initiating fund transfers using cryptocurrency also allows for the technical effect of conducting a foreign fund transfer as quickly as transferring funds from one account to another account as it avoids delays that may be caused by relying on third party systems and services. Additionally, fund transfers using cryptocurrency reduces the reliance on third party systems and the transfer of customer data to third party system, thus increasing security of customer data.”
“[…] [to] determine which cryptocurrency to use [can be] based on cryptocurrency price, volatility of the cryptocurrency, popularity of the cryptocurrency, availability of the cryptocurrency at a local cryptocurrency exchange, availability of the cryptocurrency at a foreign cryptocurrency exchange, or any potential risk factor that may be associated with a particular cryptocurrency.”
"[...] Examples of cryptocurrency exchanges [we may interface with to purchase, sell, or transfer cryptocurrency] are OKCoin, BitStamp, BTCChina [now BTCC], Cryptsy, CoinMarket [sic], Justcoin [...]"
Where Do We Go From Here?
A cursory search* of USPTO database shows 289 patent applications that use the term “Bitcoin.” 20120101886 appears to be the first one, was filed October 20, 2011, and was published on April 26, 2012. With 129 applications, 2015 has already exceeded the number of “Bitcoin” patent applications from 2014 (125). 2013 had 30 and 2012 had 5. There have been 53 patents granted to date.
The World Economic Forum recently issued a report “The Future of Financial Services: A Look into the game-changing effect of new technology on finance," which includes a section “New Payment Rails” which discusses Bitcoin. The report states that “The greatest impact of cryptocurrency protocols like bitcoin will likely be their ability to radically streamline the transfer of value.” And further, “Banks could take a forward-looking stance and leverage the source code for Bitcoin.”
The Coinbase and Bank of America filings are a turning point in cryptocurrency intellectual property. The Bitcoin community prides itself in the collective peer-to-peer open-source nature of the technology. The proprietary nature of patents will find plenty of detractors from within. Moreover, old guard legacy system of banking co-opting Bitcoin and the creation of “private blockchains” with “permissioned ledgers” usually causes quite a stir at venues ranging from Reddit to Bitcointalk to Twitter.
Last year’s attempt to create a patent pool or cryptocurrency defensive patent aggregator via The Cryptocurrency Defense Foundation appears to have failed. Patents can be used defensively as the Foundation suggests, rather than a proactively enforcing intellectual rights—or worse, patent “trolling.” BitBill’s attempt to patent physical bitcoins was the first in a long line of controversial filings and strong reactions from the community ranging from CoinSigner to MasterCard.
Leveraging the collective power of the Bitcoin community, Bitcoin pioneers such as Coinbase could choose to form a coalition amongst themselves or choose to be co-opted by big banks.
Consequently, Bitpay’s recent call for a “Bitcoin Association” will likely come into clearer focus. Since the MIT Digital Currency Initiative was launched, the Bitcoin Foundation’s mission has become a bit more fuzzy. Perhaps if the Bitcoin Foundation revives some of the ideas behind the Cryptocurrency Defense Foundation it might be a smart move.
*Note: Does not include search for the plural “Bitcoins” but does include a trademark operator. Search includes inventions that simply mention Bitcoin as a means for payment for a service or product.