On March 1st, 2018, online payments giants PayPal filed a patent for “Expedited Virtual Currency Transaction System” with the U.S. Patent and Trademark Office (USPTO), that aims to allow instantaneous crypto payments. The proposed transaction system will introduce secondary private keys to shorten transaction times.
PayPal aims to leverage its longevity as an online business and mostly trustworthy image to enter the crypto space.
The patent application proposes a system where secondary wallets are created using unique private keys for payee and receiver. The system will than would transfer these private keys between payee and receiver, which eliminates the need for cryptocurrency payments to be managed on their blockchains.
Essentially, PayPal would become a proprietary “second layer” payments network, settling on the main chain only when users decide to move their tokens to another platform.
Instant Crypto Payments to Help Merchants
In this “off-blockchain” system, transactions would be processed directly between payee and receiver using the secondary wallet private keys. As a centralized system, the Expedited Virtual Currency Transaction System can boost the speed of cryptocurrency payments.
The main aim of the concept is to narrow the transaction time between a consumer and a merchant. At present, transactions have to wait for inclusion in the next block on the open network. The patent application explained:
“The systems and methods of the present disclosure practically eliminate the amount of time the payee must wait to be sure they will receive a virtual currency payment in a virtual currency transaction by transferring to the payee private keys that are included in virtual currency wallets that are associated with predefined amounts of virtual currency that equal a payment amount identified in the virtual currency transaction.”
Paypal Aims to Be Escrow King of Cryptocurrency Market
Over the past few months, bitcoin transactions have experienced higher transaction fees and consumed more time to confirm payments. That pressure has eased in recent weeks as more services add support for SegWit addresses, and improve techniques to handle multiple transactions.
Bitcoin’s years-long scalability debate offered scope for developers to propose solutions. The most popular now is the Lightning Network that adds an extra layer for payments, while settling later on the main blockchain.
Now, PayPal has devised its own solution to scale bitcoin transactions and cash in from the growing crypto trend.
At present, the company does not mention in its filing how its proposed Expedited Virtual Currency Transaction System will fit in with the existing crypto ecosystem — i.e. can users send payments from PayPal to external addresses, or only other PayPal users?
Moreover, even if PayPal implements its ideas, will the cryptocurrency community embrace such centralized “off-blockchain” payment systems? Bitcoin users have generally preferred open source services and decentralized, open network models.
Paypal has been cautiously supportive of bitcoin and blockchain technology, but has never permitted it on its platform.
In 2014, Paypal partnered with bitcoin-related businesses like Bitpay, Coinbase, and GoCoin. Original Paypal co-founders Peter Thiel and Max Levchin have also expressed degrees of support for cryptocurrency. Thiel has occasionally invested in bitcoin startups, and Levchin once referred to it as “the elephant in the room”.
Will the crypto community be hyped about off-blockchain transactions like this? Let us know your views in the comments section.
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