US-based digital currency exchange Coinbase has secured a patent on a new bitcoin payment system that executives say will make cryptocurrency payments much safer. The new platform will keep users’ keys protected while allowing them to make bitcoin payments directly from their digital wallets.
How Does It All Work?
A segment of the patent filing states:
“It may be a security concern for users that the private keys of their Bitcoin addresses may be stolen from their wallets. Existing systems do not provide a solution for maintaining security over private keys while still allowing the users to check out on a merchant page and making payments using their wallets.”
Customers can encrypt their passphrases into a single master key, which limits the possibilities of theft or corruption. The master key will then encrypt customers’ private keys and whatever transactions occur. Once a transaction is finished, the master key is deleted to prevent outside or malicious parties from gaining access to users’ information.
Some Other Cool Stuff
Another element of the system is what’s known as its “freeze logic,” which gives administrators the power to suspend the system and prevent transactions from occurring whenever a theft or cyberattack is taking place. The patent reads:
“At any point in time after the master key is loaded, the system can be frozen. The system can be unfrozen after it has been frozen using keys from the key ceremony. The checkout process can be carried out when the system is frozen and when the system is unfrozen. The payment process can only be carried out when the system is unfrozen and not when the system is frozen.”
The application also exhibits API integration capabilities, so that websites can run differentiating versions of the new payment system. The API uses a pair of keys – one on the corresponding website, the other on Coinbase – that are required to match if a transaction can occur.
Coinbase – the Father of Bitcoin Patents
Coinbase has a lengthy history of filing for bitcoin and blockchain-based patents. The company filed a whopping nine times in 2015 alone, which caused some analysts to assert that Coinbase was building a monopoly on bitcoin services. CEO Brian Armstrong explained that this wasn’t true, and that the company was simply trying to keep blockchain technology out of the hands of “patent trolls.”
In a blog post on Medium, Armstrong wrote:
“One of the best ways to defend against patent trolls is to build your own portfolio of patents, and this is exactly what we are doing, along with just about every other tech company out there. It is an unfortunate game we all must play, but we didn’t invent the rules.”
In 2016, the company filed for an additional patent to secure Bitcoin-based private keys.
A Few Other Companies Are Joining the Ranks
In addition, many traditional financial institutions have filed for blockchain-based patents in the past. Bank of America, for example, has approximately 50 live blockchain patents. Software and computer manufacturer IBM also has several under its belt, including one for “node characterization in blockchain,” which would allow a blockchain to house nodes that are characterized by specific functions.
Lastly, delivery company UPS filed a blockchain patent in June 2017 for what executives call the “autonomous services selection system and distributed transportation database.” Whenever something is delivered or moved from point A to point B, it must go through several networks before it can reach its target destination. Thus, logistics services can find it difficult coordinate with each other.
The patented system can generate transportation data which is housed on a blockchain and tracked to ensure logistics companies can consistently meet all handling requirements.