Friday , March 29, 2024

PayPal Anticipated Cryptocurrency Processing Slowdowns a Year Before They Became a Problem

The cryptocurrency world often gets feverish upon news that an established power in payments or financial services has turned its attention to matters of Bitcoin or its cohorts. Such was the case Monday when reports surfaced that PayPal Holdings Inc. had applied for a patent for a so-called “expedited virtual currency transaction system.”

The filing was first reported by Bitcoin.com, a news Web site and digital-wallet provider for the leading cryptocurrency. The site disclosed that PayPal’s patent application was published March 1 by the U.S. Patent and Trademark Office, generating a flurry of related stories.

Turns out, however, that San Jose, Calif.-based PayPal actually had applied for the patent in late August of 2016. But it took the USPTO 18 months to make the application public.

In any case, the application shows that PayPal had identified processing delays as a problem with Bitcoin and potentially other cryptocurrencies long before slow transaction times in Bitcoin’s underlying blockchain technology began bedeviling buyers and sellers during the huge Bitcoin price run-up in 2017’s second half.

 A background section in the application notes that Bitcoin transactions “are subject to a ‘mining’ process performed by the Bitcoin network nodes that ensures that the Bitcoins being sent in the Bitcoin transaction have not previously been transferred by the payer to another user, where the mining process can take 10 minutes or more.” If the transaction process takes too long, the application notes, payers and payees will instead use “traditional payment methods rather than virtual currency.”

In fact, many Bitcoin traders experienced transaction delays of at least 10 minutes, sometimes up to hours or even a day, during periods of the worst blockchain congestion last year.

The application includes extensive text and diagrams on just how PayPal would address the problem.

Contacted Monday, PayPal declined to give details on what it will do with the patent. But in an emailed statement to Digital Transactions News, a spokesperson said “as a fintech leader, we are interested in any technologies, processes or applications that have the potential to enable our mission of financial inclusion. While blockchain technology is still in its early days, we have a team examining the potential applications of the technology and remain engaged with the broader ecosystem in regard to how blockchain may result in demonstrable benefits for financial services. As part of that process, this patent application was filed in August 2016.”

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