“In the not too distant future, as consumers and retailers become accustomed to stable value coins, one can easily imagine websites and mobile applications accepting stable value coins, in addition to (or instead of) credit cards.”
Today, blockchain projects are proceeding in nearly every major industry and occur in more than 140 countries. According to blockchain IP landscape research by Perception Partners, over the past three years, the compound annual growth rate (CAGR) of patent families publishing in the United States, Europe, Patent Cooperation Treaty (PCT), China, Japan and Korea is about 23%. The space has more than 13,000 global competitors of every size with nearly 23,000 inventors or authors disclosing or researching blockchain innovations.
Much has been written about Bitcoin and blockchain technology, including a prior article in which we provided an overview on “The Bitcoin Network, Blockchain Technology and Altcoin Futures.” To keep pace with the evolving nature of blockchain intellectual property and technology, below we provide some sample use cases of how blockchain innovations are already being leveraged in commerce and likely to be exploited in the near future.
The Future of Currency?
As we have previously explained, bitcoin is the “digital asset” of the Bitcoin network and is sometimes referred to as “virtual currency” or “digital currency.” Unlike a traditional fiat (government-supported) currency (e.g., U.S. dollars), like a piece of paper or a dime metal coin, bitcoin is a digital asset that exists only electronically.
Bitcoin is not the first “virtual currency” prior art to exist. Coupons such as green stamps or ubiquitous airline Frequent Flyer miles are also virtual currencies. The once popular virtual world, Second Life, even had its own virtual currency known as “Linden Dollars.”
That said, Bitcoin is more than a digital currency, it is also a “cryptocurrency.” In other words, it uses advanced cryptography to protect your bitcoin from being stolen. Every bitcoin owner has a “public key,” which is the information anyone can see, like an account number, and a “private key,” which is a secret number used to unlock the account for transactions.
Cryptocurrencies represent an important future revenue stream for digital businesses. Tomorrow’s online leaders will be those who gain the freedom to operate secure, independent internet marketplaces, services, portals and apps that accept crypto. Today, strategic foundational IP development and aggregation is evident in the competitive landscape.
For example, of publications referencing Bitcoin in the Intellar blockchain IP landscape, roughly 26% discuss security and about 7% reference cryptography as a material innovative element in digital platforms, software and transactions. There at least 20 other types of major cryptocurrencies being innovated against.
The IP Behind Blockchain
In contrast to the “private ledgers” of traditional bank accounts, Bitcoin uses a “public ledger” – known as “blockchain” technology – to ensure that anyone participating in the Bitcoin economy has a copy of every transaction that has ever occurred. Blockchain technology has proven to be quite useful well beyond Bitcoin and has fostered other alternative coins (or “altcoins”) and other public or quasi-public ledger systems that utilize the same basic framework. Typically, these altcoins are based on the same basic protocol as Bitcoin, or may vary in one or more attributes of the protocol, e.g., the timing of each block (e.g., Litecoin), the consensus mechanism (e.g., Ethereum), the availability of public and shielded wallets (e.g., ZCash), to name a few. The number of Ethereum, smart-contract or token-related patents granted as of August 2019 (US/EP/PCT/JP/KR/CN ) is already more than double the number of patents granted in all of 2018 (which roughly doubled from 2017).
The Bitcoin blockchain is maintained by a crowdsourced group of global “miners.” In order to process a transaction, various miners compete to be the first one to solve a difficult math problem (proof of work). Solving this problem enables miners to add a “block” (associated with the latest transactions) to the “blockchain” (a chain of records of all prior transactions within the Bitcoin economy). Miners typically control substantial computer networks, often with special hardware developed specifically to solve these difficult calculations.
What motivates a miner to make the substantial economic investment to build and maintain these computer networks?
First, at least for the next few decades, miners will be awarded a significant number of bitcoins – e.g., 12.5 bitcoins every 10 minutes – if they successfully solve the problem. At $10,000 per bitcoin, a miner can earn $125,000 for just 10 minutes of work. (Each block of the bitcoin blockchain is mined every 10 minutes.) However, the number of bitcoin awarded for successfully mining a block will be reduced over time, and at some point in the future will be zero.
Second, in order to encourage miners to include a particular transaction in a block, participants may “tip” the miner and pay a transaction fee. Although this is not a driving force today, it is expected that in the future, as the number of bitcoin awarded for each block is reduced or eliminated, tipping is likely to become more prevalent.
There is, of course, plenty of financial opportunity in blockchain entrepreneurship beyond mining. According to Crunchbase, at least 230 global organizations have raised $10 million or more since 2015. Surprisingly, relatively few granted blockchain patents are associated with these firms.
As Bitcoin becomes more popular, modifications of its key attributes, which were outlined in our previous article, have become points of novelty in many pending patent applications, especially from China. Among the top twenty firms (according to Intellar.com) publishing in the blockchain IP landscape, many are China-based: Alibaba; Bizmodeline; China Unicom; Hangzhou Fuzamei Technology; Ping An Technology and Baidu.
With smart contracts and tokens, the potential uses cases for blockchain technology are expanded greatly.
One interesting use case is the rise of so-called stablecoins. Gemini Dollar is an early adopter of a regulated stablecoin using blockchain technology. Like Bitcoin and other alt coins, Gemini Dollar is transparent. It is based on the Ethereum Blockchain, and thus is immutably built into Ethereum. Unlike Bitcoin and many other altcoins, it is pegged directly to fiat (in this case $1 Gemini Dollar is equal to US$1). Because Gemini Trust Company, a regulated exchange, issues the Gemini Dollar Token, it is regulated by the New York Department of Financial Services (or “NYDFS”). Unlike prior efforts to generate a stablecoin (like Tether) Gemini Dollar is regularly audited by independent auditors to ensure that the appropriate amount of fiat is maintained by Gemini to maintain the 1:1 valuation. Thus, it is not volatile like Bitcoin, and is in fact “stable”.
As a stable value token, Gemini Dollar can be used like any other cryptocurrency, just by sending a message to the Ethereum Blockchain. Unlike credit cards which charge large transaction fees (as much as 3% of the amount charged), Gemini Dollars can be used without any transaction fee by Gemini, just a small “gas” charge to have the transaction posted on the Ethereum network.
Shortly after Gemini Trust Company announced its stable value coin, Facebook made a large public announcement of its own Libra stable value coin, adopting many similar principles.
In the not too distant future, as consumers and retailers become accustomed to stable value coins, one can easily imagine websites and mobile applications accepting stable value coins, in addition to (or instead of) credit cards, and thus saving their customers and their bottom lines from the large transaction fees currently charged for using credit cards.
Looking to the broader blockchain IP landscape dataset maintained by Intellar.com, the three-year compound annual growth of investment indicators in stablecoin (as mined from global patents since 2010; and technical literature and news since 2015) parallels the phenomenal global growth of blockchain itself: +24% of worldwide locations; +24.8% new organizations, and a huge +43.8% in new people focused on the technology area.
For more information, tune in on Friday, October 4, 2019 at noon EDT, when the Innovation Research Interchange (IRI) will be hosting a webinar on Navigating The Blockchain Landscape For Digital Businesses, as its October Brown Bag Webinar.
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Charles R. Macedo
is a Partner at Amster, Rothstein & Ebenstein LLP, where he advises and litigates in all areas of intellectual property law, including patent, trademark and copyright law, with a special emphasis in complex litigation. He also assists clients in obtaining, maintaining and enforcing patent and trademark portfolios. He has successfully recovered domain names registered to others using clients’ trademarks.
Mr. Macedo is also the author of the book, The Corporate Insider’s Guide to U.S. Patent Practice, originally published by Oxford University Press.
For more information or to contact Mr. Macedo, please visit his Firm Profile Page.
is a World-Leading IP Strategist, recognized for the past 9 years in the global IAM 300 listing, most recently in 2017. He is a Certified Licensing Professional (CLP), Registered Technology Transfer Professional (RTTP) and the Founder and Managing Partner of Perception Partners®, an innovation services firm specializing in intellectual property strategy, competitive monitoring and patent brokering transactions. Barry helps early-stage companies, F500 firms and research institutions leverage organic and investment capital to improve business results, monetize IP, commercialize disruptive technology and create competitive advantage. Barry’s firm provides software tools and executive level insights about complex IP matters to senior management, in house IP counsel, outside patent counsel, R&D managers, business development executives and economic development leaders.
Barry is also the Chief Executive Officer of Starpound Corporation, which licenses technology to turn mobile phones into remote control devices. Barry holds six patents and others pending related to these endeavors.