Mastercard has been granted a patent by the United States Patent and Trademark Office (USPTO) for a method of linking blockchain-based assets to fiat currency accounts.
Filed in May but granted approval by the USPTO on Tuesday, the patent is described by the card giant as a “description of systems and method for managing fractional reserves of blockchain currency”.
Blockchain has the potential to rewrite the economy and change the balance of power across industries. It also has specific uses for the enterprise. Mastercard is touting its plan as one favouring the consumer by speeding up the transaction time of cryptocurrencies and also as providing security for the payee.
“While blockchain currencies can often provide such safety and security for the payer’s information, such security may be limited for payees, particularly due to the limitations of the blockchain,” Mastercard wrote.
When using your Mastercard in the @lyft app turns into an #AllStarGame viewing party with Cal Ripken Jr. AND THEN… tickets to the actual All-Star Game — #PricelessSurprises. pic.twitter.com/1vxBLaUmC8
— Mastercard (@Mastercard) July 18, 2018
“For example, it often takes a significant amount of time, around ten minutes, for a blockchain-based transaction to be processed, due to the computer processing time and resources required to verify and update the blockchain.”
Mastercard goes on to say that traditional fiat payment transactions processed using payment networks can be conducted in nanoseconds, which has left consumers wanting the same from a crypto payment.
“Consumers and merchants that are accustomed to fast transaction times are often either forced to wait a significant amount of time for a blockchain transaction to be conducted, or the payee must rely on the payer’s good faith that their transfer will be valid,” the company wrote.
“In such latter instances, the anonymity of the blockchain may leave the payee at a disadvantage, because the inability for the payee to identify the payer may prohibit the payee from utilising various risk or fraud detection methods.”
Mastercard says its solution would somewhat thwart the wariness of merchants, retailers, and other service providers to accept blockchain-based payments, while consumers may also be more willing to trade in cryptocurrency if the decentralised nature of the technology was somewhat removed.
“There is a need to improve on the storage and processing of transactions that utilise blockchain currencies,” Mastercard wrote.
— Mastercard (@Mastercard) June 24, 2018
“Accordingly, the use of traditional payment networks and payment systems technologies in combination with blockchain currencies may provide consumers and merchants the benefits of the decentralised blockchain while still maintaining security of account information and provide a strong defence against fraud and theft.”
Mastercard’s patent is essentially a method for managing fractional reserves of blockchain currency.
Where storage is concerned, it is described as first requiring a central account with a fiat currency, and a second with “at least” a blockchain amount associated with a blockchain currency.
Then, the storing, in an account database, a “plurality of account profiles, wherein each account profile includes data associated with a consumer including at least a fiat currency amount, a blockchain currency amount, an account identifier, and an address”.
Where receiving by a “receiving device” is concerned, a transaction message is required that is formatted based on one or more standards and includes a “plurality of data elements, including at least a data element reserved for private use including a specific address and a transaction amount”.
Identifcation by a processing device will require a specific account profile stored in the account database where the included address corresponds to the specific address included in the data element in the received transaction message, Mastercard said; and lastly, would require updating, by the processing device, the blockchain currency amount included in the identified specific account profile based on the transaction amount included in the data element in the received transaction message.