eBay To Challenge Bitcoin With New Patent Filing

By Michael Patrick McSweeney (@mpmcsweeney)

eBay has filed a patent application for a token-based secure payment system that functions similarly to a virtual currency.

The application, published on Dec.19 by the U.S. Patent and Trademark Office and filed in mid-2012, outlines how a person can make a purchase without his or her “own payment provider account.”

The move represents a potential challenger to bitcoin and other virtual currencies. If approved, consumers may use the token both online and in physical form via a USB drive or similar device. It remains unclear whether the company will be awarded the patent, but the proposed system is notable because it can be used outside of eBay.

Virtual Currencies Head Offline

Physical versions of bitcoin are already available in many countries, and bitcoin ATMs are becoming increasingly popular, reports show. eBay’s application calls for a token that is specifically designed to interface with both digital and brick-and-mortar storefronts through either a payment system provider such as PayPal or a USB drive.

“A gift or payment instrument can be given from a user of a payment provider, such as Paypal Inc., to a gift recipient,” the application reads. “The recipient can use the token to purchase a product using the payment provider. The purchase can be made from a brick-and-mortar store or an online store. The purchase can be made without requiring the user to create the user’s own payment provider account.”

The application also states that “hardware tokens can be embodied in a hardware device, such as a USB device or a smart card.”

Additionally, it appears that eBay may try to use mobile devices as a means for carrying out purchases. The application states that mobile phone numbers can be used in lieu of a PIN number at the time of transaction.

A Successful Challenger To Bitcoin?

Some observers have interpreted the patent application as an implicit challenge to bitcoin and other virtual currencies, which also operate without the need for a designated payment account. How successful eBay will be in providing an alternative remains to be seen.

A criticism central to the argument that bitcoin is not a currency is that its value fluctuates too much to encourage significant circulation. The eBay patent application does not outline specifically how a value would be applied to the token. However, it does state that each token would have a predetermined value and that recipients of the token would know in advance how much it is worth.

A loophole reported last month by CoinDesk indicates that eBay allows users to sell cryptocurrencies such as bitcoin and litecoin as long as they are stored on a physical hard drive or USB drive.

Seeking Success Where Others Have Failed

eBay follows in the footsteps of such other eCommerce players as Amazon and Facebook as it seeks to create a virtual currency. Amazon Coins, launched in 2013, can be used to buy apps, games and books for the Kindle Fire. Since inception, Amazon has provided free Coins to users as part of promotional campaigns.

Facebook discontinued Facebook Credits in June following a troubled roll out and issues with game developers such as Zynga. Consumers may purchase credits online or through gift cards available at participating retailers.

Will eBay’s token, which does not yet have a branded name, succeed where Facebook failed? As bitcoin and other cryptocurrencies continue to face scrutiny by governments and law-enforcement officials in the U.S. and abroad, demand for a less controversial alternative may take shape.

Read eBay’s full patent application by clicking here.


New PYMNTS Report: Preventing Financial Crimes Playbook – July 2020 

Call it the great tug-of-war. Fraudsters are teaming up to form elaborate rings that work in sync to launch account takeovers. Chris Tremont, EVP at Radius Bank, tells PYMNTS that financial institutions (FIs) can beat such highly organized fraudsters at their own game. In the July 2020 Preventing Financial Crimes Playbook, Tremont lays out how.

Click to comment