Reconsidering Crypto Patents: A New Market Phase Begins

The original and mighty Bitcoin has been subject to many trials and tribulations in its short life. Much of this is due to its open source nature.  Indeed, there is a tug-of-war going on within the cryptocurrency community about whether to patent blockchain technology. As attorney Carol Van Cleef asserts, “You can take open source code, modify it and patent around the modification of it.” … assuming it has an interesting twist on any technology that currently exists. This “race to the courthouse” is almost to be expected in an emerging tech industry widely accessible to the public. What matters is whether crypto patent protection will safeguard or gradually degrade the decentralized nature of cryptocurrency.  

A Desire for Control

The banking industry’s foray into cryptocurrency appears to be gaining steam. Banking analyst Tanaya Macheel notes that Bank of America is rapidly increasing its investment in blockchain-related patents (having increased its patent submissions by a third in the past three years).  Although such efforts are publicly perceived as a desire for financial control, the banking industry is also pursuing patents in order to establish a legal framework for blockchains. In essence, they doing what they need to do to stay relevant and in the game.

To that end, some banks are developing their own digital currencies. For instance, Goldman, Sachs & Co. claims to have developed a new cryptocurrency  that seamlessly interacts with other assets inside a digital wallet. Called SETLcoin, they describe it thus:

“The wallet has the technology to generate, manipulate, and store a new cryptographic currency, referred to as SETLcoins, for exchanging assets, such as securities (e.g., stocks, bonds, etc.) cash, and/or cash equivalents via a peer-to-peer network.”

Not incidentally, the four titans of banking (UBS, Deutsche Bank, Santander and BNY Mellon) have joined forces to develop their own digital currency. Other large banks, such as Citibank and The Bank of Toyko-Mitsubishi UFj (MUFj), either have a crypto variant (such as Citicoin) or plan to launch their own digital currency.  While crypto fans might shrug their shoulders at such moves, at least one observer is sounding an alarm. As the article’s author asserts,

It is a clever move on the part of the bankers because they know that once they step into the game and start issuing their own coins, regulations will have to be brought in and they will apply equally to existing currencies like Bitcoin, Ethereum and Dogecoins. Essentially this can be seen as a hijack bid..

Alternative Reasons for a Crypto Patent

Critics argue that patenting tends to inhibit creativity and stifle innovation. And indeed, while such moves may not be healthy for cryptocurrency and decentralization, patenting may be the only way to save the crypto field from centralized banks.  With the patent wars being waged right now, it only makes sense for emerging altcoins to protect themselves from sinister forces at play. And banks may not even be the most potent threat. For instance, patent mongers like Erich Spangenberg are aggressively pursuing patentable technologies where they can find them.  The notorious Spangenberg is employing 20 full-time staff  to “apply blockchain, artificial intelligence and predictive analytics to improve patents,”  ostensibly with the intention to “crush it and make a fortune”.  

And yet, banks aren’t the only entities trying to stay ahead of the curve. Thought leaders in a cross-section of industries are reviewing how they might take advantage of blockchain technology. Corporate giants like Wal-Mart, IBM, Mastercard, Facebook, and AT&T are already among the top patent-filers in this new arena.  Although their primary motivation for pursuing patents appears to be internal growth, they’re also safeguarding their own technology from becoming deployed through emerging and evolving open source technologies.

Emergence of Intellectual Property

Intellectual property (IP) issues are increasingly taking center stage in blockchain technology. First and foremost, IP provides valuable protection against any entity from outright stealing technology, patenting it, and then calling it their own.  Second, IP serves to protect crypto developers from patent trolls, those who obtain patents on unprotected tech innovation for the sole purpose of financial compensation. Perhaps more importantly, IP helps keep crypto decentralized and accessible. By protecting crypto technology from patent trolls and others who would seek to control it, IP protection resists the centralizing tendencies inherent within the  financial sector.

Obviously, open source technology enables designers and innovators to help technology progress. They also help retain the trust of the market. And in an ideal world the crypto field would stay transparent, allowing code that meets the demands of a growing market to evolve at a much faster pace. In reality, as more value is realized within the crypto field, the desire to hide innovative and secure proprietary technology will slow industry evolution dramatically. Such developments invariably signify a maturing industry as it moves along Its market lifecycle.

Preparing For The Next Market Phase

Unfortunately, many if not most altcoins are simply forks of Bitcoin. These coins, founded upon slightly altered code and serving no new real purpose, are at risk from patent mongers as well. And with so many forks, the crypto field maybe at risk for a patent shootout. From this chaos, those innovators who are fully prepared to take on the next market lifecycle stage will succeed. If is for this reason that XTRABYTES Lead Developer Borzalom has recently announced his desire to pursue patent protection – in a rather oblique manner, no less. As recently announced in an interview with XtraBytes Founder CCRevolution

“Borzalom has identified a 100% patent-able section of  tech and we are going to register the patent. Obviously we cannot share any more details about this at this time. But, this is a major moment for the XTRABYTES Community and it is very important to also note that the patent owners (Borzalom and CCRevolution) will enable free usage forever of the patent for the XTRABYTES Community only. This is designed to protect the XTRABYTES Community. It is no secret that we want to prevent a fork, because we do not want to see a bunch of useless altcoins like BTC has. We want to integrate all the developer power into one project and not have the resources split.

Of course, there will be those who will say that the project team is limiting the tech by not making it open source, but that doesn’t mean that those who want to improve the tech won’t be able to.  As stated above, the patent owners are going to enable usage forever of the patent for the XBY community only.  This is a solid move by the platform’s development team, allowing the project to progress and keeping the technology secure for years to come.

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