PayPal made great strides toward creating its own blockchain ecosystem by filing a patent application for a non-fungible token (nft) purchase and transfer system. The application, submitted in March and published September 21, describes a means of transacting NFTs, both on-chain and off-chain.
The patent application, which is still pending, describes a system where users can buy and sell NFTs through a third-party service provider. That provider is not specified, although ethereum is mentioned in the text.
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PayPal envisioned using the full potential of NFTs for tokenization, going far beyond the exchange of electronic collectibles:
“The nft in this example can represent any unique piece of digital data that can be tracked using a decentralized blockchain ledger. (…) Examples of such assets include (…) digital images and videos, music, collectibles and other digital works of art along with personal property titles, event tickets, legal documents and other real-world items.”
The system can be customized in various ways. For example, it could accommodate fractional purchases by distributing governance tokens, which could then be traded themselves. Additionally, a decentralized autonomous organization “associated with the service provider can be used to promote nft liquidity through a dedicated platform.” NFTs could also earn income from royalties.
Processing by the service provider may include compliance and risk management. Users could have their own digital wallets, but would not be required to do so. A third-party broker could provide a variety of storage and payment services as an alternative. Off-chain transactions could be handled within an “omnibus wallet” associated with the service provider and containing the wallets of both the buyer and seller:
“Therefore, no transfer is recorded on the blockchain and there is no need to transmit the transaction to the blockchain network or pay any gas fees associated with such an on-chain transaction.”
Depending on the application, any currency in the system could be used. In August, PayPal introduced its own stablecoin, PayPal USD (PYUSD), based on ethereum.
It’s the first day like @PayPalPresident and CEO of. I’m excited to join this team on a powerful mission with a remarkable history of revolutionizing the way millions of people around the world take control of their financial lives. PayPal team, let’s change the world! pic.twitter.com/PIZuY8iKn2
—Alex Chriss (@acce) September 27, 2023
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