JPMorgan Chase Awarded Patent For Blockchain Technology, But What Is Blockchain?
JPMorgan Chase has been issued a new patent that relies on blockchain-based virtual technology geared toward their banking services. However, others think the bank will begin to venture into cryptocurrency applications as well.
The bank hopes to use blockchain technology to tokenize assets and use them for digital trading on virtual receipts. According to the patent application, JP Morgan Chase’s “Virtual Receipts” are defined as electronic tokens that are linked to underlying assets whose trade and transfer will be tracked and facilitated throughout their distributed system, or blockchain.
This is a huge milestone for the company; while it’s difficult to receive a patent in the first place, the “patent pending” only lasts for 12 months. If the provisional patent application were to expire, the innovation or invention would no longer be protected after this time. For JPMorgan’s new technology, the business hopes to use this innovation to explore blockchain applications.
The bank hopes to achieve this goal by creating a new security token that is regulated by the U.S. Securities and Exchange Commission before issuing a digital receipt.
Some claim that this patent is similar to the use of ICO — or Initial Coin Offering — tokens, but JPMorgan is apparently going to use theirs for Initial Public Offering, or IPO. JPMorgan’s IPO differs primarily from ICO because of its ability to create the aforementioned security tokens. Additionally, the bank does not have plans to use this technology in the financial sector.
But what is blockchain?
Blockchain technologies were designed to streamline the record-keeping process and eliminate the practical need for centralized ledgers. By relying on this type of distributed ledgers, it will keep all parties aware of the goings-on between asset transfers. When everyone has access to the same information, there’s no longer a need for discrepancies between exchanges.
For most blockchain applications there are three primary characteristics: throughput, decentralized communications, and consensus between users.
Throughput refers to the number of transactions the blockchain can perform. For to replace a central ledger, blockchain technology can process around 10 transactions every second, making it a poor application for large-scale transactions with rapid-fire transactions.
Decentralized communications means that a communication channel isn’t necessary to perform blockchain record-keeping. Though this has its advantages, this point is somewhat null due to the constant communication the world now has.
Consensus is fairly easy to understand; it means that each party involved with the transaction agrees to use the same technology and the same ledger. This agreement is a necessity for blockchain users. In the event one company sues another over a breach in contract, the plaintiff must prove four things: that the contract exists, that the plaintiff followed the contract, that the defendant breached the contract, and that there was damage caused by the breach. It necessitates both parties are on the same page.
In fact, IBM has filed a lawsuit against Groupon for $167 million over claims the discount site has breached four of IBM’s patents regarding basic internet technology.
However, Groupon claims that the tech giant is shaking down its business partners for patent fees with the threat of litigation.
With mobile internet penetration expected to reach 61.2% in 2018 alone, IBM may just be covering its liabilities.
“If a patent troll wants to buy a patent from us then we insist on a covenant not to sue IBM. We achieve some level of protection from being sued ourselves,” said Thomas McBride, the licensing executive of IBM.
Now that JPMorgan Chase has a registered patent on their blockchain technology, the bank may have to perform similar safeguards. Though it is unknown if JPMorgan Chase will make it into the financial sector with its patented blockchain technology, the implications of such use may hold future opportunities for the bank.