PayPal patent application looks to be undertaking plans to create a virtual currency

01/02/2014 - 00:00

A patent application by eBay, the parent of PayPal, may signal that the company is making plans for its own virtual currency.

The patent, which was applied for in summer 2012, is for something called a “gift token”. It appears that eBaymay have designs on developing a new way to distribute monetary value within the digital realm. “A gift can be given from a user of a payment provider to a gift recipient,” according to US patent application 20130339188, which was published on 19th December 2013.

“The recipient can be a member of the user’s family, a friend, or any other person or entity. The recipient can use the token to purchase a product using a checkout through the payment provider.”

It’s clear that eBay’s intention is to use the idea of gift tokens with PayPal, which has been the company’s payment arm since it was acquired in 2002 for $1.5bn.

The application states:

“A gift or payment instrument can be given from a user of a payment provider, such as PayPal, Inc.”

What’s interesting about the application is that the tokens may be designed for more ubiquitous use outside of PayPal, which could encourage wide adoption.
 The patent application continues, saying that:

“The purchase can be made without requiring the user to create the user’s own payment provider account.”

Widespread payment adoption is likely a determinant as to whether a virtual currency will succeed or not. An example of this would be the alternative decentralized virtual currency to bitcoin known as dogecoin, built off of litecoin’s source code. Dogecoin’s use as a tipping mechanism as well as its association with an internet meme has contributed to its rise in popularity over a short period of time.

PayPal president David Marcus has said that he believes that bitcoin is a part of the future of money. But according to him, the general public has an identity problem with bitcoin, commenting on the issue at LeWeb:

“People are confused. They think because it’s called cryptocurrency it’s a currency. I don’t think it is a currency. It’s a store of value, a distributed ledger.”

And in a Bloomberg BusinessWeek article in December, Marcus was quoted saying that mobile was the future of payments for PayPal. The patent application could signify that PayPal expects virtual gift tokens to eventually replace the functionality of gift cards.

“Mobile is going to be at the center of your money and all the transactions you make,” Marcus said on Bloomberg TV.