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PayPal seeks patent for NFT marketplace, enabling trading of assets on or off-chain.

PayPal has taken a significant step forward in establishing its own blockchain ecosystem.

In March, they filed a patent application for a system that facilitates the purchase and transfer of nonfungible tokens (NFTs).

The application, which was recently published on September 21, outlines a method for conducting NFT transactions both on and off the blockchain.

The pending patent application details a platform where users can engage in buying and selling NFTs through a third-party service provider, with Ethereum mentioned as a potential option.

PayPal’s vision extends beyond the realm of digital collectibles, as they aim to leverage the full potential of NFTs for tokenization purposes.

“The NFT in this example may 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 art along with deeds to personal property, event tickets, legal documents and other real-world items.”

One notable feature of the system is its ability to facilitate fractionalized purchases, allowing for the distribution of governance tokens that users can trade independently.

Furthermore, PayPal envisions the involvement of a decentralized autonomous organization (DAO) linked to the service provider, which would enhance NFT liquidity through a dedicated platform.

Another exciting prospect highlighted in the application is the potential for NFTs to generate income through royalties.

PayPal’s Patented System: Comprehensive Processing, Wallet Options, and the Introduction of PayPal USD Stablecoin

Schematic of an off-chain NFT trade, as proposed by PayPal.
Schematic of an off-chain NFT trade, as proposed by PayPal.

According to the patent application filed in March 2023 and published on September 21, PayPal’s envisioned system involves comprehensive processing by the service provider, which encompasses compliance and risk management procedures.

While users have the option to possess their own digital wallets, it is not mandatory.

As an alternative, a third-party broker could offer various storage and checkout services.

The system utilizes an “omnibus wallet” linked to the service provider for off-chain transactions, incorporating the wallets of both the buyer and seller.

The application also highlights the flexibility of currency usage within the system.

“Therefore, no transfer is registered on the blockchain and there is no need to broadcast the transaction to the blockchain network or pay the gas fees associated with such an on-chain transaction.”

Notably, in August, PayPal introduced its own stablecoin called PayPalUSD, which operates on the Ethereum blockchain.

This development showcases PayPal’s commitment to exploring new avenues and expanding its digital currency offerings.

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