PayPal Filed Application to Patent Bitcoin’s Lightning Network in 2016

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PayPal Inc has filed an application on August 30th 2016 to patent a system that sounds very much like bitcoin’s second layer Lighting Network (LN). PayPal says:

“Performing a respective virtual currency transaction using the first user primary wallet private key to transfer an association of predefined amounts of the virtual currency from the first user primary wallet to each of the plurality of first user secondary wallets such that at least two of the plurality of first user secondary wallets are associated with different predefined amounts of the virtual currency.

Receiving, subsequent to associating the predefined amounts of the virtual currency with each of the plurality of first user secondary wallets, an instruction to transfer a payment amount to a second user; and allocating a subset of the first user secondary wallet private keys to the second user, wherein the subset of the first user secondary wallet private keys are included in respective first user secondary wallets that are associated with predefined amounts of the virtual currency that equal the payment amount.”

That is, in the first part you link the blockchain address with secondary addresses in what LN calls opening a channel.

Once the channel is opened, then these secondary balances can increase or decrease based on payments made, and all such increases or decreases are bound to the primary key, or as you might call it, the blockchain address.

This is very much similar to how the Lightning Network operates, with different “secondary wallets” transacting with each other while having their transactions bound to the blockchain balance.

“Receiving a plurality of encrypted third user secondary wallet private keys that are included in respective third user secondary wallets; decrypting the plurality of encrypted third user secondary wallet private keys to provide a plurality of decrypted third user secondary wallet private keys; and storing the plurality of decrypted third user secondary wallet private keys.”

That’s basically describing LN hubs or nodes, with the patent further elaborating on it by stating the above is achieved through:

“Performing a respective virtual currency transaction using each of the plurality of decrypted third user secondary wallet private keys to transfer the association of predefined amounts of the virtual currency associated with respective third user secondary wallets to the first user primary wallet.”

That is, the system allows you to pay a third party through a second party so making it possible for Alice to pay Carol through Bob by allocating, through encryption and hashes, part of the private key to the secondary wallet.

This allows for instant payments, PayPal says, addressing what they call the latency problem due to bitcoin requiring around 10 minutes for one confirmation. Similar to what LN claims.

The patent hasn’t been granted as far as we are aware, but does seem to be under consideration with it published this March the first.

Which shows PayPal is clearly paying close attention to this space, as far back as 2016 and probably even earlier. With the system further showing how PayPal or banks could fund these secondary wallets to presumably act as intermediaries.

It’s unclear how enforceable this patent would be or whether it would be granted at all as the Lightning Network whitepaper was published in January 2016.

So this might be just a throw anything and see what sticks approach by PayPal, or perhaps they somehow have a prior claim. Something which we won’t know until the patent office decides.

 

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