Cryptocurrencies have long been at a disadvantage to traditional fiat currencies when it comes to payment processing times. Indeed, some analysts believe that it is the discrepancy in payment processing which has so far prevented digital currencies from truly breaking into the mainstream. Now, Mastercard (MA) has won a patent in the U.S. for a new method of speeding up digital currency payments. To be sure, Mastercard has had a mixed relationship with digital currencies in the past, but this new system aims to do nothing less than to revolutionize the digital currency world. Below, we'll explore what this method entails and take a look at some of the ways that it might impact the digital currency space more broadly.
New User Account
Mastercard aims to reduce transaction times by using a new type of user account, according to a report by Coindesk. These accounts would have the capacity to transact using existing fiat currency systems, but with cryptocurrency tokens instead. Each account would link a set of different profiles in order to identify each user's "fiat currency amount, a blockchain currency amount, an account identifier and an address."
In this way, Mastercard would aim to harness the system that is already in place to process fiat currency transactions, but each transaction would instead represent a cryptocurrency. A document published by the U.S. Patent and Trademark Office (USPTO) suggests that "it often takes a significant amount of time, around ten minutes, for a blockchain-based transaction to be processed...conversely, traditional fiat payment transactions that are processed using payment networks often have processing times that are measured in nanoseconds...therefore, many entities, particularly merchants, retailers, service providers, and other purveyors of goods and services, may be wary of accepting blockchain currency for products and participating in blockchain transactions." The patent goes on to suggest that "there is a need to improve on the storage and processing of transactions that utilize blockchain currencies."
Mastercard aims to do just that.
Applications Beyond Efficient Payments
Should Mastercard's new project be successful, it could dramatically change the way that mainstream financial institutions view cryptocurrencies. Without the significant barrier of slow processing times relative to fiat currencies, cryptocurrencies would overcome a major hurdle.
Further, there may be other reasons why Mastercard's patent helps digital currencies, too. Cryptocurrencies have long held an appeal for investors looking for the ability to transact with anonymity and security beyond what fiat currency systems afford them. Digital currencies offer these things, but along with those potential benefits come added risks as well; another reason that the mainstream business world has been reluctant to adopt digital currencies is because of a widespread fear of the possibility of fraud, scams, money laundering, and other illegal activity. Because cryptocurrencies are anonymous and secure, both legitimate investors as well as criminal enterprises can make use of them.
Mastercard believes that its system could help to cut down on the risk of fraud. The patent states that "payment networks may be able to evaluate the likelihood of fraud and assess risk for blockchain transactions using existing fraud and risk algorithms and information that is available to payment networks, such as historical fiat and blockchain transaction data, credit bureau data, demographic information, etc., that is unavailable for use in blockchain networks." Should Mastercard's system be able to effectively provide added protection against cryptocurrency fraud, it seems all the more likely to help the company deliver digital currency payment systems to the broader financial landscape.
This is not the first patent application that Mastercard has filed in the digital currency space. Last year, the company filed for a separate patent that aimed to build refund services for digital currency transactions.
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